Meaning of Decision Making

Different problems are confronted in day to day operation of an organization. Such problems can be solved through the best possible alternative course of action. The process of selecting the best course of action to solve any problem is called decision making.

 Decision making is the process of selecting a course of action out of many alternatives for the solution of a problem. It is the act of choosing the most feasible course of action out of numerous alternative courses of action. It is a managerial function that prevents and tackles obstacles and obstructions due to problems of various nature during or not during the course of operation of the organization.

Decision making  smooths all organizational functions and ensures pre-determined goals of the organization are attained in time. The effectiveness of the decision taken depends upon the decision making ability of the managers and the decision making situation.

Key Definitions

Defined By	Definition
Ricky W. Griffin	“Decision making is the act of choosing one alternative from among a set of alternatives”
George R. Terry	“Decision making is the selection based on some criteria from two or more possible alternatives”
Koontz and Weihrich	“Decision making is defined as the selection of course of action from among alternatives”
Robert Kreitner	“Decision making is the process of identifying and choosing an alternative course of action in a manner appropriate to the demands of the situation”

From the above discussion and definitions:

• Decision making is a process of selecting the best course of action from among available alternatives.
• It aims at solving problems to ensure all conducts are on track to achieve organizational goals.
• It reduces the possible adverse impact of any problem and facilitates handling such problems with ease within the time, cost and effort of the employees of the organization.
• Decision making is the act of choosing the best course of action from multiple alternatives to solve existing and prevent future problems.

Nature/Characteristics of Decision Making

• It is a selective process that chooses one alternative over many available alternatives
• It is a human and rational process as the decision is taken by an individual or group rationally through mental exercises
• Decision making is dependent upon the knowledge, skills, abilities and experiences of the decision-maker
• It is a dynamic process that considers time, resource and environmental factors of the organization
• Decision making is a goal-oriented process as every decision taken are guided and intended towards the accomplishment of organizational goals
• It is a continuous process as the act of decision making never stops in an organization
• Every decision taken has an either positive or negative impact

Different Types of Decisions

Managers have to take different decisions based on the time and need of the organization. There are different types of decisions to be taken in different situations. The types of decisions taken by managers have been explained below:

1. Programmed and Non-Programmed Decisions:

Programmed decisions are decisions for regular and repetitive problems in an organization. These are ready-made decisions for any given ready-made problems or situations. Such decisions are taken based on past experience and decisions under similar situations. These decisions are taken by departmental heads, a section incharge, unit chiefs and supervisors within the current policy and practice of the organization. On the other hand, non-programmed decisions are unique or creative decisions taken to tackle those problems which have never occurred before. These are decisions taken for new challenges or problems. Managers do not have a ready-made solution to such decision situations and derive solutions after rational evaluation of available information. Such decisions are taken mostly by top-level managers in an organization.

• Routine and Basic Decisions:

Routine decisions are taken during day to day operation of the organization. These decisions are taken and implemented promptly. Such decisions are taken to tackle problems of regular and repetitive nature. These decisions are taken by lower-level managers to ensure continuity of organizational activities. On the other hand, basic decisions are strategic decisions taken for the long-term growth and survival of the organization. Such decisions require an in-depth study of future impact, creativity, intuition and judgment of management is needed.  Basic decisions are mostly taken by top-level management concerning business expansion, replacement of assets, recruitment and selection of new employees etc.

• Personal and Organizational Decisions:

Personal decisions are informal or individual decisions taken based on personal knowledge, skills and abilities. Such decisions are takenbased onthe personal interest, desire and necessity of the decision-maker. These decisions do not affect the regular performance of the organization. It includes decisions such as voluntary retirement, not to go for higher studies, accept or reject promotion offers etc. On the other hand,  organizational decisions are formal or official decisions taken within the limit of authority in the organization. For taking such decisions, the decision-maker has to follow all the procedures, systems, hierarchies and formalities within the organization. Such decisions are directly implemented after they are taken. The authority to take such decisions can be delegated to subordinates as per the rule and practices of the organization.

• Individual and Group Decisions:

Individual decisions are those decisions taken by an individual solely. The decision-maker uses his/her knowledge, skills, experience and ideas to take such decisions. Importantly, such decisions should not go beyond rules, regulations and delegated authority in the organization. These include decisions taken by a sole trader, department head, group leader etc. on his/her own without considering others. ON the other hand, group decisions are taken by a group such as the board of directors, management committee, partners etc. For such decisions, proper discussion among group members is done and the final course is decided. Such types of decisions are taken in large organizations such as partnership firms, co-operatives, joint-stock companies etc.

• Policy and Operational Decisions:

Policy decisions are decisions of long-term impact and nature that are taken by top-level management. This includes decisions of new or amendment of rules, product, process, or technology. On the other hand, operational decisions are concerned with day to day operation of the organization taken by operation-level managers. Such decisions are taken to implement policies and plans decided by top management. Decisions such as a change in work schedule, amount of remuneration to employees, set up of machine and equipment etc. are some examples of operational decisions. 

• Decisions under Certainty and Uncertainty:

In a decision under certainty, the outcome of the decisions is known to the decision-maker. In such a situation, the decision-maker knows the outcome based on past achievement, present performance and future forecast. Due to this, the decision-maker can easily predict the outcome of the course initiated as decisions. On the other hand, the future cannot be predicted completely at the time of making decisions. This is the condition of uncertainty where the decision-maker uses forecasts, intuitions and future expectations to make decisions at his/her own risk. The impact of decisions taken under conditions of uncertainty may or may not meet the need or expectations of the decision-maker.

The Decision Making Process

Decision making is a continuous and dynamic process. It is the process of solving problems and issues related to working. It involves series of steps to be followed while arriving at a decision. Following are the steps involved in making a rational decision:

Step 1: Identification of Problem

The first step in the decision making process is to identify the problem. The problem is the deviation between planned performance and actual performance. The reason behind such deviation is either due to internal or external factors. Such factor and the root cause of the problem is also identified. The manager uses his/her intelligence, knowledge, skills, abilities and experiences to conclude problem status. This step is concerned with recognizing a problem and problem situation. 

Step 2:  Analysis of Problem

After recognition of the problem, the problem has to be analyzed in this step. Such analysis is noting down the cause and effect of the problem. The problem can be analyzed by collecting all the facts, data and information about the problem. The availability of such data, facts and information about the problem depends upon the nature, frequency and complexity of the problem. Such analysis is concerned with knowing the sources of the problem to ensure the right and relevant diagnosis of the problem can be done.

Step 3:  Development of Alternatives

A problem can be solved in different ways. These different ways of solving a problem are the alternatives. After analyzing a problem, different solution alternatives for it should be developed. Development of alternatives is a mental process requiring creativity and innovation. Techniques like an expert opinion, group discussion, creditors’ and customers’ surveys etc. can be used to generate numerous alternatives to solve a problem. A hand full of alternatives help in identifying the most suitable one for solving the analyzed problem. For developing alternatives, managers should devote more time and effort to creativity and innovation to solve the problem considering its different dimensions.

Step 4:  Evaluation of Alternatives

After the development of alternatives, each alternative should be studied and evaluated. They should be studied considering effort dedicated and outcomes expected from alternatives. While evaluating any alternative solution, the following things should be considered:

• Feasibility of the alternative solution in terms of time, cost, legal constraints, human and other resources
• Satisfactory level of the alternative to solve the problem
• Favourability of the consequence of the alternative for the organization

Only after considering the above facts of all alternatives, the best alternative can be identified. Moreover, it is necessary for evaluating each alternative in terms of cost and benefit concerned with them.

Step 5:  Selection of Best Alternative

In this step, the best alternative is selected after making a proper evaluation of all the developed alternatives. It is about identifying and choosing the best alternative course to solve a problem. While making such a selection of best alternatives, the following approaches should be used:

• Experience
• Experimentation
• Research and analysis
• Personal value and aspiration

Importantly, the above approaches are used to choose the best alternative. While making such a decision, the feasibility, satisfactory to solve the problem and the favorable consequences to the organization is duly considered. Moreover, the best alternative is chosen which has a combination of minimum cost, efficiency, optimum resource utilization, the optimum time and effort need, financial viability etc.

Step 6:  Implementation of Alternative

This is the operational stage where the selected alternative is implemented. This is the most challenging step in the decision making process. Most decision-makers are good up a selection of the best alternative. But their efficiency and effectiveness are very poor in implementation. This is the step where the selected alternative is operated or performed in reality. It is the real test of the decision maker’s ability to materialize what has been selected as the best alternative solution. Therefore, to ensure effective implementation, the decision-maker has to provide instruction to the operational authorities and communicating with them from time to time. The decision-maker has to best use his/her co-ordinating and communicating skills to make implementation effective.

Step 7:  Review of Implementation

The outcomes of implemented alternative should be measured and evaluated from time to time This is crucial to know about the feedback of performance. The implementation of the best alternative does not necessarily mean the certainty of accomplishment of desired objectives or results. Therefore, regular review and routine follow-up are required after an alternative has been implemented. Such follow-up helps to know anydeviation between what it is and what it should have been. This means a review of implementation helps in finding the deviation of actual and planned performance and control it through corrective actions wherever required.

Importance/Role of Decision Making

Decision making is concerned with every activity performed in an organization. Every manager makes decisions in performing different managerial functions and roles. Good decisions taken can only ensure the timely accomplishment of organizational goals. Due to this, it is regarded as the most important function in management. The importance of decision making has been discussed below:

1. Execution of Managerial Functions:

There are different functions in management. Planning, organizing, staffing, leading and controlling are major functions in management. A decision has to be taken while performing each of these functions. Planning is deciding in advance the future course of action. Organizing is deciding the structural, hierarchical and contextual dimensions of the organization. Likewise, staffing is concerned with deciding the entire course of recruiting, selecting and placing the right man at the right work at the right time. Leading is deciding upon tools and schemes through which the behavior of employees is to be influenced. Similarly, controlling is deciding the deviation of actual and standard performance and corrective measures needed. In this way, decision making is highly significant to execute all managerial functions.

• Evaluation of Managerial Performance:

It is a decision that determines the level of performance. A good decision taken ensures no deviation between actual and required performance. On the other hand, if a decision taken is not good, actual performance always deviates from required performance. The quality of decisions taken determines the intensity, interest and direction of activities towards the accomplishment of set goals. Performance is subject to the timeliness and correctness of the decision taken. Hence, evaluation of performance is based on performance guided by decisions taken.

• Establishment of Policies:

All the policies of an organization are established through decision making. This includes policies related to human resources, material procurement and handling, technological adaptations, financial management, organizational re-design, product positioning etc. Policies are related to what, when, how, where, who etc. to perform different organizational activities are determined through decision making.

• Changes and Challenges:

Decision making helps in coping with changes and handling challenges in an organization. No changes can be initiated without taking decisions. Every forced or planned changes come with corresponding challenges. Such challenges are addressed by taking necessary decisions by the managers. Successful implementation of changes and management of challenges is determined by the quality and timeliness of decisions taken. This means changes and challenges in an organization can be tackled properly only through effective decision making.

• Optimum Utilization of Resources:

An organization consists of human and non-human resources. These resources are to be used to achieve desired objectives. A decision is needed to use, utilize and mobilize available resources in the organization. Decisions are taken ensuring no resources remain idle, underutilized, or over-utilized. Organizational goals can be achieved only through optimum utilization of these resources. Such optimum utilization is ensured through decision making in an organization.

• Employee Motivation:

Different employee-related strategies and policies are developed through decision making. It includes recruitment, selection, socialization, placement, transfer, promotion etc. related to employees. Further, employee incentives, benefits and development are also decided through taking crucial decisions. All such decisions intend to motivate employees and keep their morale high with better job satisfaction and quality of work life.

• Accomplishment of Goals:

All decisions taken in an organization are intended and directed towards the accomplishment of goals. All activities from goal setting to development of road map and implementation plan are finalized through decision making. Through decision making, the best alternative course to act is decided which facilitatesthe accomplishment of goals.

Group Decision Making

Group decision making is the process of taking decisions collectively by group members. This is more increasing in modern organizations as an individual may not have sufficient knowledge of everything concerned with an issue or problem.Group decision making increases the quality of decisions taken in a participative manner. Such an approach is used mostly to take programmed decisions concerning the vision, mission, strategies, policies, plans and objectives of the organization.

Group decision making  is a systematic process through which two or more individuals put together thoughts, ideas, experiences, intuitions, expertise and knowledge to arrive at a decision. It is used to enhance the quality and effectiveness of decisions for better accomplishment of organizational goals. Such an approach to decision making is being preferred over an individualistic approach by organizations around the world. Such group decision making follows the following steps to arrive at the final decision:

• First of all, the problem is diagnosed after it is identified and all relevant information  is duly collected
• After a diagnosis of the problem, all the possible alternatives to solve such problem is developed within the constraints of time, cost and resources
• When all alternatives are developed and tested, each of them is evaluated based on feasibility, viability and suitability to the organization
• One best alternative is chosen after evaluating all the alternatives developed
• Finally, the selected alternative is implemented as a decision and regular monitoring of such implemented decision is done

Why group decision making instead of individual decision making?

In recent global management practice, a group is given higher importance than an individual. A group brings synergy in all the activities done for the accomplishment of the organizational goals or objectives. A group is a quality and diverse pool of knowledge, skill, competence, experience, wisdom etc. Hence, any managerial function performed in a group has better productivity, efficiency and effectiveness. This is no different in the context of group decision making. The reasons for preference of group decision making over individual decision making have been outlined below:

• A large number of group members provide a large variety of information, intelligence, wisdom and knowledge
• A decision taken in a group have higher acceptance among group members and concerned stakeholders of the decision
• Many minds in a group have multiple dimensions of creativity and innovative ideas resulting in an increased number of possible alternatives
• More involved, participative and legitimacy of the decision making
• Opinions of diverse and distinct dimensions can be obtained in a group which helps in making the decision more qualitative
• Active participation of group members means better team-building with synergy and efficiency
• IT promotes collective decision making through collective expert opinions and contribution of ideas
• Group decisions taken with a wide range of expert opinions, information, thought etc. make the decision strong as compared to a decision taken single-handedly
• Timely accomplishment of goals as group effort contribute remarkably as compared to just an individual’s effort