Everything you need to know about Decision Making. Decision making is the selection of one course of action from two or more alternative courses of action. It is a choice-making activity and the choice determines our action or inaction.
Let us make an in-depth study of Decision-Making:-
1. Definition of Decision-Making 2. Features of Decision-Making 3. Elements 4. Importance 5. Scientific Process 6. Principles.
Definition of Decision Making:
The important definitions of management are as follows:
1. In Simple word:
“Decision-making is the selection of one course of action from two or more alternative courses of action. It is a choice-making activity and the choice determines our action or inaction.”
2. According to George R. Terry:
“Decision-making is the selection based on some criteria from two or more possible alternatives.”
3. Philip Kotler has defined decision-making as under:
“A decision-making is a conscious choice among alternative courses of action.”
It is clear from the above definitions that if there is only one course of action, the question of decision-making does not arise. But when more than one alternative courses are open before us then the selection of the best alternative is called decision-making.”
Characteristics or Features of Decision Making:
The important characteristics of decision-making are as follows:
1. Decision-making is a selective process in which only the best possible alternative is chosen.
2. Decision-making involves careful evaluation and analysis of all the possible alternatives.
3. Decision-making is the responsibility of the management executives at all levels.
4. It is a continuous process which goes on throughout the life of an organisation.
5. It is a mental process which involves deep thinking and foreseeing things.
6. It may be positive to do a certain thing or negative not to do a certain thing.
7. Decisions are normally taken on the basis of past experiences and present circumstances for a future course of action.
8. It is not an end in itself but a means to reach the goal.
9. If necessary experts and specialists should be consulted before making a particular decision.
10. Decisions exert great influence on the success or failure of an organisation. Therefore, they should not be made in a hurry or without close security and thinking.
Main Elements of Decision Making:
The main elements of decision-making are as follows:
1. Concept of Best Decision:
Rational decisions must conform the basic concept of good decision.
Curdiff and Still:
Mentions three keys to rational decision-making:
are the three main keys to rational decision-making. The problem should be thoroughly analysed and all possible alternatives be folly considered.
Rational decisions require:
(b) Insight, and
(c) Lot of experience.
2. Organisational Environment of the Company:
Organisation environment also exert great influence on decision-making. Some organisations believe in rigid centralisation while others have faith in decentralisation and leave the routine decision-making function with the departmental heads.
Further, in the interest of the company it has been suggested that the policy matter decision must be left with the top management and leave the ordinary day to day routine matter decisions to the various departmental heads. External, Social, Political and Economic environment also influence decision-making. But instable political conditions in the country are not conducive to important decision-making.
3. Psychological Elements:
In psychological elements personal traits like preferences, intellectual maturity experience, educational standard, social and religious designation and status etc., of the person responsible for the decision-making also exert great influence on decision-making.
Further in company the manager’s habits, temperament, social environment, upbringing domestic life and political learning’s all have to trace his choice of alternative, consequently on his decisions.
4. Timing of Decisions:
Decisions must be taken at the appropriate time keeping in view the prevailing conditions. Marketing aim should also be taken into consideration and time required for achieving the aim. Any decision taken in time leaves a lasting impression on the mind of those who are affected by the decision.
5. Communication of Decisions:
When a particular decision has been taken it must be communicated properly in time to the persons concerned. Decision should be communicated to the subordinate executives in a courteous, simple and understandable language. There should not be any ambiguity in the language written. It should be in a vary simple language.
6. Participation of Employees:
Participation of the employees in decision-making makes its implementation easier. Employees participation has certain advantages and it ensures loyalty of the employees towards the organisation. It arouses the feeling of oneness with the company and the decision taken are considered as superior. It helps in enhancing the efficiency of the organisation which helps in attaining the goals of the organisation.
Importance of Decision Making in Management:
The Management and decision are two very important activities which cannot be separated. Both move together. Decision-making is the main business of management and it has been considered as soul of management. Decision should always be taken after a great deal of deliberations and it should be taken quickly and as far as possible intuition based.
Sound decisions are always information based and are a combination of:
(a) Judgement, and
(b) Information (on facts) based.
But information based decisions have many major problems, which arise at irregular intervals. Sound decisions live for a long time because it is very difficult and awkward to change decisions once they are made.
Scientific Process of Decision Making:
The process of decision-making has been divided under two heads:
1. Traditional method or Symptomatic Diagnosis.
2. Scientific method.
1. Traditional or Symptomatic Diagnosis:
This decision is taken on the basis of—limited knowledge, experience and intuitions. There is no scientific analysis involved in this. In this decision taken are not logical. This method is also known as “Symptomatic Diagnosis”. The Physicians in ancient times diagnosed the ailment on the basis of symptoms only.
In the same way the management also resolves the various problems facing the organisation on the basis of symptoms. Now-a-days an expert doctor relies not only on external symptoms but makes use of accurate X-ray, E.C.G. reports etc.
2. Scientific Method:
The process of taking scientific decisions is as follows:
(i) Defining the problem, objectives and constraints are studied.
(ii) Analysis of the problem.
(iii) Development of alternative solution is searched.
(iv) Deciding upon the best solution.
(v) Converting the decision into effective action.
(vi) Follow up the decision.
(i) Defining the problem, objectives and constraints are studied:
Under this process the nature of problem is considered. Here, a careful study of the external and internal aspects of the problem should be made carefully. The objectives of resolving the problem and constraints in the way of resolving it must also be given due weight-age in order to reach the correct decision.
(ii) Analysing the problem:
It involves careful appraisal of the alternatives and as such to decide which departmental executive should take the particular decision. Who others should be taken into confidence. Whether some specialists have also been consulted in this connection and who should be informed of such decisions.
It should be noted here that all policies and operating decisions should be taken by the top management while routine departmental decisions should be left to be taken by Departmental Heads. To make an important decision thorough analysis of relevant information is needed. If facts and factual information are not available, they may be estimated to the best of information available.
(iii) Development of Alternative Solution:
To develop alternate solutions following courses be adopted:
(a) Spending more on advertisement and publicity,
(b) Developing the market promotion activities, or
(c) Appointing more salesmen,
(d) Improving the quality of the product,
(e) Packaging should be more attractive or reducing the price etc.
Management should not depend on one solution alone, because if that fails under a peculiar situation the other one might be taken up in its place. It is therefore, essential to consider all possible course of action.
(iv) Deciding upon the Best Solution:
It is essential that the decisions be effective there must be co-ordinated, systematic and continuous information of all facts and situation. For example—All decisions on the marketing problem are taken on the basis of complete information available from internal and external sources. In deciding the best solution several factors have to be taken into consideration.
(a) The ratio of advantages and dis-advantages of each solution.
(b) Out of all the possible solutions which one is such that require the minimum amount of effort.
(c) What is the financial limitation of the organisation?
(d) Which solution is favourable to the circumstances after considering all these factors, the best possible solution should be decided upon?
(e) Now a day’s Operation Research Technique is employed in selecting the best alternative. Each alternative is quantitatively evaluated. Those which cannot be evaluated quantitatively is judged on the basis of experience, knowledge and intelligence.
(v) Converting the Decisions into Effective Action:
It is to be noted that a decision what so ever important it may be if not put into practice effectively it can serve no purpose. The decision taken must reach to the hands of all sub-ordinate officers and staff’ and all concerned employees and executives for whom it is meant.
The language of the decision must be simple and understandable. There must be full co-operation from the side of staff in its implementation. Staff should feel that the management decision is their own decision. While taking decision it is essential that sub-ordinates should be involved by their participation. Their participation will help in its implementation and it makes the matter quite simple, efficient and effective.
(vi) Follow up the Decision:
Decision making by scientific process is no guarantee that it is cent per cent correct. It is quite possible that it may be defective and might cause loss to the organisation. In order to minimise the chances of loss it in necessary that it should be followed carefully and shortcomings in the decision should be made up by taking suitable steps.
Therefore, the follow-up action has been considered a better scientific decision. Knowledge regarding business is never said to end and perfect, similarly marketing conditions are never stable. There is always uncertainty about the future. So all decisions must be taken considering all aspects of the business.
Principles of Decision Making:
Eminent authors of management are of this opinion that on right and appropriate decisions, the success and failure of the enterprise depend. Therefore, a manager has to take all precautions before arriving at a decision.
Following are the important principles which may be taken into consideration while taking decision:
1. Marginal Theory of Decision-Making:
This theory has been suggested by various economists. Economists believe that a business undertaking works for earning profits. To earn profit is their prime-motto. That is why they agree that the manager must take every decision with the aim in view that the profit of the organisation goes on increasing till it reaches its maximum.
The marginal analysis of the problem is based on law of diminishing returns. With extra unit of labour and capital put in production, the production increases but it increases at a proportionately reduced rate.
From every extra unit of labour and capital the production diminishes and a time comes when the increase in production stops with ‘zero’ as the production of the last unit used there in. At this stage a decision is taken to the effect that no additional unit of labour and capital now is required to be introduced in the production.
Production of the last unit is marginal one where-after further in-production of extra-unit becomes un-economical or non-yielding.
The marginal principle can be effectively and while taking decision on matters relating to:
(vi) Appointment and other matters, where marginal theory can be scientifically and statistically used and a good decision is rendered possible.
2. Mathematical Theory:
There are few other theories like—venture analysis, game theory, probability theory, waiting theory. On the basis of which a manager analyses a given fact and takes decision accordingly. This has given rise to a scientific approach to the decision-making process.
3. Psychological Theory:
Manager’s aspirations, personality, habits, temperament, political leanings and social and organisational status, domestic life, technological skill and bent of mind play an important role in decision-making. They all in some form or the other leave an impact on the decision taken by the manager.
He is also bound by his responsibilities and answerability. Decision-making is a mental process and the psychology of those who are deliberating and of the person who takes the final decision has a definite say in decision-making.
4. Principle of Limiting Factors:
The decisions taken are based on limited factors nevertheless they are supposed to be good because of the simple fact that under the circumstances it was the only possibility.
From this principle it emerges that though there are numerous alternative available to a decision-maker but he takes cognizance to only those alternatives which suit the: (i) time, (ii) purpose, and (iii) circumstances and which can be properly and thoroughly analysed considering the human capacity and then finally one of the alternatives is chosen which form the basis of a decision.
5. Principle of Alternatives:
Decision is an act of choice. It is a selection process. Out of many available alternatives the manager has to choose on which he considers best in the given circumstances and purpose.
6. Principle of Participation:
This principle is based on human behaviour, human relationship and psychology. Every human being wants to be treated as an important person if it is not possible to accord him a V.I.P. treatment. This helps the organisation in getting maximum from every person at least from those who have been given the place of importance and honour.
Participation signifies that the subordinates even if they are not concerned should be consulted and due weightage should be given to their viewpoint. Japanese do this. Japanese business or institutions or government make decisions by consensus.
This makes all of them feel that they are very much part of the decision. The Japanese mostly debate a proposed decision throughout its length and breadth of the organisation until there is an agreement.
A few may disagree with Japanese method of decision-making because they may agree that it is not suited to our conditions. Such a method involves politicking, delays the decisions and sometimes may result into indecisiveness. But workers participation in decision-making can be ensured by the Japanese method.
Those favouring Japanese method and workers participation advance the argument that decisions are important. But according to modern thinking the decision should not be within the purview of only a selected few. Those who are to carry out the decisions must be actively associated with their decision-making also.
The principle of participation mostly aims at two things:
(1) It aims at the development and research of all possible alternatives. If larger number of people concerned are asked to search for alternatives on the basis of which decisions are expected to be taken then greater participation is assured which is surely an important aim of this principle.
(2) This principle asks for debating and deliberating by more and more people, so as to know the mind of all and to assess the possible reaction of a particular decision which the manager has in mind.
Why the Principle of Participation is becoming Popular?
The principle of participation is becoming popular due to the following reasons:
1. The participants feel that the business is their own of which they are important parts;
2. Opposition to a decision is considerably reduced and those who are to carry the decision are gladly accepting even if any change is being introduced;
3. Guidance and direction functions of management are being easily performed;
4. Decisions are the results of best possible selection of the alternatives, therefore decisions may yield results to the advantage of the organisation on the expected lines;
5. Increase in the efficiency of workers;
6. Development of co-ordinated efforts;
7. Development of good human relations.
8. Development of team spirit and better understanding because of good human relations; and
9. Assurance of growth and prosperity to both the organisation as well as the whole working force—managerial supervisory and operating.
Today the managers are more interested in eliciting the participation of workers with their decisions with a view to get more co-operations and to exercise effective control. Over them in the accomplishment of the tasks assigned by the objectives of the organisation.