Meaning and definition of decision making
Decision Making is an integral part of management which is at the core of planning and
applied in every function of management. Peter F. Drucker has rightly said “Whatever a
manager does he does through decision making”. Managers at all levels are engaged in
decision making of one kind or the other, Management and decision making go hand in hand.
Every manager constantly makes decisions. Decision making is a combination of thinking,
deciding and action
Decision making involves the selection of particular course of action among alternative
courses of action. It is a course of action deliberately and consciously chosen from two or
more alternatives for accomplishing a desired result.
Definition
According to Geroge R. Terry, “Decision making is the selecting of an alternative from two
or more alternatives to determine an opinion or course of action”.
Types decisions
1. Personal and Organisational decisions: A personal decision is one which a manager
takes in his individual capacity and not as a member of the organisation. These decisions
have no binding on the organisation and cannot be delegated to others. Whereas, an
organization decision is one which a manager takes in his official capacity and on behalf of
the organization. Authority with regard to such decisions can be delegated to others.
2. Policy and Operating decisions: Policy decisions are of vital importance as they affect
the entire organisation. They are normally taken by the top management. But, operating
decisions are taken for implementing policy decisions. These decisions are taken by the lower
level management. They are concerned with day to day operations of an Oranization.
3. Strategic and Routine decisions: Strategic decisions or basic decisions are important
decisions taken by the top and middle level management. They normally involve long term
commitments. These decisions are related to the handling of the external environment which
is uncontrollable. Example: development of a new product is a strategic decision which
requires much thinking and deliberation. A mistake in such a decision will affect the entire
organisation.
Whereas, routine decisions or tactical decisions are of a recurring nature which affect only a
small part of the organisation. These decisions are taken by the lower and middle
management. They are based upon well-established procedures, rules and policies which do
not require any extra effort on the part of the manager who makes these decisions.
4. Programmed and Non-Programmed decisions: ” Programmed decisions are of a
repetitive and routine nature for which specific procedures already exist in the enterprise.
They do not require independent judgement on the part of the manager and they deal with
only familiar problems. They are otherwise called as structured decisions. Non-programmed
or unstructured decisions have no standard procedure for handling problems because they
arise from unstructured problems. They deal with unexpected situations which require a great
deal of imagination and independent judgement.
5. Individual and Group decisions: When a decision is taken by a single person it is called
an individual decision. These decisions are taken generally in a small enterprise and in those
enterprises which have an autocratic style of management. Group decisions are taken by a
group of persons. It is also called collective decision. Group decisions are considered better
than individual decisions because two heads and always better than one.
The Process of decision making
Decision making is a complex mental activity which requires careful thinking, analysis and
verification. It is a dynamic process which is influenced by multiple forces. It involves the
entire process of establishing goals, defining he problem, searching for alternatives and
developing plans in order to establish the best answer to the decision problem. The following
are the different steps involved in the decision making process:-
1. Defining the problem:
This involves clear recognition, identification and formulation of the problem.
A problem is a question put forward for solution. In an oranisation a problem may arise
due to unfulfilled goals or due to deviations from the desired state of affairs. it is necessary to
specify the magnitude and nature of the problem. Mostly
what managers consider as the problems are really symptoms of the problem. For
example, if there is a fall in demand for a company’s product this is only a symptom. The
real problem may be faulty design, lack of promotion, inappropriate pricing policy etc.
Analysing the problem: Once the problem is clearly defined, the next step is analysis
of the problem in order to determine its causes and scope. This is done through
classification of the problem and collection of relevant information. Classification helps in
determining as to who should take decision and who should be consulted. The problem
should be classified taking into consideration certain factors like the nature of the decision,
the impact of the decision, the periodicity of the decision, the futurity of the decision and
the limiting or strategic factors relevant to the decision.
3. Developing alternatives: After defining and analysing the problem with the help of
relevant and appropriate information, the next step in the decision making process is the
development of alternative solutions for the problems. There are a number of ways
through which a problem can be solved but all of them are not equally good. Developing
alternative course of action is essential for effective decision making, this requires
considerable amount of imagination and research so that the best alternatives are
considered before selecting a course of action. Development of alternatives does not
always provide the guarantee of finding the best possible decision, but it helps in weighing
one alternative against others and thereby eliminates unwanted alternatives.
4. Evaluation of alternatives: After developing different alternatives the next step is to
evaluate each of these alternatives in order to make the final choice. The pros and cons of
each alternative are compared and scrutinized on the basis of risk involved, resources
available, accomplishment of certain goals, economy of efforts, timings etc. There are
various ways through which an alternative can be evaluated.
5. Choice of alternative: Once the various alternatives have been evaluated, a clear
picture is presented as to how each one of them contributes towards solving the problem.
On the basis of a comparison among the various alternatives the best one is chosen alternative
that has been selected should be acceptable in the light of the organisational
objective and it need not be the best one. In choosing an alternative, Koontz and
O’Donnell have suggested three approaches, namely experience, experimentation, and
research and analysis.
a. Experience:-If a manager has solved similar problems earlier he can choose an
alternative on the basis of his past experience. Normally, most managers while taking
decisions rely more on past experience. It is quite dangerous to give more importance to past
experience because the choice of an alternative in one situation may not be suitable in
a different situation. Past experience can be used more in routine decisions than in
strategic decisions which require long term commitment.
b. Experimentation:-Experimentation involves the practical application of an alternative
in actual conditions, where the results are observed and the alternative giving the best
result is selected. The approach can be effectively used in test marketing of a new product.
But this technique cannot be always put into practice because it is very time consuming
and costly.
c. Research and Analysis:-this is considered to be the most effective approach of
selecting among alternatives in case of major and crucial decisions. This approach involves a
search for logical relationships among the more critical variables, constraints
and premises that bear upon the desired goal. In order to make the choice of alternatives
more objective and rational, it takes the help of computers and certain mathematical
techniques. In the real sense, research and analysis is the right approach to decision
making.
6. Implementing the decision: Once the alternative is selected, that is a decision is taken,
it will have to be put into practice. A manager is not only concerned with taking a
decision, but he will also have to implement it. Implementation of a decision involves
several systematic steps.
i. All the concerned employees should be informed of the decision.
ii. In case of any resistance to the decision, it will have to be overcome:
subordinates should know what is expected of them and what is expected of
them and what benefits they will derive out of it. Participation in decision
making makes the subordinates more committed to the decision.
iii. Proper procedures should be laid down for effective implementation of the
decisions.
iv. Responsibility should be fixed for the execution of the decisions.
7. Follow Up: When a decision is implemented, it brings certain results, and these results
should be compared with the expected results, in order to find out whether the decision
taken is appropriate or not. In case of any deviation, corrective action should be taken and
the decision should be modified. This is what we call follow-up. Hence, every decisionmaker
should take up follow-up action in the light of feedback received from the results.
In order to achieve proper follow up, an effective management information system is
necessary. This should provide adequate and relevant information regarding
implementation of the decision.
