Universitas Gadjah Mada
Faculty of Economics and Business

Decision making is a process that combines rational and judgmental approach of which the process cannot be formulated completely.In the process, decision makers will always face the risk that influences the judgment process. Understanding the decision making process for a complex problem is very important to make good decision and to deal with risks wisely. “The practices of decision making up to now showed problem complexities and human's limited rationality, so people will make decision rationally and also in many conditions, making decision through heuristic process,” Prof. Ainun Na’im, M.B.A., Ph.D.in his professorship inaugural speech on Wednesday (29/12) at UGM Senate Hall. Ainun in front of the Council of Professors. The title of the speech was Decision Making, Consideration and Bias.

Ainun added that to improve the quality of decision making, the study in this field showed system improvement (including decision making tools) and that arrangement of obvious standard (procedure) about job qualification and decision making process are the best solution. Auditing standard in medical profession, accountant audit standard, are examples of how system and standard are used to avoid (or reduce) error and bias in decision making. “The solution that is offered here is improving the system and arranging detailed standards about job qualification and decision making process,” Ainun who is also Senior Vice Rector of Administrative, Finance and Human Resources UGM added.

Decision making issue is an important case because it implicates on big benefits or budget for the  community. Decision making dynamics have been researched and developed into a science that has theories about decision making (decision science and decision theories) in many kinds and environment of humankind. One of the theories is of Nicolas Bernoulli’s in 1713 that became part of various disciplines such as psychology, management, economics, accountancy, and sociology. “Unfortunately, many researches and science development of decision making are conducted in Indonesia, particularly because many social phenomenon can be raised in this theory development,” said the man born in Kediri on 4 December 1960.

Theory about decision making not only develops and influences economic and organizational theory development (in macro and messo levels), but also experiences development particularly those that relate to how a decision is made and produce good, accurate, and in line with ideal goal of problem solving process (micro level).

Ainun also explained there is development in the discipline itself (decision science and cognitive science) and in other disciplines such as education, management, and accountancy. Several theories related to heuristic and bias are, among others, heuristic theory, conjunction fallacy, and hindsight bias.

According to Ainun, heuristic is a process conducted by individuals in making decision quickly, using general manual and some information. This process possibly causes bias, error and inaccurate decisions.

Conjunction fallacy is decision making about possibility of conjunctive event which is different from the logic of probability theory. Meanwhile, hindsight bias is known as bias tendency because a person  (evaluator) that has obtained information previously about result seems to understand the result before a decision is taken. “Usually, this is seen unfair for decision makers because it pushes aside the condition when the decision is taken,” the husband of Yani Ratnawati and father of Aisa, Gabriel, Hassan, and Haniifan, explained.

Source: Satria/UGM