When to Trust Your Gut? The Effectiveness of Intuition in Organizational Decision-Making


Literature Review, 2021

16 Pages, Grade: 1,7


Excerpt

Table of Contents

1. Introduction

2. Literature Review
2.1 Intuitive Decision-Making
2.2 Factors Influencing the Effectiveness of Intuitive Decision-Making

3. Evidence-based Advice

4. Conclusion

5. List of references

1. Introduction

Decision-making plays a crucial role in the organization’s success (Ceschi et al., 2017). Ceschi et al. (2017) establish that making high-quality and efficient decisions is a key competence of high-performing organizations. The last two decades have seen major changes in organizational structures and processes due to technological advances and societal developments (Ackerman & Kanfer, 2020; Barley et al., 2017). Accordingly, the circumstances in which decisions are made have changed and become more challenging (Ackerman & Kanfer, 2020; Barley et al., 2017). As Sadler-Smith and Shefy (2004) point out, organizational decisions can involve a large amount of information to be processed. This increases the complexity of decision-making processes. Time is also often limited, and decisions must be made under fast-moving conditions (Sadler-Smith & Shefy, 2004). Furthermore, Faraji-Rad and Pham (2017) suggest that the database of information available can be inadequate or ambiguous, which makes the decision’s outcome difficult to predict. Organizational decisions can hence be associated with a high degree of uncertainty (Faraji-Rad & Pham, 2017). Traditionally, organizations aim for a rational approach to decision-making. To decide rationally, all relevant information must be considered (Sadler-Smith & Shefy, 2004). However, according to the authors, changing working conditions require individuals to make decisions quickly and in uncertain situations. Under such conditions, a rational model to decision-making cannot be applied because the human capacity to process information is limited (Halevy & Chou, 2014). Consequently, individuals must rely on their intuition. Decisions in an organizational context are therefore often taken not only in a rational way but also by intuition (Faraji-Rad & Pham, 2017; Sadler-Smith & Shefy, 2004). As empirical findings confirm, 47% of employees often decide intuitively (Tichá et al., 2010).

Previous research indicates that intuitive decision-making yields creative and original outcomes (Dane et al., 2012). Several studies demonstrate that individuals who trust their intuition generate innovative ideas and solutions to problems (Garfield et al., 2001; Zhu et al., 2017). Similarly, Eubanks et al. (2010) conclude that these decisions are of higher quality and utility. While these empirical studies collectively suggest that using intuition improves decision-making effectiveness, it is also prone to bias and can result in errors and misleading judgments (Sadler-Smith & Shefy, 2004).

In organizations, there is growing pressure to make decisions both quickly and effectively (Perlow et al., 2002). Dane and Pratt (2007) propose that the use of intuition is effective to make decisions within a short time. Consequently, it is crucial to understand what influences intuitive decision-making and its effectiveness. Therefore, this paper investigates the factors that determine whether or not the use of intuition is effective in decision-making. This paper aims to examine whether organizations benefit in the long term when their employees make decisions intuitively rather than rationally. From this, implications for managers on how to effectively make intuitive decisions in organizations are derived.

This paper begins by defining and conceptualizing intuitive decision-making and discussing its benefits and limitations in an organizational context. Then, it elaborates on intuitive decision-making effectiveness and analyzes the key factors that determine the effectiveness. Finally, this paper presents evidence-based advice for managers on how to implement and foster effective intuitive decision-making in organizations.

2. Literature Review

The following section provides definitions and approaches to conceptualizing intuition in decision-making. It then places intuitive decision-making in the organizational context and explains its benefits and limitations. Furthermore, this part of the paper investigates the factors that influence effectiveness.

2.1 Intuitive Decision-Making

Intuitive decision-making can be defined as the unconscious processing of information that results in direct knowing without conscious inference (Sinclair & Ashkanasy, 2005). Likewise, Eubanks et al. (2010) explain that intuition entails the ability to know without objective analysis or logical reasoning. In addition, Dane and Pratt (2007) describe intuitive decision-making as the recognition of patterns that lead to affective arguments. This happens quickly and unconsciously (Dane & Pratt, 2007). Based on these characteristics, intuition can be distinguished from the rational approach to making decisions (Dane et al., 2012). In contrast, rational decision-making implies conscious, deliberative, and analytical thinking (Sadler-Smith & Shefy, 2004).

The phenomenon of intuition in decision-making is further conceptualized by Miller and Ireland (2005). They use two different approaches: Intuition as a holistic hunch and as automated expertise. Similarly, Sadler-Smith and Shefy (2004) point out, that intuition can be conceived as knowledge, based on expertise, and as sensation, based on feelings (Sadler-Smith & Shefy, 2004). Intuition as a holistic hunch or as sensation refers to decisions made in response to information that has been unconsciously synthesized from experiences (Miller & Ireland, 2005). Dane and Pratt (2007) argue that experiences from past situations are summarized as unconscious cognitive patterns. When faced with a decision, individuals unconsciously draw holistic associations to these patterns and make judgments (Dane & Pratt, 2007). According to Mille and Ireland (2005), intuition as automated expertise or as knowledge is based on a sense of familiarity. When a decision has been made similarly before, previously acquired knowledge related to this situation is applied. Thus, the decision is made through a subconscious process involving past learning and the recognition of patterns (Miller & Ireland, 2005). Automated expertise develops over time as it is the accumulation of extensive experiences in particular fields (Salas et al., 2010). Intuitive decisions are hence taken unconsciously based on patterns of information and situation-specific expertise (Dane & Pratt, 2007; Miller & Ireland, 2005; Salas et al., 2010).

Rational decision-making is still the preferred approach in today’s organizations (Robbins & Judge, 2019). This is due to the prevailing assumption that rational decisions are value-maximizing, efficient, and less biased than intuitive decisions (Sadler-Smith & Shefy, 2004). However, Sadler-Smith and Shefy (2004) point out that decisions are based on both intuition and rational analysis. Consequently, the authors argue that using intuition is as important as using rationality (Sadler-Smith & Shefy, 2004). Likewise, Elbanna (2006) notes that intuitive decisions in organizations are becoming more common due to increasingly ambiguous, and time-limited work conditions. This view is supported by empirically collected data which suggest that managers rely extensively on their intuition when making decisions (Burke & Miller, 1999).

Consistent with the preference for rationality in decision-making is the widely held assumption that rational processes yield better outcomes than intuitive processes (Elbanna, 2006). However, existing literature indicates that intuitive decision-making has multiple benefits (Dane et al., 2012). Previous research establishes that intuitive decisions are of higher creativity (Zhu et al., 2017) and higher originality (Garfield et al., 2001) than deliberative decisions. Similarly, Eubanks et al. (2010) find that intuitive individuals generate more creative ideas and problem solutions. Furthermore, these ideas are more qualitative and useful (Eubanks et al., 2010).

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Excerpt out of 16 pages

Details

Title
When to Trust Your Gut? The Effectiveness of Intuition in Organizational Decision-Making
College
Maastricht University
Grade
1,7
Author
Year
2021
Pages
16
Catalog Number
V1184297
ISBN (Book)
9783346608093
Language
English
Tags
Intuitive decision-making, Intuition, Decision-making, Organizational decision-making
Quote paper
Sabina Dörner (Author), 2021, When to Trust Your Gut? The Effectiveness of Intuition in Organizational Decision-Making, Munich, GRIN Verlag, https://www.grin.com/document/1184297

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