Decision Making

Decision Making is an indispensable component of

the management process itself.

Decision making is a process by which selection of

a course of action is taken from the available alternatives.

Importance –

1) Decision making sets the ball rolling. 2) Decision making facilitates the entire management

process. It is necessary while conducting other management functions such as organizing staffing, co-ordinating, communicating, directing, controlling and motivating.

3) Decision making is a continuous managerial function – continuous decision making is a must in the case of all managers/executives. Follow up actions are not possible unless decision are taken.

4) Decision making is essential to face new problems and challenges – changes in the external environment. Introduction of new products, new competitors, govt. policies leads to new problems and new decisions are needed.

5) Decision making is a delicate and responsible job – management activities are possible when suitable decisions are taken. Correct decisions provide opportunities of growth while wrong decisions lead to loss and instability of a business unit.

6) Process of Decision making-

• Identifying the problem – Information relevant to the problem should be gathered. Manager should consider the cause and find out whether they are controllable or un-controllable.

• Analysing the problem - While analyzing the problem futurity of the decision, the scope of its impact, number of qualitative considerations involved and uniqueness of the decision should be kept in mind.

• Collecting relevant data - All available information should be utilized fully for analysis of the problem. This brings clarity to all aspect of the problem.

• Developing Alternative Solutions – After the problem has been defined and diagnosed, the manager has to determine available alternative courses of action that could be used to solve the problem at hand.

• Selecting the Best Solution - An alternative that seems to be most rational for solving the problem. Acceptance of the decision by group members is always desirable and useful for its effective implementation.

• Converting Decision into Action – The subordinates should be taken in confidence and they should be convinced about the correctness of the solution. Thereafter the manager has to see that suitable actions are taken to execute the decision taken.

• Ensuring feedback – Feedback is the last step in the decision making process. Manager has to make built in arrangements to ensure feedback for continuously testing actual developments against the expectations. Feedback is possible in the form of organized information, reports and personal observations, feedback is necessary to decide whether the decision already taken should be continued or be modified in the light of changed conditions.

Decision Making –

1) Profits - employees coming always late, new warehouses to be built, top priority subject in the departmental meeting.

2) Consciously subconsciously – minor-subconsciously Major decision – consciously – application of

considerable human judgement & experience before solution.

3) Decision making – used in planning – what to produce, sell, whom, how , where

Decision Making –

1) Profits - employees coming always late, new warehouses to be built, top priority subject in the departmental meeting.

2) Consciously subconsciously – minor-subconsciously Major decision – consciously – application of

considerable human judgement & experience before solution.

3) Decision making – (i) used in planning – what to produce, sell, whom, how , where

(ii) Organising –Choice of structure, nature & form of organisation, division of work, delegation of authority, fixing of responsibility.

(iii) In directing – Orders and Instructions

(iv) Controlling – Performance standards, strategic control points, procedure for control.

Decision Making - alternatives available

Wisdom and experience to evaluate several alternatives and select the best one.

Types of Decisions – Programmed & Non-programmed

1) Pro-repetitive, routine & easiest (determining salary

payment to employees who have been ill, recording

officer supplies, set rules & policies.

2) Non-programme - * Novel and non-repetitive* what to

do about a failing product line. * no definite procedure

exists. *own personal belief, attitude and value

judement.

GRESHAM’s LAW IN DECISION MAKING

General Tendency – Programme decision to overshadow

non programme decisions. Managers take time in making

routine, unimportant programmed decisions and very less

time is left for making non-routine important and non-

programmed decisions.

2) Major & Minor decisions -

Major(Long run Impact) - Replacement of men by

machinery diversification of the existing product line

effects all functional areas, rare decisions are regarded as

major.

Minor – Store raw material / decision affects only one

function, decision which occur very often.

3) Routine (Little Deliberation)&Strategic Decisions (Lengthy

Deliberation)– Basic amenities provision (routine) lowering

the price, changing the product line, installation of all

automatic plants are strategic.

4) Individual and Group Decisions -

Group decision help in implementation. Reduce the

amount of co-ordination and communication.

Nominal Group Technique – Generate their ideas in

writing/ present without discussion / ideas summarised

and written on blackboard/then discussed for clarification

& evaluation / independent rating via voting.

Deelphi Technique – Questionnaire sent on a topic

through mail. One and two decision taken on the basis of

second.

5) Simple and Complex Decisions -

Variables to be considered for solving a problem are few.

When they are many the decision is complex.

Routine decision – problem is simple and outcome has

certainity.

Judgemental – Problem is simple low degree of certainty.

Analytical – Complex problem – high certainty.

Adaptive – Complex problem – low degree of certainty.

STEPS IN RATIONAL DECISION MAKING

1. Recognising the problem.

2. Deciding priorities among problem.

3. Diagnosing the problem.

4. Developing alternative courses of action.

5. Measuring the consequences of alternative solutions.

6. Converting the decision into effective action.

ENVIRONMENT OF DECISION MAKING

Based on uncertainty, risk

Common difficulties in decision making –

Lack of information / unspporting Environment /

Non-acceptance by subordinates / Ineffective

Communication / Incorrect Timing