Techniques of Decision-Making
Decision-making is a step-wise process. There are certain highly effective as
well as systematic approaches that can help us in taking the right decisions
with great consistency. While there is nothing that can guarantee error-free
decision-making, some decision-making methods can reduce the likelihood of
making poor decisions.
1. Command method
In this method, decision-making is an executive power, and the decisions are
taken by a central authority. This is an authoritative or dictatorial method as it
doesn’t necessarily involve the opinion of other stakeholders. One of the
major drawbacks of this method is ignorance about alternate options or
opinions.
At the same time, this is also the fastest and clearest decision-making process
as it doesn’t involve conflicts and discussions with other people. This decision-
making technique is beneficial in emergencies when there is not enough time
to hold discussions or undertake lengthy analysis or review processes.
2. Consultation
Consultation is the commonest among all the decision-making techniques for
taking long-term decisions. Under this technique, the decision-maker seeks
inputs from others and considers them diligently, but the eventual power of
decision remains with decision maker.
It usually takes longer when you apply this technique compared to the time
taken in the command decision-making method as it involves taking the
opinions of multiple people and in-depth evaluation and discussions. This
process makes others feel valuable as it takes into account their opinions. It
can do wonders for employees’ satisfaction and loyalty as they would feel
involved with the decision-making process even though the final decision is
not taken by them.
3. Voting
Voting is considered one of the most democratic techniques of decision-
making in management. During this process the available options are brought
to the notice of all group members and each action is deliberated upon. Once
the discussions are complete, the present members vote in favor of the option
they find most suitable. The option selected by the majority of the voters is
regarded as the final decision.
Voting is the preferred decision-making method among committees, boards of
directors, or senior company executives. Voting techniques of decision-
making in management are time-bound which ensures that the process does
not drag for too long.
4. Brainstorming
Brainstorming is among the various techniques of decision-making that proves
beneficial when there are no clear options in sight. Under this technique, all
group members get together to find options through discussion and debate.
Decisions related to strategy, policy-making, laying down of rules and
procedures and operations usually involve a lot of brainstorming. This is one
of the lengthier processes of decision-making as there are usually a lot of
ideas and differences of opinions that have to be overcome before a final
decision is taken.
5. Multi-point analysis
This is easily among the best decision-making methods while going for an
acquisition or a major purchase. Under this technique, businesses undertake
a systematic evaluation of all options available to them. Factors such as cost,
return on investment, quality, performance, and skill required these relevant
points, get evaluated.
Suppose a company needs to buy a fleet of vehicles for transporting its
employees safely. Various vehicle makers will submit their proposals which
will then be evaluated on factors such as comfort, mileage, safety, number of
passengers, and driving ease.
6. Consensus
Among all the decision-making techniques, the consensus method is the most
difficult and time-consuming. In this process, the group holds several rounds
of discussions until everyone unanimously agrees upon a decision.
Since this is one of those decision-making methods that require everyone to
overcome their differences and decide in favor of one option, it often drags on
endlessly without any result.
Management By Objectives (MBO)
MBO is both a philosophy and approach of management. It is a process
whereby superiors and subordinate managers jointly identify the
common objectives, set the results that should be achieved by the
subordinates, assess the contribution of each individual and integrate
individuals with the organization so as to make the best use of
organizational resources. Thus MBO is a system for integrating
managerial activities.
According to Koontz and O’Donnell “MBO is a comprehensive
managerial system that integrates many key managerial activities in a
systematic manner, consciously directed towards the effective and
efficient achievement of organizational objectives”
According to George Ordiorne “MBO is not merely a set of rules, a
series of procedures or even a set method of managing, but it is a way of
thinking about management”
Features of MBO
The following are the important features of MBO
1. MBO is an approach and philosophy to management and not merely a
technique.
2. MBO gives emphasis on objectives.
3. Objective setting and performance reviews are made by the
participation of concerned managers.
4. MBO reviews performance periodically.
5. Objectives in MBO provide guidelines for appropriate systems and
procedures. MBO establishes a community of interest and a shared sense
of vision among all the managers.
Process of MBO
The following are the stages involved in the MBO process
1. Setting of organizational objectives: The first step in MBO is the
definition of organizational objectives and purpose. Usually the
objective setting starts at the top level of organization and moves
downward to the lowest managerial levels. The setting of objective
include defining the purpose of organization, long range and short range
organizational objectives, divisional or departmental objective and
individual manager’s objectives.
2. Identification of Key Result Areas: Organizational objectives provide
the basis for the identification of Key Result Areas (KRAs). KRAs are
derived from the expectations of various stakeholders and they indicate
the priorities for organizational performance such as profitability, market
standing, innovation, productivity, social responsibility etc.
3. Setting subordinates’ objectives: The achievement of organizational
goals is only possible through individuals. So each individual manager
must know in advance what he is expected to attain. The process of
objective setting begins with superior’s proposed recommendations for
his subordinate’s objectives. In turn, the subordinate state his own
objectives as perceived by him. Thereafter the final objectives for the
subordinates are set by the mutual negotiation between superiors and
subordinates.
4. Matching resources with objectives: Resource availability is an
important aspect of objective setting because it is the proper allocation
of resources which ensures objective achievement. So there should be a
matching between objectives and resources.
5. Appraisal: Appraisal tries to measure whether subordinate is
achieving his objective or not. Appraisal is undertaken as an on-going
process with a view to find out deficiency in the working and also to
remove it promptly in order to attain the objectives of organization.
6. Recycling: Though appraisal is the last aspect of MBO process, it is
used as an input for recycling objectives and other actions. Recycling
process include setting of objectives at various levels, action planning on
the basis of those objectives and performance review. Each of these
three aspects gives base for others. This process goes on a continuous
basis.
Benefits of MBO
The benefits of MBO can be seen as follows
MBO helps in better managing the organisational resources and
activities.
Since organizational objectives are defined very clearly in MBO,
they help in relating the organization with its environment.
MBO helps in improving productivity as the management team
concentrates on the important task of reducing cost.
MBO helps in making more systematic evaluation of performance.
MBO provides greater opportunity for personal satisfaction
because of their participation in objective setting and rational
performance appraisal.
It helps locating weak and problem area because of improved
communication and organization structure.
It serves as a device for organizational control integration.
It stimulates the subordinate’s motivation.
MBO stimulates organisational change and provides a frame work
and guidelines for organizational change
Problems and Limitations of MBO
Each organization is likely to encounter specific problems in MBO
practice but some of the common problems are as follows
1. MBO is a time consuming and costly process
2. Manager’s failure to teach MBO philosophy
3. Problems in objective setting
4. More emphasis on short term objectives
5. Danger of inflexibility in the organization in a dynamic environment
6. MBO creates frustration among managers
In spite of the obstacles and problems in MBO, it continues to be
a way of managing organization.
