Decision Making in Uncertainty

SHOR Paradigm

By

VIKRAM KARVE

“The man who insists upon seeing with perfect clearness before he decides, never decides”  …Frederic Amiel

Decision-making is so pervasive that everyone, professionally or personally, is involved with making a variety of decisions.

In today’s fast-moving world, the timing of a decision is of paramount importance in many decision-making situations.

In real life even the “perfect” decision may not be optimal if it is made too late. 

Information is a vital resource in decision-making.

One of the most important characteristics of successful managers is the ability to make the correct decision when confronted with imperfect or insufficient information (i.e.) Decision-making under conditions of uncertainty.

In the context of decision-processing, two realms or domains of uncertainty are:

1. Information Input Uncertainty which creates the need for hypothesis generation and evaluation;

2. Consequence-of-Action Uncertainty which creates the need for option generation and evaluation.

THE SHOR PARADIGM

A decision taxonomy: The Stimulus – Hypothesis – Options – Response (SHOR) paradigm, formulated by Wohl, is useful in such decision situations.

The SHOR paradigm represents a qualitative, descriptive, model as distinct from a quantitative, predictive model, and comprises the following primary decision-making task elements:

S: Stimulus Input Data Processing

H: Hypothesis Generation, Hypothesis Evaluation, Information Processing [What is?]

O: Option Generation, Option Evaluation, Decision-Making [What if?]

R: Response Output Action

The SHOR paradigm is basically an extension of the classical Stimulus – Response (SR) Paradigm of behaviourist psychology.

The SHOR paradigm provides explicitly for the necessity to deal with information input uncertainty and consequence-of-action uncertainty, and helps us understand some of the peculiar human factors that affect the quality of the decision-making and answering questions such as:

What makes some decision-makers perform better than others, especially in placing high-value assets at risk, in business?

What are the sources and dimensions of “poor” performance?

HUMAN ERRORS IN DECISION-MAKING

Based on the SHOR Model, human errors in decision-making appear to lie in four domains:

(S) Stimulus: “I didn’t know…”

(H) Hypothesis: “I didn’t understand…”

(O) Options: “I didn’t consider…”

(R) Response: “I didn’t act…”

Stimulus based errors of the type “I didn’t know…” result from lack or inadequacy of information, the true inability to obtain information.

“I didn’t understand…” is the fundamental result of information input uncertainty, while “I didn’t consider…” is the product of consequence-of-action uncertainty.

It is possible to have accessed all significant information, to have developed the correct hypothesis and to have selected the best option and yet fail to take appropriate action.

The two possible reasons for the “I didn’t act…” type of response error are:

1. Paralysis: This is a complete failure to act, the pathological ‘observation of an inevitable course’ without intervention. It is caused by an over-riding emotional struggle in which some internal factor is being placed in conflict with the course of action selected by the decision-maker. The final scene in the evergreen classic film The Bridge on the River Kwai (1957) exemplifies such a situation.

2. Misjudgement: The decision-maker correctly decides what to do but errs in either or both of the two dimensions – how [the specifics of the action] or when [the timing of the action].

Prediction of the critical consequences of inaction may be of some help in dealing with paralysis whilst the ability to perform sensitivity analyses may assist in alleviating misjudgement. 

Any Decision-Maker [and designers of decision proccesors and aids] must address the four cardinal types of errors epitomized by the SHOR paradigm: “I didn’t know…”, “I didn’t understand…”, “I didn’t consider…” and “I didn’t act…”

DECISION-MAKING IN UNCERTAINTY

In the context of decision-making in uncertainty, the conflict theory paradigm developed by Janis and Mann may be apt.

This paradigm postulates five patterns of coping behaviour which tends to occur in such situations:

1. Unconflicted Adherence in which the uncertain, or risk, information is ignored and the decision-maker complacently decides to continue whatever he has been doing.

2. Unconflicted Change to a new course of action, where the decision-maker uncritically adopts whichever new course of action is most salient, obvious or strongly recommended.

3. Defensive Avoidance in which the decision-maker evades conflict by procrastinating, shifting responsibility to someone else, or constructing wishful rationalisations and remaining selectively inattentive to corrective information.

4. Hypervigilance wherein the decision-maker searches frantically for a way out of the dilemma and impulsively seizes upon a hastily contrived solution that seems to promise immediate relief, overlooking the full range of consequences of his choice because of emotional excitement, repetitive thinking and cognitive constriction. In its most extreme form hypervigilance is referred to as “panic”.

5. Concerned Vigilance in which the decision-maker optimally processes pertinent information, generates and evaluates hypotheses and options before selecting a response as characterised by the SHOR paradigm.

In many real-life situations a decision-maker cannot always keep waiting until the entire information-input and consequence-of-action conditions are known a priori with certainty.

In most cases there is no such thing as “perfect” certainty.

If a single most important characteristic is crucial to a decision-maker in any field, it is the ability to make optimal decisions in conditions of uncertainty.

Qualitative descriptive models like the SHOR paradigm may prove useful in such situations.

To quote Frederic Amiel once again: “The man who insists upon seeing with perfect clearness before he decides, never decides”.

VIKRAM KARVE

Copyright © Vikram Karve 2009

Vikram Karve has asserted his right under the Copyright, Designs and Patents Act 1988 to be identified as the author of this work. 

http://www.linkedin.com/in/karve

http://vikramkarve.sulekha.com