Measuring Rational Behaviour and Efficiency in Management Decision Making Processes: Theoretical Framework, Model Development and Preliminary Experimental Foundations

Aims: This paper aims to provide insights into the measurement of decision making efficiency and decision making behaviour by establishing a “holistic“ theoretical approach, which extensively considers quantitative, qualitative and situational cause-effect relations in decision making processes. Furthermore, the paper is supposed to show, how theoretical measures can be applied in an empirical environment within a particular decision making situation.

Study Design: This research study is designed as a theoretical framework of business decision making behaviour, supported by the findings of an experimental investigation.
Place and Duration of Study: The research paper evolved as a significant part of a comprehensive research project, investigating managerial decision making behaviour, conducted jointly at the University of Fulda (GER) and at the University of Latvia (LV) in 2012 and 2013, as a collaborative effort of doctoral students from the University of Latvia and doctoral supervisors from the University of Fulda. The research project at Fulda and Latvia utilized the results of an experimental research study which was conducted by Neuert at the University of Bayreuth (GER) earlier on (in 1983).

Methodology: The methodology of this paper is based on the notion of “critical rationalism”. This approach requires that the theoretical framework of the research study, the “paradigm of socio-economic-quasi-rational behavioural patterns”, has to be tested via an empirical survey. The empirical study was conducted as a laboratory experiment by using a business simulation game as a research design.

Results: The findings of this research paper support the basic hypotheses that business decision making behaviour generally ranges within an identifiable spectrum of activity patterns, which makes business decision making foreseeable to a certain extent. The applied statistical procedures (normal distribution tests, confidence intervals, multiple regression analyses, optimization algorithms) provide significant outcomes to a large extent. The sample of the experimental study was comprised of 65 advanced business management students and 16 professional managers, representing a subject sample of 128 decision making processes, altogether. The experimental investigation was conducted at the University of Bayreuth.

Conclusion: The novel paradigm of decision making, outlined in this paper, can be verifiably applied for the analyses and the design of professional business decision making procedures and contexts. It further suggests that, by and large, actual decision making behaviour is “located” within a measurable range of “statistical” indicators like standard deviation, standard error and variation coefficient.