decision making process in management

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Decision Making Process In Management - Problem Solving

1. What is Decision Making?

Decision-making is an essential aspect of modern management. It is a

primary function of management. A manager's major job is sound/rationaldecision-making. He takes hundreds of decisions consciously and

subconsciously. Decision-making is the key part of manager's activities.

Decisions are important as they determine both managerial andorganiational actions. A decision may be defined as !a course of action

"hich is consciously chosen from among a set of alternatives to achieve adesired result.! It represents a "ell-balanced judgment and a commitment

to action.

It is rightly said that the first important function of management is to takedecisions on problems and situations. Decision-making pervades all

managerial actions. It is a continuous process. Decision-making is anindispensable component of the management process itself.

#eans and ends are linked together through decision-making. $o decide

means to come to some definite conclusion for follo"-up action. Decision is achoice from among a set of alternatives. $he "ord 'decision' is derived from

the %atin "ords de ciso "hich means 'a cutting a"ay or a cutting off or in apractical sense' to come to a conclusion. Decisions are made to achieve

goals through suitable follo"-up actions. Decision-making is a process by

"hich a decision &course of action is taken. Decision-making lies embeddedin the process of management.

According to (eter Drucker) !*hatever a manager does) he does throughdecision-making!. A manager has to take a decision before acting or before

preparing a plan for e+ecution. #oreover) his ability is very often judged by

the ,uality of decisions he takes. $hus) management is al"ays a decision-making process. It is a part of every managerial function. $his is because

action is not possible unless a firm decision is taken about a businessproblem or situation.

$his clearly suggests that decision-making is necessary in planning)

organising) directing) controlling and staffing. or e+ample) in planningalternative plans are prepared to meet different possible situations. ut of


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such alternative plans) the best one &i.e.) plan "hich most appropriate underthe available business environment is to be selected. Here) the planner has

to take correct decision. $his suggests that decision-making is the core ofplanning function. In the same "ay) decisions are re,uired to be taken "hile

performing other functions of management such as organising) directing)

staffing) etc. $his suggests the importance of decision-making in the "holeprocess of management.

$he effectiveness of management depends on the ,uality of decision-

making. In this sense) management is rightly described as decision-makingprocess. According to . 0. Davis) !management is a decision-making

process.! Decision-making is an intellectual process "hich involves selectionof one course of action out of many alternatives. Decision-making "ill be

follo"ed by second function of management called planning. $he otherelements "hich follo" planning are many such as organising) directing)

coordinating) controlling and motivating.

Decision-making has priority over planning function. According to (eterDrucker) it is the top management "hich is responsible for all strategic

decisions such as the objectives of the business) capital e+penditure

decisions as "ell as such operating decisions as training of manpo"er and soon. *ithout such decisions) no action can take place and naturally the

resources "ould remain idle and unproductive. $he managerial decisionsshould be correct to the ma+imum e+tent possible. or this) scientific

decision-making is essential.

2. Definitions of Decision-making

1. $he +ford Dictionary defines the term decision-making as !the actionof carrying out or carrying into effect!.

2. According to $re"atha 3 4e"port) !Decision-making involves the

selection of a course of action from among t"o or more possiblealternatives in order to arrive at a solution for a given problem!.

3. Characteristics of Decision Making

1. Decision making implies choice5 Decision making is choosing from

among t"o or more alternative courses of action. $hus) it is the


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process of selection of one solution out of many available. or anybusiness problem) alternative solutions are available. #anagers have

to consider these alternatives and select the best one for actuale+ecution. Here) planners/ decision-makers have to consider the

business environment available and select the promising alternative

plan to deal "ith the business problem effectively. It is rightly said that!Decision-making is fundamentally choosing bet"een the alternatives!.

In decision-making) various alternatives are to be considered criticallyand the best one is to be selected. Here) the available business

environment also needs careful consideration. $he alternative selected

may be correct or may not be correct. $his "ill be decided in thefuture) as per the results available from the decision already taken. In

short) decision-making is fundamentally a process of choosing bet"eenthe alternatives &t"o or more available. #oreover) in the decision-

making process) information is collected6 alternative solutions are

decided and considered critically in order to find out the best solutionamong the available. 7very problem can be solved by different

methods. $hese are the alternatives and a decision-maker has toselect one alternative "hich he considers as most appropriate. $his

clearly suggests that decision-making is basically/fundamentallychoosing bet"een the alternatives. $he alternatives may be t"o or

more. ut of such alternatives) the most suitable is to be selected for

actual use. $he manager needs capacity to select the best alternative.$he benefits of correct decision-making "ill be available only "hen the

best alternative is selected for actual use.2. 0ontinuous activity/process5 Decision-making is a continuous and

dynamic process. It pervades all organiational activity. #anagershave to take decisions on various policy and administrative matters. Itis a never ending activity in business management.

8. #ental/intellectual activity5 Decision-making is a mental as "ell as

intellectual activity/process and re,uires kno"ledge) skills) e+perience

and maturity on the part of decision-maker. It is essentially a humanactivity.

9. :ased on reliable information/feedback5 ;ood decisions are al"aysbased on reliable information. $he ,uality of decision-making at all

levels of the rganisation can be improved "ith the support of aneffective and efficient management information system I


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>. #eans and not the end5 Decision-making is a means for solving aproblem or for achieving a target/objective and not the end in itself.

?. elates to specific problem5 Decision-making is not identical "ithproblem solving but it has its roots in a problem itself.

@. $ime-consuming activity5 Decision-making is a time-consuming

activity as various aspects need careful consideration before taking

final decision. or decision makers) various steps are re,uired to becompleted. $his makes decision-making a time consuming activity.

. 4eeds effective communication5 Decision-taken needs to be

communicated to all concerned parties for suitable follo"-up actions.

Decisions taken "ill remain on paper if they are not communicated toconcerned persons. ollo"ing actions "ill not be possible in the

absence of effective communication.

1B. (ervasive process5 Decision-making process is all pervasive. $hismeans managers "orking at all levels have to take decisions onmatters "ithin their jurisdiction.

11. esponsible job5 Decision-making is a responsible job as "rongdecisions prove to be too costly to the rganisation. Decision-makers

should be matured) e+perienced) kno"ledgeable and rational in theirapproach. Decision-making need not be treated as routing and casual

activity. It is a delicate and responsible job.

. !"vantages of Decision Making

1. Decision making is the primary function of management5 $he functionsof management starts only "hen the top-level management takes

strategic decisions. *ithout decisions) actions "ill not be possible and

the resources "ill not be put to use. $hus decision-making is theprimary function of management.

2. Decision-making facilitates the entire management process5 Decision-

making creates proper background for the first management activitycalled planning. (lanning gives concrete shape to broad decisions

about business objectives taken by the top-level management. Inaddition) decision-making is necessary "hile conducting other

management functions such as organising) staffing) coordinating andcommunicating.


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8. Decision-making is a continuous managerial function5 #anagers"orking at all levels "ill have to take decisions as regards the

functions assigned to them. 0ontinuous decision making is a must inthe case of all managers/e+ecutives. ollo"-up actions are not possible

unless decisions are taken.

9. Decision-making is essential to face ne" problems and challenges5

Decisions are re,uired to be taken regularly as ne" problems)difficulties and challenges develop before a business enterprise. $his

may be due to changes in the e+ternal environment. 4e" products

may come in the market) ne" competitors may enter the market andgovernment policies may change. All this leads to change in the

environment around the business unit.


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9. . 7nsuring feedback for follo"-up.

$he figure given belo" suggests the steps in the decision-making process5-

1. Identifying the (roblem5 Identification of the real problem before a

business enterprise is the first step in the process of decision-making.

It is rightly said that a problem "ell-defined is a problem half-solved.Information relevant to the problem should be gathered so that critical

analysis of the problem is possible. $his is ho" the problem can bediagnosed. 0lear distinction should be made bet"een the problem and

the symptoms "hich may cloud the real issue. In brief) the manager

should search the 'critical factor' at "ork. It is the point at "hich thechoice applies.


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decision and "ho must be informed about the decision taken. Here)the follo"ing four factors should be kept in mind5

1. uturity of the decision)

2. $he scope of its impact)

8. 4umber of ,ualitative considerations involved) and

9. Cni,ueness of the decision.

8. 0ollecting elevant Data5 After defining the problem and analying itsnature) the ne+t step is to obtain the relevant information/ data about

it. $here is information flood in the business "orld due to ne"developments in the field of information technology. All available

information should be utilised fully for analysis of the problem. $his

brings clarity to all aspects of the problem.

9. Developing Alternative


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ensure feedback for continuously testing actual developments againstthe e+pectations. It is like checking the effectiveness of follo"-up

measures. eedback is possible in the form of organised information)reports and personal observations. eed back is necessary to decide

"hether the decision already taken should be continued or be modified

in the light of changed conditions.

7very step in the decision-making process is important and needs proper

consideration by managers. $his facilitates accurate decision-making. 7ven,uantitative techni,ues such as 0(#) (7$/) linear programming) etc. are

useful for accurate decision-making. Decision-making is important as itfacilitates entire management process. #anagement activities are just not

possible "ithout decision-making as it is an integral aspect of management

process itself. Ho"ever) the ,uality of decision-making should be al"ayssuperior as faulty/irrational decisions are al"ays dangerous.

arious advantages of decision-making &already e+plained are easily

'available "hen the entire decision-making process is follo"ed properly.Decisions are fre,uently needed in the management process. Ho"ever) such

decisions should be appropriate) timely and rational. aulty and hastydecisions are "rong and even dangerous. $his clearly suggests that various

advantages of decision-making are available only "hen scientific decisions

are taken by follo"ing the procedure of decision-making in an appropriatemanner.

or accurate/rational decision-making attention should be given to the

follo"ing points5

1. Identification of a "ide range of alternative courses of action i.e.)

decisions. $his provides "ide choice for the selection of suitabledecision for follo"-up actions.

2. A careful consideration of the costs and risks of both positive and

negative conse,uences that could follo" from each alternation.

8. 7fforts should be made to search for ne" information relevant to

further evaluation of the alternatives. $his is necessary as the ,ualityof decision depends on the ,uality of information used in the decision-

making process.

9. e-e+amination of the positive and negative effects of all kno"n

alternatives before making a final selection.


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=. Arrangements should be made for implementing the chosen course ofaction including contingency plans in the event that various kno"n

risks "ere actually to occur.

>. 7fforts should be made to introduce creativity and rationality in the

final decision taken.

%. Wh& 'ational an" 'ight Decisions !re (ot Possible?

ational decisions are the best decisions under the available circumstances.All decisions should be rational as such decisions facilitate e+pansion of

business and give more profit) good"ill and prosperity to a business unit.

ationality and decision-making are closely related concepts. ationalityprinciple is applicable to all types of decisions. All decisions &business)

economic) social etc. should be fair and rational. $hey should serve ase+amples over a long period. or such decisions) rational/scientific/balanced

approach is essential "hile making decisions. In the absence of suchapproach) decisions are likely to be faulty and dangerous to the rganisation

and also to all concerned parties.

ationality in decision-making is possible through human brain "hich hasthe ability to learn) think) analye and relate comple+ facts and variables

"hile arriving at a decision. A manager has to introduce rationality in hisdecision-making by using his skills) e+perience) kno"ledge and mentalabilities.

n some occasions) such rational and right decisions are not taken due to

variety of possible reasons. It is also possible that the decision taken may berational "hen taken but is treated as "rong/irrational/faulty because' the

results available from the decision taken are not ase+pected/positive/encouraging. ational decisions may not be possible "hen

the approach of the decision-maker is casual and superficial. He may not be

alert) careful and cautious "hile taking the decisions or he might not have

follo"ed the decision-making process in a scientific manner. In brief) allbusiness decisions should be rational as far as possible as such rationaldecisions offer many benefits/advantages. Ho"ever) rational decisions may

not be taken on certain occasions. According to Herbert A.


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). 'easons Wh& 'ational an" 'ight Decisions Ma& (ot *e Possible?

1. Inade,uate information) data and kno"ledge5 or rational decision-

making accurate) reliable and complete information about various

aspects of the problem under investigation is necessary. $he possiblefuture trends can be estimated "ith the help of such information. $hisfacilitates rational decision-making. Ho"ever) ade,uate and reliable

information may not be available at the time of decision-making. As a

result) the decisions become defective or irrational.


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price) some compromise "ith the ,uality may be necessary. Amanager gives more importance to one and less to the other. He takes

one decision "hich is rational at the same time makes somecompromise in the other decision. As a result) other decision is not

likely to be fully rational. In short) business decisions are interlinked.

$his brings an element of irrationality in some decisions.

$he points noted above suggest "hy it is not possible to take rational and

right decisions on all occasions.

+. 'elationshi$ *et,een Planning an" Decision-making

$here is close relationship bet"een planning and decision-making. Decision-making has priority over planning function. It is the starting point of the"hole management process. In fact) decision-making is a particular type of

planning. A decision is a type of plan involving commitment to resources forachieving specific objective. According to (eter Drucker) it is the top

management "hich is responsible for all strategic decisions such as the

objectives of the business) capital e+penditure decisions as "ell as operatingdecisions such as training of manpo"er and so on. *ithout management

decisions) no action can take place and naturally the resources "ould remainidle and unproductive. $he managerial decisions should be correct to the

ma+imum e+tent possible. or this) scientific decision-making is essential.

decision making process in management

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