DEFINITION OF DECISION MAKING
The process of making choices by identifying a decision, gathering information, and assessing alternative resolutions (umassd.edu)
The election of a course of action from two or more alternatives; the decision-making process is a sequence of steps leading to final selection (Henry Sisk and Cliffton Williams)
Decision Making is an important function in management that related to problem. An effective decision-making helps to achieve the desired goals or objectives by solving such problems (businessmanagementideas.com)
CHARACTERISTICS OF DECISION MAKING
It is a Process
During decision making, it involved process to find out the solution to any problem or for the achievement of a specific result
It is an indicator of commitment
The decision maker must bear the result the decisions
It is the Last Process
Decision making is the last stage of the process because the result of the work is derived from it.
It is Continuous and Dynamic Process
Continuously for routine and special tasks especially in business organization. Dynamic because the situations and circumstances of each decision are different
It is a Measurement of Performance
Decision making can be measurement based on the success or failure of the decisions taken.
It is a Human and Social Process
Because it includes the use of intuition and Justice.
It is a Best Selected Alternative
The best alternative is selected – one or two or more possible alternatives for solving any problem / achieve identified goal.
Decision Making might be Positive or Negative
Positive or negative solution
Rationality, Mental and Intellectual Process
They are based on logical deliberations to make them more rational because the need of intelligence, knowledge, experience, educational level, and mental facilities.
PROCESS OF DECISION MAKING
One: Investigate the Situation
A detailed investigation is made on three aspects: define problem identification of objectives and diagnosis.
Determining the problem to be solved.
- Defining the problem helps to avoid confusing symptoms and problems the next step.
- At this stage, time and effort should be expanded only in gathering data and information that is relevant to an identification of the real problem.
Decide what would constitute and effective solution.
- Decision maker should begin to determine which parts of the problem they must and should solve.
- Most problems consist of several elements, find one solution that will work for all of them.
Determine the actions that will achieve it
- Formulate hypotheses about the causes.
Two: Develop Alternatives
See things from many viewpoints.
- Only realistic alternatives should be included in the listing.
Brainstorming may be effective at this stage.
- This is a group approach to develop and create potential solutions
- The objective is to generate as many ideas as possible.
Criticism must be prohibited.
- The leader must keep the discussion moving by asking questions and making statements.
Three: Evaluate Alternatives and Select the Best One
Analyzing and evaluating each alternative in terms of its possible consequences.
Require decision maker to call on every aspect: present knowledge, past experience, foresight and scientific acumen.
For the proper analysis of alternatives, Peter Drucker has suggested the following four (4) criteria:
The risk
- Every solution naturally carries a risk element.
- The risk of each course of action must be weighed against the possible gains.
Economy for effort
- Select the action or solution that gives the greatest results with the least effort.
Timing
- Short notice (urgency) – dramatizes the decision and serves notice on the organization that something important is happening.
- Plenty of time (long) – consistent effort is needed, a slow start that gathers momentum may be preferable.
Limitations of resources.
- Also known as the “principle of limiting factor” which is the essence of decision making.
- The most important resources are the human beings who will carry out the decision.
Four: Implement and Monitor the Decision
Ready to make plans to cope with the requirements and problems. The resources must be acquired and allocated.
The Decision Maker must set up
- Budgets
- Schedules
- Progress reports
Budget, schedules and progress report are all essential to performing the management functions of control.
Potential risks and uncertainties that have been identified during the earlier evaluation of alternatives stage must also be kept in mind. Re-examine the decision at this point and develop detailed plans for dealing with these risks and uncertainties.
Action taken to implement a decision must be monitored.
7 STEPS TO EFFECTIVE DECISION MAKING
Using a step-by-step decision-making process can help you make more deliberate, thoughtful decisions by organizing relevant information and defining alternatives. This approach increases the chances that you will choose the most satisfying alternative possible.
Step 1: Identify the decision
This first step is very important. You realize that you need to make a decision.
Clearly the nature of the decision you must make. Set your goal.
Step 2: Gather relevant information
Collect some relevant information before you make your decision:
- What information is needed,
- The best sources of information
- How to get it
Use this term: What, Which, Who, When, How
Internal Information: you’ll seek it through a process of self-assessment.
External Information: you’ll find it online, in books, from other people, and from other sources.
Step 3: Identify the alternatives
As you collect information, you will probably identify several possible actions or alternatives solution to decide.
In this step, you will list all possible and desirable alternatives.
Step 4: Weigh the evidence
Based on your information, try to imagine what it would be like if you carried out each of the alternatives.
You’ll begin to favor certain alternatives: those that seem to have a higher potential for reaching your goal.
Finally, place the alternatives in a priority order.
Step 5: Choose among alternatives
Once you have weighed all the evidence, you are ready to select the alternative that seems to be best one for you. You may even choose a combination of alternatives.
Step 6: Take action
You are now ready to take some positive action. Let’s start to implement the alternative you chose in Step 5.
Step 7: Review your decision & its consequences
Evaluate the results of your decision whether it has resolved the need you identified in Step 1.
If the decision has not met the identified need, you may want to repeat certain steps of the process to make a new decision. For example, you might want to gather more detailed or somewhat different information or explore additional alternatives.
FACTORS INFLUENCING DECISION MAKING
Time Pressures
How much time the decision maker has in which to make the decisions.
Lack of time can force a manager to decide without gathering important facts or exploring possible solutions
Manager’s Values
The Values that determine how we shall act.
- Manager’s values have a significant influence on the quality of decisions: – likes, dislikes, should, ought, judgments and prejudices.
- The value orientations of management: – mission, objectives and strategies
Some specific influences which have value on the decision-making process are:
- Value judgments are necessary in the development of objectives and the assignment of priorities.
- It is necessary to make value judgments about the various possibilities and
- Value judgments will be reflected in the alternative chosen.
Organizational Policy
Decisions are limited by the policies that higher managers develop to guide the actions of the organization. Decisions that clearly violated policies will be rejected automatically.
Other Factors
- The effect of other departments.
- Higher-management attitude.
- Personnel required.
- Budget money.
- Subordinate reactions.
RATIONALITY
Rationality in Decision Making
Rationality implies the capacity for objective and intelligent action.
A rational business decision is one which effectively and efficiently assures the achievement of aims for which the means are selected – Steiner
Rationality in decision-making implies that the decision maker tries to maximize the values in a situation by choosing the most suitable course of action for achieving the goal.
Rationality Problems
The end – means or value system approach to rationality is faced with certain problem.
- The end to be attained is often incompletely or incorrectly stated.
- In actual practice means cannot be separated completely from ends.
- The means ends terminology obscures the role of the time- element in decision-making.
DECISION MAKING STYLES
Decision making style propose that people differ in two dimensions when they approach decision making.
- Way of thinking – differs from rational to intuitive
- Tolerance for ambiguity – differs from a need for consistency and order to the ability to process many thoughts simultaneously.
Decision making style basically depends on managers’ approach to decision making. Decision making can be grouped into four main styles.
One: Directive style – Fast, efficient and logical
- Decision making style have low tolerance for ambiguity and they are rational in the way they think.
- This type of leader is very rational but thinks mostly about the short-term.
- They are very logical, efficient and take quick decisions within a short time.
Two: Analytic style – careful and able to adapt with new situations
- Managers using analytic decision-making style have high tolerance for ambiguity and rational way of thinking
- They want more information before deciding and considering more alternatives.
- Such managers are more careful decision makers as they consider factual and detailed information before taking any decision.
- They must find answers to many “what if” questions.
Three: Conceptual style – able to fine creative solutions
- Managers using conceptual decision-making style have high tolerance for ambiguity and have intuitive in their way of thinking.
- They look at many alternatives.
- This kind of decision making is for a long term and subjected to changes.
Four: Behavioral style – seek acceptance of decisions
- Managers using behavioral decision-making style have low tolerance for ambiguity and intuitive in their way of thinking.
- The manager possesses behavioral style decision-making will engage in team discussion. He is responsive to the mood of the team members.
- They are concerned about the achievement of subordinates and always take suggestions from others.
- They organize meetings of subordinate’s time and again to get information and suggestions.
- They try to avoid conflict. Acceptance by others is important to this decision-making style.
