Unit -5 Decision Making Process

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Unit -5 decision making process


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Introduction

It is a primary function of management. A manager'smajor job is sound/rational decision-making. He takeshundreds of decisions consciously and subconsciously.Decision-making is the key part of manager's activities.

Decisions are important as they determine bothmanagerial and organizational actions. A decision maybe defined as "a course of action which is consciouslychosen from among a set of alternatives to achieve adesired result.

Decisions are made to achieve goals through suitablefollow-up actions. Decision-making is a process bywhich a decision (course of action) is taken.


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Meaning

The word 'decision' is derived from the Latin words de ciso whichmeans 'a cutting away or a cutting off or in a practical sense' tocome to a conclusion.

According to R. C. Davis, "management is a decision-making

process." Decision-making is an intellectual process which involvesselection of one course of action out of many alternatives.

Decision-making will be followed by second function ofmanagement called planning.

The other elements which follow planning are many such as

organising, directing, coordinating, controlling and motivating.Decision-making has priority over planning function.


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Definitions of Decision-making

The Oxford Dictionary defines the term decision-making as "the action of carrying out or carrying intoeffect".

Me Farland : "A decision is an act of choice wherein an

executive forms a conclusion about what must be donein a given situation. A decision represents a course ofbehavior chosen from a number of possiblealternatives."

(3) Dr. George R.Terry : "Decision making can bedefined as the selection based on some criteria of onebehavior alternative from two or more possiblealternatives."


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Characteristics of Decision Making

Decision making means making choice: Decision making is choosing from amongtwo or more alternative courses of action. Thus, it is the process of selection ofone solution\ out of many available. For any business problem, alternativesolutions are available. Managers have to consider these alternatives and selectthe best one for actual execution. Here, planners/ decisionmakers have toconsider the business environment available and select the promising alternativeplan to deal with the business problem effectively

Continuous activity/process: Decision- making is a continuous and dynamicprocess. It pervades all organizational activity. Managers have to take decisions onvarious policy and administrative matters. It is a never ending activity in businessmanagement.

Mental/intellectual activity: Decision-making is a mental as well as intellectualactivity/ process and requires knowledge, skills, experience and maturity on thepart of decision-maker. It is essentially a human activity.

Based on reliable information/feedback: Good decisions are always based onreliable information. The quality of decision-making at all levels of theOrganisation can be improved with the support of an effective and efficientmanagement information system (MIS).


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Goal oriented process: Decision-making aims at providing a solution to a givenproblem/ difficulty before a business enterprise. It is a goal-oriented process andprovides solutions to problems faced by a business unit.

Means and not the end: Decision-making is a means for solving a problem or forachieving a target/objective and not the end in itself.

Relates to specific problem: Decision- making is not identical with problem solving

but it has its roots in a problem itself. Time-consuming activity: Decision-making is a time-consuming activity as various

aspects need careful consideration before taking final decision. For decisionmakers, various steps are required to be completed. This makes decision-making atime consuming activity.

Needs effective communication: Decision- taken needs to be communicated to allconcerned parties for suitable follow-up actions. Decisions taken will remain on

paper if they are not communicated to concerned persons. Following actions willnot be possible in the absence of effective communication.

Pervasive process: Decision-making process is all pervasive. This means managersworking at all levels have to take decisions on matters within their jurisdiction.


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Advantages of Decision Making

Decision-making facilitates the entire management process: Decision-makingcreates proper background for the first management activity called planning.Planning gives concrete shape to broad decisions about business objectives takenby the top-level management. In addition, decision-making is necessary whileconducting other management functions such as organising, staffing, coordinatingand communicating.

Decision-making is a continuous managerial function: Managers working at alllevels will have to take decisions as regards the functions assigned to them.Continuous decision making is a must in the case of all managers/executives.Follow-up actions are not possible unless decisions are taken.

Decision-making is essential to face new problems and challenges: Decisions arerequired to be taken regularly as new problems, difficulties and challenges developbefore a business enterprise. This may be due to changes in the externalenvironment. New products may come in the market, new competitors may enterthe market and government policies may change. All this leads to change in theenvironment around the business unit. Such change leads to new problems andnew decisions are needed.


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Decision-making is a delicate and responsible

job: Managers have to take quick and correct

decisions while discharging their duties. In

fact, they are paid for their skill, maturity and

capacity of decision-making. Management

activities are possible only when suitable

decisions are taken. Correct decisions provideopportunities of growth while wrong decisions

lead to loss and instability to a business unit.


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Steps Involved In Decision Making

Process

Decision-making involves a number of stepswhich need to be taken in a logical manner.This is treated as a rational or scientific

'decision-making process' which is lengthy andtime consuming. Such lengthy process needsto be followed in order to takerational/scientific/result oriented decisions.

Decision-making process prescribes somerules and guidelines as to how a decisionshould be taken / made.


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Identifying the problem: Identifying the Problem:Identification of the real problem before a businessenterprise is the first step in the process of decision-making. It is rightly said that a problem well-defined is aproblem half-solved. Information relevant to the problem

should be gathered so that critical analysis of the problemis possible. This is how the problem can be diagnosed. Cleardistinction should be made between the problem and thesymptoms which may cloud the real issue. In brief, themanager should search the 'critical factor' at work. It is the

point at which the choice applies. Similarly, whilediagnosing the real problem the manager should considercauses and find out whether they are controllable oruncontrollable.


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Analyzing the Problem: After defining the problem,the next step in the decision- making process is toanalyze the problem in depth. This is necessary toclassify the problem in order to know who must take

the decision and who must be informed about thedecision taken. Here, the following four factors shouldbe kept in mind:

i. Futurity of the decision,

ii. The scope of its impact,

iii. Number of qualitative considerations

iv. involved, and

v. Uniqueness of the decision.


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Collecting Relevant Data: After defining the

problem and analyzing its nature, the next

step is to obtain the relevant information/

data about it. There is information flood in thebusiness world due to new developments in

the field of information technology. All

available information should be utilised fullyor analysis of the problem. This brings clarity

to all aspects of the problem.


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Developing Alternative Solutions: After theproblem has been defined, diagnosed on thebasis of relevant information, the manager has todetermine available alternative courses of action

that could be used to solve the problem at hand.Only realistic alternatives should be considered. Itis equally important to take into account time andcost constraints and psychological barriers that

will restrict that number of alternatives. Ifnecessary, group participation techniques may beused while developing alternative solutions asdepending on one solution is undesirable.


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Selecting the Best Solution: After preparingalternative solutions, the next step in thedecision-making process is to select an

alternative that seems to be most rational forsolving the problem. The alternative thusselected must be communicated to those whoare likely to be affected by it. Acceptance of

the decision by group members is alwaysdesirable and useful for its effectiveimplementation


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Converting Decision into Action: After theselection of the best decision, the next step is toconvert the selected decision into an effectiveaction. Without such action, the decision will

remain merely a declaration of good intentions.Here, the manager has to convert 'his decisioninto 'their decision through his leadership. Forthis, the subordinates should be taken in

confidence and they should be convinced aboutthe correctness of the decision. Thereafter, themanager has to take follow-up steps for theexecution of decision taken.


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Ensuring follow up: Feedback is the last step inthe decision-making process. Here, the managerhas to make built-in arrangements to ensurefeedback for continuously testing actual

developments against the expectations. It is likechecking the effectiveness of follow-up measures.Feedback is possible in the form of organisedinformation, reports and personal observations.

Feed back is necessary to decide whether thedecision already taken should be continued or bemodified in the light of changed conditions.

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Unit -5 Decision Making Process