Decision Making

Decision Making Meaning

Decision-making may be viewed as the process of selecting a course of action from among several alternatives to accomplish the desired result. The objective of decision-making is to direct human behaviour and commitment towards a future goal. It involves committing the organisation and its resources to a certain choice of course of action thought to be sufficient and capable of achieving some predetermined objective.

Decision Making Definition

According to George R. Terry, Decision-making is the selection based on certain criteria from two or more alternatives”.

According to Mary Cushing Niles, “Decision-making takes place in adopting the objectives and choosing the means and again when a change in the situation creates a necessity for adjustments”.

According to Heinz Weihrich and Harold Koontz, “Decision-making is defined as the selection of a course of action among alternatives; it is the care of planning”.

Managers at all levels in the organisation make decisions and solve problems. In fact, decision-making is the process of lessening the gap between the existing and the desired situation through solving problems and making use of opportunities. A decision is a conclusion reached after consideration; it occurs when one option is selected, and to the exclusion of others it is the rendering of judgment.

Characteristics of Decisions 

Characteristics of decision-making can be of the following types:

1) Process of Selecting Courses of Action: Decision-making is a process of selection or choice among alternative courses of action. The need for decision-making occurs only when more than one alternative exists for doing the work. 

2) Finds the Best Possible Action: The aim of decision-making is to find out the best possible course of action. It is a rational and purposeful activity designed to attain well-defined purposes. Decisions relate means to ends. To identify the best alternative, it is vital to evaluate all available alternatives. As decision-making is always intentional, there may just be a decision not to decide.

3) Intellectual or Rational Process: Decision-making is an intellectual or rational process. As a mental exercise, it involves considerable deliberation and thoughtful consideration of different factors influencing the choice. It is the end process preceded by reasoning and judgement.

4) Involves Certain Commitment: Decision-making involves a certain commitment. A decision results in the commitment of resources and the reputation of the organisation. This commitment may be for short-term or long-term depending upon the decision type. Decision-making involves a time dimension and time lags.

5) Related to Situation or Environment: Decision-making is always related to the situation or the environment. A manager may take one decision in a particular situation and an opposite decision in a different situation. In some cases, there may just be a decision not to decide.

6) Pervasive Function: Decision-making is a pervasive function of management. This function is performed by managers at all levels as the nature of decisions may differ from one level to another. Decision-making is a continuous process.

7) Human and Social Process: Decision-making is a human and social process. It involves the use not simply of intellectual abilities but also of intuition, subjective values and judgement. It is not a purely intellectual process. Perception and human judgement are indispensable and no technique can replace them. But knowledge and experience also provide the basis for correct decisions.

8) Freedom to Choose among Alternative Courses of Action: The choice in decision-making implies the freedom to choose from among alternative courses of action without coercion. It also means uncertainty about the final outcome. When there is no choice of action, no decision is essential. The need for making any decision occurs only when some uncertainty as to the outcome exists.

Types of Decisions

Though managers are constantly called upon to make decisions and all managerial decisions are essential in their own ways, some decisions have a limited scope while others involve the whole organisation in a significant manner. For a better understanding of the managerial decisions, it can be classified as follows:

1) Programmed and Non-Programmed Decisions: The decisions can be classified into two classes: 

i) Programmed Decisions are normally of repetitive nature and are taken within the broad policy structure. An organisation can develop specific processes for handling these decisions, For example, standing operating procedures and policies. Programmed decisions have short-run impacts and are taken by lower-level managers, such as granting leave to an employee, purchase of materials in normal routine, etc.

ii) Non-Programmed Decisions are of non-repetitive nature. Their need arises because of some specific circumstances, such as the opening of a new branch, introducing a new product in the market, etc. They involve judgment, intuition and creativity. Such decisions are always taken by top management.

2) Major and Minor Decisions: Decisions may be categorised as major and minor. For example, if it relates to the purchase of a big machine worth, say a lac of rupees, it is a major decision. On the other hand, the purchase of fountain pen ink or a few reams of paper are minor matters and may be decided by the office superintendent.

3) Routine and Strategic Decisions: Tactical decisions are another name for routine decisions. They are taken in the context of the day-to-day operations of the organisation. They are not very important. Mostly they are of repetitive nature and do not need much analysis and evaluation and can be made quickly. Strategic or Fundamental decisions relate to policy matters and usually involve large investments or expenditure of funds. These decisions are mostly non-repetitive in nature. These decisions are taken by a higher level of management after careful analysis and evaluation of various alternatives.

4) Policy and Operative Decisions: Policy decisions are taken by top management and they mostly relate to fundamental policies. Such decisions are very essential and they have a long-term impact. Big concerns generally publish their policy decisions in the form of a ‘Policy Manual’ which becomes the base for other operative decisions.

Operative decisions relate to the day-to-day operations of the company. They are generally taken by middle and lower-level management who are more closely related to the supervision of actual operations. 

5) Organisational and Personal Decisions: The executive takes organisational decisions when he acts formally as a company officer. Such decisions reflect the basic policy of the organisation. They can be delegated to others. Personal decisions relate to the executive as an individual and not as a member of the organisation. Such decisions cannot be delegated. 

6) Individual and Group Decisions: As is apparent, personal decisions are taken by an individual in the context of routine or programmed decisions where the analysis of variables is simple and for which broad policies are already provided. Group decisions are taken by a group or a standing committee constituted for this specific objective. Such decisions are very important for the organisation because they involve the participation of a large number of people.

7) Long-Term, Departmental and Non-Economic Decisions: Decisions may also be categorised as long-term, departmental and non-economic. In the case of long-term decisions, the time covered is long and the risk involved is more. Departmental decisions are taken by the heads of the department and relate to the department only. Decisions relating to non-economic factors (such as technical values, moral behaviour, etc.) may be termed non-economic decisions. While taking decisions on these elements, care should be taken to see that justice is done to all and as a result of this decision, no new problem is created for the organisation.

8) Crisis and Research Decisions: An extreme type of non-programmed decision is a crisis decision that occurs when an unexpected problem arises and leads to disaster if not resolved. Crisis decisions commonly involve a few, very high-level decision-makers. A crisis consists of a perceived threat to the decision makers and their state and a finite time period within which to make a decision which is usually very short.

A research decision does not involve any urgency and executives can take time to reach any decision. 

9) Problem and Opportunity Decisions: Problem decisions may be defined as those that fall in between, being evoked by milder pressures than crises. Crisis decisions are generally triggered by single stimuli. They present themselves suddenly and unequivocally, and require immediate attention, as in the case, for example, of a fire or a bankruptcy. Opportunity decisions are generally those that are customer-centric such as cross-sell and up-sell decisions Opportunity decisions also use expert judgement, and increasingly, analytics to predict the likely response of a customer & the potential size of the opportunity.

Types of Decisions

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