Intuitive Decision Making: The Intuition Concept in Decision Making

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International Journal of Business and Behavioral Sciences
Vol. 4, No.7; July 2014
Intuitive Decision Making: The Intuition Concept in Decision Making Process
*Ade Maharini Adiandari
Post Graduate Program, Faculty of Economics and Business, Brawijaya University
Malang
*maharini.phd@gmail.com
Abstract
One of the important tasks as a leader is making a decision; further, one of the bases of decision making
is intuition. Therefore, intuition is inseparable in the decision making process. This article discusses the
concept of Intuitive Decision Making (IDM) as an intuition concept in decision making process which
consists of the definition of intuition, intuition in decision making process, IDM process, the fundamental
theories of IDM, the empirical study related to IDM and its measurement. It is expected that this article
can provide a comprehensive description related to IDM, intuition concept in decision making process,
and benefits for enriching insight related to IDM.
1. Research Background
Globalization is a challenge in the XXI century as the human life experiences extraordinary changes
that are different from the former centuries. Peter Sange (1994) states that, in the future, situation will
shift and develop from detail complexity to dynamic complexity. To face globalization, the role of leader
is critical due to the leader as the main actor on each decision making activity that must make quick and
right decision, particularly when the wave of change occurs remarkably.
Decision making process nowadays should combine between prudential principles and business
opportunities for the customers. In a turbulence business environment and rapid information change,
decision maker needs not only data and document analysis but also whole information which are then
processed quickly to generate proper business decision.
A leader may use some several bases of decision making process. According to Terry (in Hasan,
2002), the foundations of decision making are intuition, logic, facts, authority, and experience. A leader is
necessarily to use intuition in making a decision. It is supported by a statement that in a complex,
uncertain, and limited-time situation when there is no or incomplete alternatives, a rational decision
making will be hindered by the task complexity and information processing ability of the decision maker
(Simon, 1997).
From the description above, it emerges some questions such as what is intuition and how is the
intuition concept applicable in decision making process? This article discusses the concept of Intuitive
Decision Making (IDM) which consists of the definition of intuition, intuition in decision making, the
process of IDM, the fundamental theories of intuition, empirical studies on IDM, and IDM measurement.
It is expected that this writing can deliver comprehensive description related to IDM which means the
intuition concept in decision making process.
2. Review Of Literature
2.1.
The Definition of Intuition
Discussing about the definition of intuition, the author describes the definition of intuition from
several prior researches as the following: Kotler (2003), Hayashi (2001), and Hornby (2005) define
intuition in some terms such as premonition, gut instinct, invert voice, hunch, natural feeling, or
conscience. The terms such as gut instinct or hunch are commonly mentioned by practitioners to express
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Vol. 4, No.7; July 2014
their conscience which help them in decision making. Accordingly, in daily life, intuition is frequently
perceived and utilized. Dane & Pratt (2007) and Kahneman & Klein (2009) state that intuition is often
called as the sharpness of natural feeling or conscience as the result of cognitive and affect processes
unconsciously which then produce holistic and immediate evaluation about the validity of the
characteristics interaction between individual’s environment and tasks. Besides, Smith (2008) describes
that intuition comes from Latin verb intueri which is usually translated as “to look inside” or to
“contemplate”. Next, some of the literature sources about intuition as presented by Dane & Pratt (2007)
can be seen in Table 1 below:
Source
Jung (1993)
Wild (1938)
Bruner (1962)
Westcott & Ranzoni
(1963)
Rorty (1967)
Bowers, Regehr,
Balthazard & Parker
(1990)
Shirley& Langanfox
(1996)
Simon (1996)
Shapiro & Spence
(1997)
Burke & Miller (1999)
Policastro (1999)
Lieberman (2000)
Raidl & Lubart (2000
– 2001)
Hogarth (2001)
Table 1
Intuition Definition from some Experts
The Definition of Intuition
Psychological function which transmits perception subconsciously
Direct consciousness of the subject from some particular entities
The act of grasping the meaning, significance, or structure of a
problem or situation without explicit reliance on the analytic apparatus
of one’s craft
The process of reaching a conclusion on the basis of little information
which is normally reached on the basis of significantly more
information
A fear on something which is going to happen suddenly
An initial perception on coherence (pattern, meaning, structure) which
at first subconsciously comes up, yet the perception still guides the
thought and investigation on premonition or hypothesis on the
coherence
A feeling of knowing with certainty based on less information and
without consciousness on the rational way of thinking.
Action of recognition
A subconscious and holistic processes as the assessment is made
subconsciously based on the rule of knowledge used to conclude
which part is perceived as the right part though unable to explain the
reason
A cognitive conclusion based on the experience and emotional
feedbacks of the decision maker
A form of tacit knowledge which is oriented to decision making on the
promising direction
Subjective experience of the quick sub consciousness process,
illogical, and no access to consciousness
A perceptual process, shaped through subconscious action of the
information elements’ linkage
A thought that is achieved from less real effort and without
consciousness; involving less or none deep consideration.
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Myers (2002)
Kahneman (2003)
Epstein (2004)
Vol. 4, No.7; July 2014
Capacity of direct and quick knowledge before rational analysis
Thinking and wants which come into someone’s mind quickly and
with less reflection.
The work of experience system
As observed from the definitions above, there are some different definitions which indicate not
only the development of prior research results on intuition but also different perspectives among
researchers on intuition terminology. Perception on intuition terminology depends on the expertise of the
researcher which then it underlies the researcher or scientist to define intuition as stated by Parikh (1995)
in Table 2 below:
Table 2
Perception on Intuition Terminology
Num.
1
2
3
4
5
6
AREA
Philosophy
Epistemology
Psychology
Art
Neuro science
Mystical
science
Intuition as
Insight (knowledge)
Process (Skills)
Trait (Attitude)
Creative expression
Chemical processes
Altered states of consciousness
Considering those definitions of intuition from former researchers in Table 1 and perception on
intuition terminology in Table 2 above, the author generally concludes that intuition has several
characteristics as the following:
a. Directly associated to thinking process
b. Occur unconsciously/ subconsciously
c. Come up quickly, even in sudden
d. Underpinned from experience as one of the sources
e. Affect the decision that is going to be taken
The characteristics proposed by the author above are in fact also described in the definition stated
by Klein (2006) who says that intuition is a cognitive process which instantly occurs as an individual
recognizes the familiar pattern to decide an action that he should do. To ease in understanding the
definition of intuition, the author generates her own definition of intuition which is resulted from
exploring and reviewing several definitions from prior researchers; furthermore, intuition is defined as a
thinking process which occurs subconsciously in an instant that affects a decision which is going to be
taken based on the pattern of former experiences which are shaped and stored in subconscious memory of
an individual for particular range of time. The following figure describes the emergence of the author’s
intuition definition:
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Fig.1
The Emergence Process of Intuition Definition by the Author
Terminological
Perception on Intuition
Definitions of Intuition
from Prior Research
Exploring the
Characteristics of
Intuition
2.2.
Emergence
of Intuition
Definition
from Author
Intuitive Decision Making (IDM)
What is the definition of intuitive decision making? Why intuition should be recognized in the
process of decision making? From prior description of the author, it mentions that one of the intuition’s
characteristics is that intuition affects decision which is going to be taken; thus, intuition is obviously
related to the decision making process. Some definitions of intuition in decision making issue from
former research are described by the author as the following: Echols & Shadily (2003) define intuition as
a conscience which underlies decision making. In non rational terms, such decision making is called as
intuitive and judgmental decision making which is characterized by quick response, even too fast for
conducting sequential analysis of the situations that are faced. What makes non-rational decision making
different from rational decision making is that non-rational decision making is done in subconscious
process (Simon, 1987). Besides, psychology realm perceives intuition as a cognitive-based decision
making. Some of the definitions of intuition in decision making context is called as Intuitive Decision
Making (Simon, 1987) which then this terms is taken as the standard terms referring to the use of intuition
in a decision making process.
Further, Simon (1997) states that in a complex, uncertain, and time-pressured decision making
environment when information about the alternatives is limited or abundant, a rational decision maker is
often burdened by task complexity and information processing capacity of the decision makers himself. It
implies a need on intuitive decision making of a leader to support his rational decision. Besides, it is also
mentioned that intuitive decision supports risk taking, entrepreneurial, and visionary leadership styles (De
vries, 2004; Evgeniou & Catwright, 2005). In addition, Burke & Miller (1999) mention that there is a
need on the integrated model between rational decision making and intuitive decision making as both of
the approaches are utilized as complementary between one and another. Meanwhile Eisenhardt &
Zbaracki (1992, 1997) emphasize on the importance of multi-dimensional approach as the basis of
decision making which does not only consist of limited rational thinking but also heuristic, insightful, and
intuitive thinking.
From the description above, it answers the question of why intuition should be recognized in
decision making process. It is found that intuition provides better comprehension for a leader during
decision making process in particular condition when rational decision making process is too difficult to
be taken; for instance, in the condition when there is insufficient information, when there are
contradictory facts, and when the time is very limited during decision making process.
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2.3.
The Process of IDM
There are only a few references which discuss the process of IDM. Among those references, it is
known that intuition comes up instantly, shaped by learning process and experience, which results in
pattern and confidence to decide an action quickly. The pattern and confidence that have been shaped
become a natural guidance that is needed in an intuition process to make a decision. In this text, this
condition is called as IDM. Those experiences will be stored in subconscious part which later on will
come up spontaneously, quickly and instantly in a decision which requires speed and sensitivity sharpness
due to limited-time pressure.
The review of literature result related to the process of intuitive decision (Simon, 1987; Peirce,
1997; Hayashi, 2001; Klein, 2002; Gladwell, 2006) is shown in Figure 2 which demonstrates the plot of
intuition formation which results in an action in the form of decision that must be taken under limitedtime pressure condition.
Fig. 2.
The Plot of Intuition Formation
Learning
Senses
AHA Sensation
PATTERN + BELIEF
(Intuitive Guideline)
Repeat Experience
Very Wide
Recognize opportunity
ACTION
(Decision Making)
ENVIRONEMNT
(Quick)
Source: (Simon, 1987; Peirce, 1997; Hayashi, 2001; Klein, 2002; Gladwell, 2006)
The IDM process is also reflected on the statement mentioned by Isenberg (Klein, 2002) who
says that intuition involves cognitive process which occurs almost instantly when an individual
recognizes familiar patterns based on his wide experience in analysis, problem solving, as well as
implementation.
From the two explanations of the intuition process above, the author concludes that the process of
IDM is not a random prediction which does not have any foundation or basis; also, it is not the opposite
of Rational Decision Making (RDM) since it is obvious that IDM is based on wide experience in analysis
which is stored in the subconscious realm of an individual and will emerge spontaneously during
particular condition which needs an intuitive decision.
2.4.
The Fundamental Theories of IDM
There occurs theoretical development related to intuition in recent years, particularly in
psychology and neurology realms that are often used by management researcher to formulate managerial
intuition comprehension. The theory explained by Hensman & Smith (2011) consists of three theories:
Cognitive Experiential Self Theory (CEST), Recognition Primed Decision Making Theory (RPD), and
Somatic Marker Hypothesis Theory (SMH). Those theories are described below:
2.4.1. Cognitive Experiential Self Theory (CEST) or Dual Process Theory
CEST theory or commonly called as Dual Process Theory is developed by Seymour Epstein
(1998) based on the notion that an individual handles things by using two information processing systems
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which are separated for analytical (rational) and intuitive (experiential) matters. It implies that the
complexity of human behavior partly is influenced simultaneously by cognitive representation and
processing (analytical/ rational) as well as experiential representation. The analytical (rational) system
means intentional, slow, and logical; meanwhile, intuitive system indicates quick, automatic, and
emotionally encouraged. Those systems are independent which operate in parallel and interact to generate
behavior and conscious reasoning. Epstein mentions that in the daily life context, there is a constant
interaction among both systems. Since intuitive system is quick, combined with emotion and prior
experience, and needs only a few cognitive resources, this system is used to handle most of the daily
information processing which all happen subconsciously. This fact enables us to focus on the limitation of
rational system which in any condition, it needs attention to our consciousness at that particular time.
As an example of interaction between the two information processing systems of analytical
(rational) and intuitive (experiential) as stated by Auvert and Felgoise (2002) is when an expert driver
travels from one place to another. The behavior of the driver involves an ability to divide between
automatic tasks and attention-needed tasks. Further, the analytical (rational) system and intuitive
(experiential) system can communicate and influence each other. The balance of the role between
analytical (rational) and intuitive (experiential) systems comes up flexibly and varied depending on the
various factors such as the stimuli’s characteristics, style of mastery on the things that an individual prefer
more, and emotional state. Regarding this description, Epstein (1998) proposed that emotional appeal
tends to shift the balance of the role which tends to support intuitive (experiential) system. However, both
of the systems can work well together. Interaction between the two systems can occur, either sequentially
or simultaneously, as one system can affect each other.
Next, as the conclusion of the two information processing system in CEST, the differences
between analytical (rational) system and intuitive (experiential) system are presented in the Table 3
below:
Table 3.
The Differences between Analytical (Rational) System and Intuitive (Experience) System
Rational System
Experience System
Analytical
Holistic
Intended
Automatic
Logical
Emotional
Behavioral medium through conscious
Behavioral medium through “feel”
assessment
Slow which causes postponed action
Quick which results in instant action
Volatile for some reasons
Resistance from change
Conscious
Subconscious
Source: Epstein, 1998 and Tversky & Kahneman, 1974 (processed)
2.4.2. Recognition Primed Decision Making Theory (RPD)
Klein (1998) develops Recognition Primed Decision (RPD) theory which is a model of how to
make swift and effective decision in complex situation. In this model, decision maker is assumed to
generate actions, compare the existing limitations in a particular situation, and choose the first action
which is not rejected. The traditional approach in this decision making process consists of analytical
decision making and intuitive decision making. Analytical approach is based on some criteria that should
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be compared to find the best and optimum solution. Intuitive approach is based on experience and
expertise of the decision maker to solve the problem.
RPD model combines two ways of decision development. First, it defines which actions are
rational; and second, it evaluates the cause of the actions through imagination for seeing whether the
actions are resulted from rational decision. However, experience level discrepancy between experienced
and inexperienced individuals will be the focal factor in the decision making process. RPD reveals the
critical difference between expert and beginner when they are facing repeated situations. An experienced
individual commonly is able to derive quicker decision since the situation may resemble with prototypical situations that he has previously met. On the contrary, a beginner with less experience should pass
through different probability cycle and tends to use the first action that he is sure will work.
Next, RPD decision making is especially relevant for a leader or manager of an organization who
affiliates to emergency service such as fire department, search and rescue unit, police department, and
other emergency services. It can be applied by both experienced and inexperienced individuals depending
on how they manage their decision making process.
2.4.3. Somatic Marker Hypothesis Theory (SMH)
Somatic Marker Hypothesis Theory (SMH) is developed by Damasio (1994); it is a model of
neuro anatomical system to explain the role of unconscious process and the effect of decision making
experience. When the result is not quite satisfying, usually it will followed by disappointed feeling.
Theory SMH suggests a mechanism in which emotional process can guide behavior, particularly decision
making behavior.
In economics theory, there is a tendency to make a model of human decision making without
involving emotional aspects but only logical reasoning based on the cost-benefit calculation. The theory
assumes that individuals have time, knowledge, and information processing power to make an optimal
decision. Different from the pre-mentioned theory, the somatic marker hypothesis proposes that emotion
takes critical role in the ability to make quick decision in complex and uncertain situation.
Related to the SMH theory, Dunn and Lawrence (2006) stated that SMH rooted from the effort to
comprehend blatant emotional improvement and the ability decrease on the decision making ability day
by day as demonstrated by a patient who got damage on his brain. Brain damage can cause significant
effect on his job function and social function without noticeable problem on his intelligence and cognitive
performance. We can learn this from a well-known case of Phineas Gage (Harlow, 1868).
The three theories of CEST, RPD, and SMH above, based on the existing references, are
assimilated in intuitive management research; therefore, those theories are often considered as the
foundation of conducting research in management realm. It is due to the relevance of the theory on the
several aspects as follow:
1. Conceptual integration (i.e., Dane & Pratt, 2007; Smith & Shefy, 2004; Sinclair & Ashkanasy, 2005)
2. Its relevance with decision making (Hodgkinson et al., 2009)
3. Learning and Education in Management (Burke & Smith, 2006; Smith & Shefy, 2007).
3. The Result of Prior Empirical Studies on IDM
The result of prior empirical studies related to IDM matter on several industries is utilized as the
reference point of this research. There are some research that can be taken as the underpinning to conduct
further empirical research regarding intuition.
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Agor (1989) conducted a survey on 20 managers in USA and found that the utilization of
intuition is perceived differently based on the job level (senior manager tends to be more intuitive
compared to the lower level of the hierarchy) and manager perceives intuition as the best way to take
when there is a high degree of uncertainty, unpredictable variable, the existing information does not
provide clear direction, the availability of alternatives, and limited time.
Parikh, et.al. (1994) conducted a survey on 1,312 business practitioners from nine different
countries; each country was represented by more or less 100 participants. The finding indicated that 54%
of the respondents applied intuition in their decision making in corporate strategy and corporate planning
(79.9%), human resource development (78.6%), production and operation (27.7%), and finance (31.1%).
In late 1990’s, within the similar method but smaller scale, Burke and Miller (1999) conducted a study on
60 professionals in USA and concluded that intuition is often used for personnel or human resource
decision, when the decision should be taken quickly or unpredictably, when the degree of uncertainty is
high in a new situation, when there is a minimum direction in particular situation, and when the decision
is combined with analysis.
Khatri and Ng (2000) compared the use of intuition in strategic decision making among
industrial types such as computer, banking, and utilities. The result shows that intuition is often used in
strategic decision making on computer industry rather than on banking and utilities industries. Intuition
demonstrates negative relationship with financial performance of banking and utilities industries;
whereas, intuition has positive relationship with financial performance of computer firm.
Lennart Sjoberg (2001) observed 143 participants to examine the preference of individuals on the
two models of decision making which are made on several contexts. Sjoberg (2001) also checked whether
it is correlated to risk or opportunity. In a statistical analysis decision situation, respondents tend to
choose intuitive decision making when they make personal decision on non professional role (such as
consumer decision).
Saddler and Shefy (2004) found positive relationship between intuitive decision and financial
performance of a small-scale firm which was observed in two years period.
Hough and Ogilvie (2005) observed senior managers who joined executive development; and,
they found that a decision which was made by an intuitive manager is perceived to have better quality
compared to the decision taken by a non-intuitive manager.
Lipshitz and Shulimovitz (2007) surveyed 14 debt officers and found that in appraising credibility
rate of the loan applicant, the debt officers combined financial data and sharp conscience, but used the
conscience as a more valid indicator than the relevant financial data.
La Pira (2011) studied entrepreneurs to develop greater comprehension on how an entrepreneur
makes a decision and provide empirical proofs to define the style of their entrepreneurship. This research
delivers deeper understanding on intuition and decision making particularly in entrepreneurship realm.
The result demonstrates that entrepreneur tends to make a great use of IDM.
Oluwabusuyi (2011) surveyed each 100 participants from USA and Malaysia to observe the role
of gender, management level, and country of origin toward intuitive decision making. The result shows
that there is a significant role of gender, management level, and country of origin on the use intuitive
decision making.
Hensman and Smith
(2011) conducted a semi-structured interview at FinCorp by using
qualitative research method. The result shows that intuition is a critical aspect at FinCorp; yet, the finding
cannot be generalized to other organizations.
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From the discussion of the research results above, it is apparent that there are various results due
to the differences on the types of industry as the research location. The author presents the different
research’s results above for describing the role of IDM on some organizations. IDM indicates negative
relationship with financial performance of banking and utilities industries; whereas, it has positive
relationship with financial performance of computer industry. The use of intuition also can be found in
the decision making for several subjects; yet, the least is found at financial sector. The other phenomenon
reports that the use of intuition is considered as critical aspect and has significant role.
Considering that there still occurs some differences on the research results and only a few
research on intuition for decision making in various subjects, it is important to know deeper about how
intuitive practice in decision making process (intuitive decision making) is. This article can be a reference
for conceptual realm to support other researchers to examine IDM concept empirically.
4. IDM Measurement
IDM measurement is also an important thing to be known by researchers as a source to know the
intuition level of an individual. Based on Judge and Robbins (2006), IDM is a subconscious process
which is generated from an individual’s experience. Intuitive decision maker is able to make a quick
decision though he has limited information. There are some approaches to measure individual’s intuition
level related to the process of decision making as the following:
1. Keegan’s Type Indicator (KTI), which was developed by Keegan (1982), consists of 44 question
items in its questionnaire. Sixteen questions are intended to measure sensing and intuition; sixteen
other questions are intended to measure thinking and feeling, while the rest twelve questions focus on
behavior. The question item uses 1 to 4 scale range.
2. Rational Experiential Inventory (REI) is a questionnaire developed by Pacini and Epstein (1999).
This questionnaire has 40 question items. Twenty question items focus on cognitive scale; whereas,
the twenty others focus on intuition scale. There are two sub-scales including engagement and ability
which are described below:
a. Engagement
Rational engagement refers to comfort in using logic; meanwhile, experiential engagement
refers to comport in using intuition.
b. Ability
Rational ability refers to a trust on logical thinking; yet, experiential ability refers to intuition.
The statements in REI instrument uses 5 points scale ranging from “definitely not true of myself”
“definitely true of myself.”
3. Nygren (2001) developed Decision Making Inventory (DMI) which consists of 45 question items that
measure analytical, intuitive, and emotional decision making categories. Each of the categories has 15
questions. The scale that is frequently used starts from 1 (strongly disagree) to 6 (strongly agree).
4. Allinson and Hayes (1996) developed Cognitive Style Index (CSI) to define during decision making
whether an individual tends to use intuitive or analytical approach. It has 38 question items which
scores from 0 – 38 (more intuitive) and
5. 38 – 76 (more rational).
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5. Conclusion
In facing globalization era, the role of leader is critical since leader is the main actor on each
decision making activity. One of the foundations that can be used by a leader to make a decision is
intuition. Intuition itself has some characteristics that are directly correlates to reasoning process,
occurring in sub consciousness, generated in a quick time even instantly, based on the experience as one
of its sources, and affecting the decision that is going to be made.
In a non-rational term, intuitive-based decision making is called as intuitive and judgmental
decision making which is characterized by a quick response which is too fast for making sequential
analysis on the situation that is faced. It also reveals how is the process of IDM, the how to measure IDM,
what are the relevant theories, as well as facts that intuition provides better comprehension for a leader to
make a decision on particular condition in which rational decision making process is difficult to be done.
For instance, it needs an intuitive decision making approach when the information is insufficient, it exists
some contradictory facts, and it has very limited-time to make a decision.
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