Definition of Decision Making
Decision-making can be regarded as the cognitive (mental ability)
process resulting in the selection of a belief or a course of action among
several alternative possibilities. Every decision-making process produces a
final choice that may or may not prompt action. Decision-making is the study of
identifying and choosing alternatives based on the values and preferences of
the decision maker. Decision-making is one of the central activities of
management and is a huge part of any process of implementation.
process resulting in the selection of a belief or a course of action among
several alternative possibilities. Every decision-making process produces a
final choice that may or may not prompt action. Decision-making is the study of
identifying and choosing alternatives based on the values and preferences of
the decision maker. Decision-making is one of the central activities of
management and is a huge part of any process of implementation.
Decision-making
is a crucial part of good business. The question then is ‘how is a good
decision made? One part of the answer is good information, and experience in
interpreting information. Consultation ie seeking the views and expertise of
other people also helps, as does the ability to admit one was wrong and change
one’s mind. There are also aids to decision-making, various techniques which
help to make information clearer and better analysed, and to add numerical and
objective precision to decision-making (where appropriate) to reduce the amount
of subjectivity.
is a crucial part of good business. The question then is ‘how is a good
decision made? One part of the answer is good information, and experience in
interpreting information. Consultation ie seeking the views and expertise of
other people also helps, as does the ability to admit one was wrong and change
one’s mind. There are also aids to decision-making, various techniques which
help to make information clearer and better analysed, and to add numerical and
objective precision to decision-making (where appropriate) to reduce the amount
of subjectivity.
Managers
can be trained to make better decisions. They also need a supportive
environment where they won’t be unfairly criticised for making wrong decisions
(as we all do sometimes) and will receive proper support from their colleague
and superiors. A climate of criticism and fear stifles risk-taking and
creativity; managers will respond by ‘playing it safe’ to minimise the risk of
criticism which diminishes the business’ effectiveness in responding to market
changes. It may also mean managers spend too much time trying to pass the blame
around rather than getting on with running the business.
can be trained to make better decisions. They also need a supportive
environment where they won’t be unfairly criticised for making wrong decisions
(as we all do sometimes) and will receive proper support from their colleague
and superiors. A climate of criticism and fear stifles risk-taking and
creativity; managers will respond by ‘playing it safe’ to minimise the risk of
criticism which diminishes the business’ effectiveness in responding to market
changes. It may also mean managers spend too much time trying to pass the blame
around rather than getting on with running the business.
Decision-making
increasingly happens at all levels of a business. The Board of Directors may
make the grand strategic decisions about investment and direction of future growth,
and managers may make the more tactical decisions about how their own
department may contribute most effectively to the overall business objectives.
But quite ordinary employees are increasingly expected to make decisions about
the conduct of their own tasks, responses to customers and improvements to
business practice. This needs careful recruitment and selection, good training,
and enlightened management.
increasingly happens at all levels of a business. The Board of Directors may
make the grand strategic decisions about investment and direction of future growth,
and managers may make the more tactical decisions about how their own
department may contribute most effectively to the overall business objectives.
But quite ordinary employees are increasingly expected to make decisions about
the conduct of their own tasks, responses to customers and improvements to
business practice. This needs careful recruitment and selection, good training,
and enlightened management.
Types of decision for achieving organisational
goals
goals
1. Strategic Decisions
Strategic decisions are
those that affect the direction of the firm. These major decisions concern
areas such as new products and markets, acquisitions and mergers, subsidiaries
and affiliates, joint ventures and strategic alliances, and other matters. Strategic
decision making is usually conducted by the firm’s top management, led by the
CEO or president of the company.
those that affect the direction of the firm. These major decisions concern
areas such as new products and markets, acquisitions and mergers, subsidiaries
and affiliates, joint ventures and strategic alliances, and other matters. Strategic
decision making is usually conducted by the firm’s top management, led by the
CEO or president of the company.
In markets characterized by
extreme competition and a rapid pace of change, companies are being forced to
compete on the edge. Their strategic thinking can no longer be limited to
identifying promising industries, core competencies, and strategic positions.
Rather, top management is engaged in creating a continuing flow of temporary
and shifting competitive advantages relative to other competitors and the
market being served. As a result, greater emphasis is placed on efficient
strategic decision making to create effective strategies.
extreme competition and a rapid pace of change, companies are being forced to
compete on the edge. Their strategic thinking can no longer be limited to
identifying promising industries, core competencies, and strategic positions.
Rather, top management is engaged in creating a continuing flow of temporary
and shifting competitive advantages relative to other competitors and the
market being served. As a result, greater emphasis is placed on efficient
strategic decision making to create effective strategies.
Strategic decision makers at more effective firms were
able to make quick, high-quality decisions that were widely supported
through-out the firm. There are four areas in which effective strategic
decision makers outperformed counterparts at less effective firms: (1) building
collective intuition, (2) stimulating conflict, (3) maintaining a pace or
schedule for decision making, and (4) defusing political behavior.
able to make quick, high-quality decisions that were widely supported
through-out the firm. There are four areas in which effective strategic
decision makers outperformed counterparts at less effective firms: (1) building
collective intuition, (2) stimulating conflict, (3) maintaining a pace or
schedule for decision making, and (4) defusing political behavior.
2. Tactical decisions:
These decisions relate to the implementation of
strategic decisions. They are directed towards developing divisional plans,
structuring workflows, establishing distribution channels, acquisition of
resources such as men, materials and money. These decisions are taken at the
middle level of management.
strategic decisions. They are directed towards developing divisional plans,
structuring workflows, establishing distribution channels, acquisition of
resources such as men, materials and money. These decisions are taken at the
middle level of management.
3.
Operational Decisions:
Operational Decisions:
These decisions relate to day-to-day operations of
the enterprise. They have a short-term horizon as they are taken repetitively.
These decisions are based on facts regarding the events and do not require much
of business judgement. Operational decisions are taken at lower levels of management.
As the information is needed for helping the manager to take rational, well
informed decisions, information systems need to focus on the process of
managerial decision making.
the enterprise. They have a short-term horizon as they are taken repetitively.
These decisions are based on facts regarding the events and do not require much
of business judgement. Operational decisions are taken at lower levels of management.
As the information is needed for helping the manager to take rational, well
informed decisions, information systems need to focus on the process of
managerial decision making.
4. Programmed Decisions
Programmed
decisions are those that a manager has encountered and made in the past. The
decision the manager made was correct because she used the assistance of
company policies, computations or a set of decision-making guidelines. In
addition to being well structured with predetermined rules regarding the
decision-making process, programmed decisions may also be repetitive or routine
as their outcome was successful in the past. It generally does not take a
manager as long to come to a conclusion when faced with a business-related
programmed decision because the challenge faced is not new. As a result,
programmed decisions allow a manager to make streamlined and consistently
effective choices.
decisions are those that a manager has encountered and made in the past. The
decision the manager made was correct because she used the assistance of
company policies, computations or a set of decision-making guidelines. In
addition to being well structured with predetermined rules regarding the
decision-making process, programmed decisions may also be repetitive or routine
as their outcome was successful in the past. It generally does not take a
manager as long to come to a conclusion when faced with a business-related
programmed decision because the challenge faced is not new. As a result,
programmed decisions allow a manager to make streamlined and consistently
effective choices.
Example
of a programmed decision from a business perspective, a company may create a
standard routine for handling technical issues, customer service problems or
disciplinary matters. An employee’s duties may become routine with repetition,
like the process a mechanic uses to troubleshoot problems with a customer’s
car.
of a programmed decision from a business perspective, a company may create a
standard routine for handling technical issues, customer service problems or
disciplinary matters. An employee’s duties may become routine with repetition,
like the process a mechanic uses to troubleshoot problems with a customer’s
car.
5. Unprogrammed Decisions
Unprogrammed
decisions involve scenarios that are new or novel and for which there are no
proven answers to use as a guide. In such a case, a manager must make a
decision that is unique to the situation and results in a tailored solution.
Unprogrammed decisions generally take longer to make because of all the
variables an individual must weigh; and the fact that the information available
is incomplete, so a manager cannot easily anticipate the outcome of his
decision. For example in the business world, the makers of the earliest
personal computers had to make unprogrammed decisions regarding the type of
marketing to use to attract customers who possibly had never used a computer in
the past. Fast-food companies also had to make an unprogrammed decision
regarding consumer concerns about high fat contents and lack of healthy menu
options.
decisions involve scenarios that are new or novel and for which there are no
proven answers to use as a guide. In such a case, a manager must make a
decision that is unique to the situation and results in a tailored solution.
Unprogrammed decisions generally take longer to make because of all the
variables an individual must weigh; and the fact that the information available
is incomplete, so a manager cannot easily anticipate the outcome of his
decision. For example in the business world, the makers of the earliest
personal computers had to make unprogrammed decisions regarding the type of
marketing to use to attract customers who possibly had never used a computer in
the past. Fast-food companies also had to make an unprogrammed decision
regarding consumer concerns about high fat contents and lack of healthy menu
options.
Stages Involved in Decision Making for Achieving
Organisational Goals
Organisational Goals
Seven
most essential steps involved in decision making process are: 1. Define the
problem, 2. Analysing the problem, 3. Developing alternative solutions, 4.
Selecting the best type of alternative, 5. Implementation of the decision, 6.
Follow up, 7. Monitoring and feedback!
most essential steps involved in decision making process are: 1. Define the
problem, 2. Analysing the problem, 3. Developing alternative solutions, 4.
Selecting the best type of alternative, 5. Implementation of the decision, 6.
Follow up, 7. Monitoring and feedback!
Decision-making
is concerned with the selection of one alternative course of action from two or
more alternative courses of action. Precisely it can be stated as a
choice-making activity.
is concerned with the selection of one alternative course of action from two or
more alternative courses of action. Precisely it can be stated as a
choice-making activity.
These steps can be explained as under:
1. Define the problem:
The
first and the foremost step in the decision-making process are to define the
real problem. A problem can be explained as a question for and appropriate
solution. 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.
first and the foremost step in the decision-making process are to define the
real problem. A problem can be explained as a question for and appropriate
solution. 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.
For
example, if a machine stops working due to non-availability of screw, screw is
the limiting factor in this case. Similarly fuse is a limiting or critical
factor in house lighting. While selecting alternative or probable solution to
the problem, the more the decision-making takes into account those factors that
are limiting or critical to the alternative solutions, the easier it becomes to
take the best decision.
example, if a machine stops working due to non-availability of screw, screw is
the limiting factor in this case. Similarly fuse is a limiting or critical
factor in house lighting. While selecting alternative or probable solution to
the problem, the more the decision-making takes into account those factors that
are limiting or critical to the alternative solutions, the easier it becomes to
take the best decision.
Other
examples of critical or limiting factor may be materials, money, managerial
skill, technical know-how, employee morale and customer demand, political
situation and government regulations, etc.
examples of critical or limiting factor may be materials, money, managerial
skill, technical know-how, employee morale and customer demand, political
situation and government regulations, etc.
2. Analysing the problem:
After
defining the problem, the next important step is a systematic analysis of the
available data. Sound decisions are based on proper collection, classification
and analysis of facts and figures.
defining the problem, the next important step is a systematic analysis of the
available data. Sound decisions are based on proper collection, classification
and analysis of facts and figures.
There are three principles relating to the analysis
and classification as explained below:
and classification as explained below:
(i) The futurity of the decision. This means to
what length of time, the decision will be applicable to a course of action.
what length of time, the decision will be applicable to a course of action.
(ii) The impact of decision on other functions and
areas of the business.
areas of the business.
(iii) The qualitative considerations which come
into the picture.
into the picture.
3. Developing alternative solutions:
After
defining and analysing 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.
defining and analysing 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.
modern times, the techniques of operations research and computer applications
are immensely helpful in the development of alternative courses of action.
4. Selecting the best type of alternative:
After
developing various alternatives, the manager has to select the best
alternative. It is not an easy task. The
following are the four important points to be kept in mind in selecting the
best from various alternatives:
developing various alternatives, the manager has to select the best
alternative. It is not an easy task. The
following are the four important points to be kept in mind in selecting the
best from various alternatives:
a. Risk
element involved in each course of action against the expected gain.
element involved in each course of action against the expected gain.
b. Economy
of effort involved in each alternative, i.e. securing desired results with the
least efforts.
of effort involved in each alternative, i.e. securing desired results with the
least efforts.
c. Proper
timing of the decision and action.
timing of the decision and action.
d. Final
selection of decision is also affected by the limited resources available at
our disposal. Human resources are always limited. We must have right type of
people to carry out our decisions. Their calibre, understanding, intelligence
and skill will finally determine what they can and cannot do.
selection of decision is also affected by the limited resources available at
our disposal. Human resources are always limited. We must have right type of
people to carry out our decisions. Their calibre, understanding, intelligence
and skill will finally determine what they can and cannot do.
5. Implementation of the decision:
Under
this step, a manager has to put the selected decision into action. For proper and effective execution of the
decision, three things are very important i.e.,
this step, a manager has to put the selected decision into action. For proper and effective execution of the
decision, three things are very important i.e.,
a. Proper
and effective communication of decisions to the subordinates. Decisions should
be communicated in clear, concise and understandable manner.
and effective communication of decisions to the subordinates. Decisions should
be communicated in clear, concise and understandable manner.
b. Acceptance
of decision by the subordinates is important. Group participation and
involvement of the employees will facilitate the smooth execution of decisions.
of decision by the subordinates is important. Group participation and
involvement of the employees will facilitate the smooth execution of decisions.
c. Correct
timing in the execution of decision minimizes the resistance to change. Almost
every decision introduces a change and people are hesitant to accept a change.
Implementation of the decision at the proper time plays an important role in
the execution of the decision.
timing in the execution of decision minimizes the resistance to change. Almost
every decision introduces a change and people are hesitant to accept a change.
Implementation of the decision at the proper time plays an important role in
the execution of the decision.
6. Follow up:
A
follow up system ensures the achievement of the objectives. It is exercised
through control. Simply stated it is concerned with the process of checking the
proper implementation of decision. Follow up is indispensable so as to modify
and improve upon the decisions at the earliest opportunity.
follow up system ensures the achievement of the objectives. It is exercised
through control. Simply stated it is concerned with the process of checking the
proper implementation of decision. Follow up is indispensable so as to modify
and improve upon the decisions at the earliest opportunity.
7. Monitoring and feedback:
Feedback
provides the means of determining the effectiveness of the implemented
decision. If possible, a mechanism should be built which would give periodic
reports on the success of the implementation. In addition, the mechanisms
should also serve as an instrument of “preventive maintenance”, so that the
problems can be prevented before they occur.
provides the means of determining the effectiveness of the implemented
decision. If possible, a mechanism should be built which would give periodic
reports on the success of the implementation. In addition, the mechanisms
should also serve as an instrument of “preventive maintenance”, so that the
problems can be prevented before they occur.
The
monitoring system should be such that the manager can go and look for himself for
first hand information which is always better than the written reports or other
second-hand sources. In many situations, however, computers are very
successfully used in monitoring since the information retrieval process is very
quick and accurate and in some instances the self-correcting is instantaneous.
monitoring system should be such that the manager can go and look for himself for
first hand information which is always better than the written reports or other
second-hand sources. In many situations, however, computers are very
successfully used in monitoring since the information retrieval process is very
quick and accurate and in some instances the self-correcting is instantaneous.
What to do when a business decision fails
In the business world, even
the best though off or carefully planned decision is not immune to failure.
When this happens, where are some of the steps available for the business
manager to remedy the failure:
the best though off or carefully planned decision is not immune to failure.
When this happens, where are some of the steps available for the business
manager to remedy the failure:
·
Improve the setting: Organizing better meetings (focused agenda, clear
questions, current and detailed information, necessary personnel) can be a very
helpful step in effective decision making. Avoid the garbage can; get the relevant
people in the same room at the same time. Pay attention to planning and seek
closure.
Improve the setting: Organizing better meetings (focused agenda, clear
questions, current and detailed information, necessary personnel) can be a very
helpful step in effective decision making. Avoid the garbage can; get the relevant
people in the same room at the same time. Pay attention to planning and seek
closure.
·
Use Logical Techniques. Decision making is a simple process when approached
in a logical and purposeful manner. Small businesses that are able to perceive
the problem, gather and present data, intelligently discuss the data, and implement
the decision without succumbing to emotionalism are apt to make good ones that
will launch the firm on a prosperous course.
Use Logical Techniques. Decision making is a simple process when approached
in a logical and purposeful manner. Small businesses that are able to perceive
the problem, gather and present data, intelligently discuss the data, and implement
the decision without succumbing to emotionalism are apt to make good ones that
will launch the firm on a prosperous course.
·
Evaluate decisions and
decision making patterns. Evaluation tends to focus the attention, and make individuals and teams
more sensitive to what they are actually doing in their decision making tasks.
Evaluation is especially helpful in today’s business environment because of the
interdependency of individuals and departments in executing tasks and
addressing goals.
Evaluate decisions and
decision making patterns. Evaluation tends to focus the attention, and make individuals and teams
more sensitive to what they are actually doing in their decision making tasks.
Evaluation is especially helpful in today’s business environment because of the
interdependency of individuals and departments in executing tasks and
addressing goals.
·
Determine appropriate
levels of decision making. Business enterprises need to make sure that operational decisions are
being made at the right level. Keys to avoiding micromanagement and other decision making pitfalls include: giving
problems their proper level of importance and context; addressing problems in
an appropriate time frame; and establishing and shifting decision criteria in
accordance with business goals.
Determine appropriate
levels of decision making. Business enterprises need to make sure that operational decisions are
being made at the right level. Keys to avoiding micromanagement and other decision making pitfalls include: giving
problems their proper level of importance and context; addressing problems in
an appropriate time frame; and establishing and shifting decision criteria in
accordance with business goals.
References
Hammond, J. (1999). Smart Choices: A Practical Guide to Making
Better Decisions. Boston: Harvard Business School Press, 1999.
Better Decisions. Boston: Harvard Business School Press, 1999.
Nightingale, J. (2008). Think
Smart – Act Smart: Avoiding The Business Mistakes That Even Intelligent People
Make. John Wiley & Sons. p. 1.
Smart – Act Smart: Avoiding The Business Mistakes That Even Intelligent People
Make. John Wiley & Sons. p. 1.
Smriti, C. (2014). Decisions Making: Strategic, Tactical and Operational Decisions.
Retrieved from http://www.yourarticlelibrary.com/information-technology/decisions-making-strategic-tactical-and-operational-decisions-business-management/10271/ on December 9, 2014
Retrieved from http://www.yourarticlelibrary.com/information-technology/decisions-making-strategic-tactical-and-operational-decisions-business-management/10271/ on December 9, 2014
Smriti, C. (2014). Decision Making: 7 Steps Involved in Decision Making. Retrieved from http://www.yourarticlelibrary.com/decision-making/decision-making-7-steps-involved-in-decision-making-business-management/25659/ on December 9, 2014
Richards,
F. (2014). What
Is the Difference Between Programmed & Unprogrammed Decisions From a
Business Perspective? Retrieved from http://smallbusiness.chron.com/difference-between-programmed-unprogrammed-decisions-business-perspective-25876.html
on December 9, 2014
F. (2014). What
Is the Difference Between Programmed & Unprogrammed Decisions From a
Business Perspective? Retrieved from http://smallbusiness.chron.com/difference-between-programmed-unprogrammed-decisions-business-perspective-25876.html
on December 9, 2014
