DECISION MAKING

Decision making is the process of making choices by identifying a decision, gathering information, and
assessing alternative resolutions. Using a step-by-step decision-making process can help you make more
deliberate, thoughtful decisions by organizing relevant information and defining alternatives.

Decision-making is perhaps the most important component of a manager's activities. It plays the most
important role in the planning process. When the managers plan, they decide on many matters as what
goals their organisation will pursue, what resources they will use, and who will perform each required task.
According to Andrew Smilagyi, “Decision making is a process involving information, choice of alternative
actions, implementations, and evaluation that is directed to the achievement of certain stated goals.”

Decision making is described as the essence of a manager's job because it is utilized in all four
managerial functions of planning, organizing, leading and controlling. Decisions, both large and small,
are made every day by managers and they have the potential to affect others.

CHARACTERISTICS OF DECISION MAKING

The following are the characteristics of decision making:
• Decision making is a selection process.
• Decision making is the end process. It is preceded by detailed discussion and selection of alternatives.
• Decision making is the application of intellectual abilities to a great extent.
• Decision making is a dynamic process.
• Decision making is situational.
• A decision may be either negative or positive.
• Decision making involves the evaluation of available alternatives through critical appraisal methods.
• Decision is taken to achieve the objectives of an organisation.

TYPE OF DECISIONS
Decisions taken by organization may be classified under various categories depending upon the scope,
importance and the impact that they create in the organization. The following are the different types of
decisions:
a. Programmed and Non-programmed Decisions
Programmed decisions are normally repetitive in nature. They are the easiest to make. For example:
making purchase orders, sanctioning of different types of leave, increments in salary, settlement of
normal disputes, etc. Managers in dealing with such issues of routine nature usually follow the
established procedures. On the other hand, nonprogrammed decisions are different in that they are
non-routine in nature. They are related to some exceptional situations for which there are no
established methods of handling such things. For example: Issues related to handling a serious industrial
relations problem, declining market share, increasing competition, problems with the collaborator,
growing public hostility towards the organization fall in this category.
b. Operational and Strategic Decisions
Operational or tactical decisions relate to the present. The primary purpose is to achieve high degree of
efficiency in the company‘s ongoing operations. Better working conditions, effective supervision,
prudent use of existing resources, better maintenance of the equipment, etc., fall in this category. One
the other hand, expanding the scale of operations, entering new markets, changing the product mix,
shifting the manufacturing facility from one place to the other, striking alliances with other companies,
etc., are
strategic in nature. Such decisions will have far reaching impact on the organization.

c. Organizational and Personal Decisions

Decisions taken by managers in the ordinary course of business in their capacity as managers relating to
the organizational issues are organizational decisions. For example: decisions regarding introducing a
new incentive system, transferring an employee, reallocation or redeployment of employees etc. are
taken by managers to achieve certain objectives. As against such decisions, managers do take some
decisions which are purely personal in nature. However, their impact may not exactly confine to their
selves and they may affect the organization also. For example: the manager‘s decision to quit the
organization, though personal in nature, may impact for the organization.
d. Individual and Group Decisions
It is quite common that some decisions are taken by a manager individually while some decisions are
taken collectively by a group of managers. Individual decisions are taken where the problem is of routine
nature, whereas important and strategic decisions which have a bearing on many aspects of the
organization are generally taken by a group. Group decision making is preferred these days because it
contributes for better coordination among the people concerned with the implementation of the
decision

THE DECISION-MAKING PROCESS

The decision-making process is spreads out in three stages: identifying phase (opportunities, problem,
and crises are recognized and relevant information is collected and problems are more clearly
identified), development phase (alternative solutions to problems are generated and modified) and
selection phase (alternative solutions to problems are generated and modified) and seven steps. The
seven steps followed by the author (Litherland, N., 2013) are: defining the problem, identifying and
limiting the factors, development of potential solutions, analysis of the alternatives, selecting the best
alternative, implementing the decision and establishing a control and evaluation system.
I. Identify the problem
The first step in the decision-making process is identifying the problem. To make a decision, you must
first identify the problem you need to solve. The manager should consider critical or strategic factors in
defining the problem. These factors are, in fact, obstacles in the way of finding proper solution. These
are also known as limiting factors. This process must, as a minimum, identify root causes, limiting
assumptions, system and organizational boundaries and interfaces. First of all, managers must identify
the problem. The problem has to be found and defined. Symptoms are identified and problems should
be judged, symptoms are not problems. They are warning signs of problems. So, managers should
search for symptoms for identification of problems. The first step needed in taking a decision is to have
detected a difference between the current situation and the desired situation. This discrepancy, or
problem, exerts pressure on the managing director, forcing him/her to take action, whether it is in such
fields as company policy, deadlines, financial recession, or concerning future job evaluations, among
other possibilities.
II. Collect relevant information
Once you have identified your decision, it‘s time to gather the information relevant to that choice. After
defining and analyzing the problem, the next step is to develop alternative solutions. The main aim of
developing alternative solutions is to have the best possible decision out of the available alternative
courses of action. In developing alternative solutions the manager comes across creative or original
solutions to the problems.
III. Identify the alternatives
With relevant information now at your fingertips, identify possible solutions to your problem. There is
usually more than one option to consider when trying meeting a goal—for example, if your company is
trying to gain more engagement on social media, your alternatives could include paid social
advertisements, a change in your organic social media strategy, or a combination of the two.
IV. Developing alternative solutions
After defining and analyzing the problem, the next step is to develop alternative solutions. The main aim
of developing alternative solutions is to have the best possible decision out of the available alternative
courses of action. In developing alternative solutions the manager comes across creative or original
solutions to the problems. In modern times, the techniques of operations research and computer
applications are immensely helpful in the development of alternative courses of action. Once you have
identified multiple alternatives, weigh the evidence for or against said alternatives. See what companies
have done in the past to succeed in these areas, and take a good hard look at your own organization‘s
wins and losses. Identify potential pitfalls for each of your alternatives, and weigh those against the
possible rewards.
V. Implementation of the decision
To gathered all relevant information, and developed and considered the potential paths to take. You are
perfectly prepared to choose. After you‘ve ranked your options, you must choose the one that you think
has the strongest chance of achieving your goal. In some instances, you can combine several options,
but in most cases, there will be a clear-cut direction you want to take.
VI. Take action
Once you‘ve made your decision, act on it! Develop a plan to make your decision tangible and
achievable. Use Lucidchart diagrams to plan the projects related to your decision, and then set the team
loose on their tasks once the plan is in place.
VII. Review decision
Last and important step in the decision making process is evaluating your decision for effectiveness.
Follow- up enables to identify the shortcoming or negatives consequences of the decision. It provides
valuable feed- back on which the decision may be reviewed or reconsidered.

Decision Making under various conditions

Generally, the decision maker makes decision under the condition of certainty, risk and uncertainty.
There are three conditions that managers may face as they make decisions. They are (1) Certainty, (2)
Risk, and (3) Uncertainty. These conditions determine the probability of an error in decision making.
All managers make decisions under each condition, but risk and uncertainty are common to the more
complex and unstructured problems faced by top managers. Decisions are made under the condition of
certainty when the manager has perfect knowledge of all the information needed to make a decision.
This condition is ideal for problem solving. The challenge is simply to study the alternatives and choose
the best solution.
When problems tend to arise on a regular basis, a manager may address them through standard or
prepared responses called programmed decisions. These solutions are already available from past
experiences and are appropriate for the problem at hand. A good example is the decision to reorder
inventory automatically when stock falls below a determined level. Today, an increasing number of
programmed decisions are being assisted or handled by computers using decision‐support software.
Structured problems are familiar, straightforward, and clear with respect to the information needed to
resolve them. A manager can often anticipate these problems and plan to prevent or solve them. For
example, personnel problems are common in regard to pay raises, promotions, vacation requests, and
committee assignments, as examples. Proactive managers can plan processes for handling these
complaints effectively before they even occur.
Risk
In a risk environment, the manager lacks complete information. This condition is more difficult. A
manager may understand the problem and the alternatives, but has no guarantee how each solution will
work. Risk is a fairly common decision condition for managers.
When new and unfamiliar problems arise, nonprogrammed decisions are specifically tailored to the
situations at hand. The information requirements for defining and resolving nonroutine problems are
typically high. Although computer support may assist in information processing, the decision will most
likely involve human judgment. Most problems faced by higher‐level managers demand
nonprogrammed decisions. This fact explains why the demands on a manager's conceptual skills
increase as he or she moves into higher levels of managerial responsibility.
A crisis problem is an unexpected problem that can lead to disaster if it's not resolved quickly and
appropriately. No organization can avoid crises, and the public is well aware of the immensity of
corporate crises in the modern world. The Chernobyl nuclear plant explosion in the former Soviet Union
and the Exxon Valdez spill of years past are a couple of sensational examples. Managers in more
progressive organizations now anticipate that crises, unfortunately, will occur. These managers are
installing early‐warning crisis information systems and developing crisis management plans to deal with
these situations in the best possible ways.
Uncertainty
When information is so poor that managers can't even assign probabilities to the likely outcomes of
alternatives, the manager is making a decision in an uncertain environment. This condition is the most
difficult for a manager. Decision making under conditions of uncertainty is like being a pioneer entering
unexplored territory. Uncertainty forces managers to rely heavily on creativity in solving problems: It
requires unique and often totally innovative alternatives to existing processes. Groups are frequently
used for problem solving in such situations. In all cases, the responses to uncertainty depend greatly on
intuition, educated guesses, and hunches — all of which leave considerable room for error.
These unstructured problems involve ambiguities and information deficiencies and often occur as new
or unexpected situations. These problems are most often unanticipated and are addressed reactively as
they occur. Unstructured problems require novel solutions. Proactive managers are sometimes able to
get a jump on unstructured problems by realizing that a situation is susceptible to problems and then
making contingency plans. For example, at the Vanguard Group, executives are tireless in their
preparations for a variety of events that could disrupt their mutual fund business. Their biggest fear is an
investor panic that overloads their customer service system during a major plunge in the bond or stock
markets. In anticipation of this occurrence, the firm has trained accountants, lawyers, and fund
managers to staff the telephones if needed.