After reading this article you will learn about Decision Making in an Enterprise:- 1. Meaning of Decision Making 2. Process of Decision Making.

Meaning of Decision Making:

To decide means to ‘cut short’, ‘cut-off’ or come to conclusion, A decision is a choice whereby a person forms a conclusion about a situation. A decision represents a course of behaviour or action about what must or must not be done.

Managerial function is exercised through decision making. Decision are necessary on multifarious issues and problems in each area of business, e.g., production, marketing, finance and personnel.

Problems are considered as opportunities to test managerial talents and to make improvements or progress. Problems are in a sense the food or diet upon which a manager thrives. He gets a double advantage when he meets the problem by finding out a sound solution.


The enterprise is served when an obstacle is successfully overcome. At the same time, the manager achieves personal satisfaction and advancement. Decision making pervades all elements of management. Hence, many a time management is defined as decision making process choosing between alternatives.

“Whatever a manager does,” wrote P. Drucker, “he, does through decision making.” J. McDonald observed: “The business executive is by profession a decision maker. Uncertainty is his opponent, overcoming it is his mission. Whether the outcome is a consequence of luck or wisdom, the moment of decision is undoubtedly the most creative event in the life of an executive or manager.”

The life of a manager is a perpetual choice-making activity. Hence, sometimes management is defined as decision making activity the total task of manager. A decision is a choice whereby an executive forms a conclusion about a certain situation.

It is the point at which plans, policies and objectives are translated into concrete actions. Planning leads to decision making and implies the choice of selection from alternatives the best course of action or behaviour. In absence of alternatives, there would be no need for a decision.

Process of Decision Making:


Decision making involves six distinct steps or phases:

1. Define the problem to be solved. Problem defined is a problem half-solved.

2. Determine possible alternative solutions.

3. Analyse, compare and evaluate the impact of alternatives.


4. Decide upon the best solution, i.e., select the plan to be followed noting all necessary factors. Choose a course of action.

5. Convert the decision into effective action, i.e., take action. Effective action on decision needs best communication and employee acceptance.

6. Follow-up the same till you secure the desired result. Modify the decision at the earliest opportunity to ensure anticipated result.

In finding the best solution there are four criteria for picking the best from among the possible alternatives:


1. The Risk:

The manager has to weigh the risk of each course of action against the expected gains.

2. Economy of Effort:

He must secure the greatest benefit with the least effort or expenditure.


3. Timing:

He must take action in time to secure the best result. Proper timing reduces resistance for change.

4. Limitation of Resources:

He must have the means to carry out his decisions. He must have skilled, competent and trained executives and workers. Solution on paper may fail in practice, if we have an inefficient administrative machinery.