Hunch and Intuition in Decision Making

Many business decisions are taken not just on the basis of data and analysis, but using the intuition or hunch of the decision maker.

Intuition refers to the use of "gut feeling" to make decisions rather than rely on a more scientific approach using data and other quantitative evidence, supported by logical, rational decision-making models.

The potential advantages of hunch and intuition in decision-making include:

Speed - decision-making can be instant, rather than waiting for the results of scientific data analysis!

Based on personal experience: data isn't always reliable and a manager may feel more comfortable with the gut feeling if it seems to contradict the results suggested by data

Of course intuition and hunch is pretty unsuitable for certain business decisions, particularly those that involve a higher degree of risk for a business (e.g. a new product, takeover or other major investment).

Often intuition and hunch are combined with scientific approaches to reach a sensible decision.

A good example is investment appraisal. The scientific element involves identifying and quantifying the investment costs and returns. The intuition is based on determining the appropriate discount factors to apply and managerial judgement to interpret the results.