MANAGEMENT “GYAN” - SHOR MODEL FOR DECISION-MAKING IN UNCERTAINTY

MANAGEMENT “GYAN”

From my Academic Writing Archives:

Here is an article written more than 20 years ago, based on my lectures on Technology Management, on the Topic on SHOR MODEL FOR DECISION MAKING IN UNCERTAINTY

I have published this article in management journals in the 1990's and also posted this article on a number of my blogs from time to time since the year 2004, when I started blogging.

I am posting it once more for you to read:

SHOR MODEL FOR DECISION-MAKING IN UNCERTAINTY

By

VIKRAM KARVE

MAY YOU LIVE IN INTERESTING TIMES

The phrase May You Live in Interesting Times while purporting to be a blessing, may actually be a curse, since the couched meaning is perhaps that may you experience much upheaval and trouble in your life, the clear implication being that uninteresting times of peace and tranquility are much better and far more life-enhancing. 

In present day interesting yet uncertain times we need an effective technique for making good decisions in situations of uncertainty. The SHOR paradigm is one such apt model.

Before we discuss the SHOR Model, let me tell you an apocryphal teaching story:

Once Buddha was walking from one town to another town with a few of his followers.

While they were travelling, they happened to pass a lake.

They stopped there and Buddha told one of his disciples, “I am feeling thirsty. Please get me some water from that lake.” 

The disciple walked up to the lake. When he reached it, he noticed that some people were washing clothes in the water, and right at that moment, a bullock cart started crossing through the lake.  As a result, the water became very muddy, very turbid. 

The disciple thought, “How can I give this muddy water to Buddha to drink...?”

So he came back and told Buddha, “The water in there is very muddy. I don’t think it is fit to drink.”   

After about half an hour, again Buddha asked the same disciple to go back to the lake and get him some water to drink.   

The disciple obediently went back to the lake.   

This time he found that the lake had absolutely clear water in it.  The mud had settled down and the water above it looked fit to be consumed.  So he collected some water in a pot and brought it to Buddha.   

Buddha looked at the water, and then he looked up at the disciple and said, “See what you did to make the water clean. You let it be. And the mud settled down on its own – and you got clear water. Your mind is also like that! When it is disturbed, just let it be. Give it a little time. It will settle down on its own. You don’t have to put in any effort to calm it down. It will happen. It is effortless.”

This story from the life of Buddha that highlights the fact that a calm mind leads to better decisions.

But in actual life, is it possible to remain calm when confronted with making decisions? Especially making decisions in situations of uncertainty. 

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.

A unique ability that sets humans apart from animals is self-awareness and the ability to choose how we respond to any stimulus. Animals do not have this independent will. They respond to a stimulus in a pre-programmed manner. If there is a threat stimulus the response is either fight or flight. We human beings too sometimes instantly follow the stimulus-response model.

It may be apt to remember that whenever we are confronted with any decision making situation, between Stimulus and Response there lies a space, a timeline, and in that space lies our freedom to choose a course of action, and in that choice lies our sagacity.

Hence, when confronted with a stimulus, instead of instantly responding, we must calm our minds, be self-aware, dispassionately analyse and evaluate the situation, draw up options and then choose the most suitable option as the response. 

(Remember the Story narrated above from the Life of Buddha)

When there is peace inside you, that peace permeates to the outside.  

This inner peace soon spreads around you and percolates into the environment and helps you make better decisions. 

Conversely, you could be in very peaceful surroundings, where everything is wonderfully beautiful, but if your inside is disturbed, then that beauty is of no use to you. 

For you to be peaceful, peace has to be generated from deep within you - from your being to the mind, and from the mind to the environment. 

For example, even if you have the best music system, you cannot truly enjoy music if you are mentally disturbed. 

In fact, it is more important to be in a sublime state of inner peace and to be in harmony with oneself in order to relish the finer things of life.

One of the factors that disturb your inner peace is uncertainty – many times uncertainty elicits sub-optimal responses if we use the Stimulus-Response (SR) Paradigm of decision making and hence there is need for a better model like the SHOR Paradigm, which is described below.

TYPES OF UNCERTAINTY

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.

SHOR PARADIGM

 

Decision Taxonomy: 

The Stimulus – Hypothesis – Option – Response (SHOR) Paradigm decision making model 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 behaviorist 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 did not know…”

(H) Hypothesis: “I did not understand…”

(O) Option: “I did not consider…”

(R) Response: “I did not act…”

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

“I did not understand…” is the fundamental result of information input uncertainty, while “I did not 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 did not 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 misjudgment.  

Any Decision-Maker (and designers of decision processors and aids) must address the four cardinal types of errors epitomized by the SHOR paradigm: “I did not know…”, “I did not understand…”, “I did not consider…” and “I did not 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 rationalizations and remaining selectively inattentive to corrective information.

4. Hyper-vigilance 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 hyper-vigilance is referred to as “panic”.

5. Concerned Vigilance in which the decision-maker optimally processes pertinent information and then generates and evaluates hypotheses and options before selecting a response as characterized 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.

CONCLUSION

As we discussed in the beginning, the phrase May You Live in Interesting Times while purporting to be a blessing, may actually be a curse, since the couched meaning is perhaps that may you experience much upheaval and trouble in your life, the clear implication being that uninteresting times of peace and tranquility are much better and far more life-enhancing. 

In these interesting yet uncertain times, recent events have demonstrated the failure of the Stimulus-Response (SR) Model of decision-making and underlined the need for expertise for making good decisions in situations of uncertainty. 

I am sure that in your life you have witnessed many of the concepts mentioned in the article above. 

First there was Information Input Uncertainty followed by Consequence of Action Uncertainty which caused Human Errors in decision-making and leading to Misjudgment and finally a state of Paralysis in Decision Making.

VIKRAM KARVE

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1. These are my personal views based on my observations and life experiences and the stories and examples quoted may be apocryphal.

2. All stories in this blog are a work of fiction. Events, Places, Settings and Incidents narrated in the story are a figment of my imagination. The characters do not exist and are purely imaginary. Any resemblance to persons, living or dead, is purely coincidental.

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