Compilation of answers we got on the process, steps and stages of decision making. Also learn about:
- Decision Making Process 8 Steps 2. Decision Making Process Definition
- 5 Steps In Decision Making Process
- Decision Making In Management
- Types Of Decision Making Process
- Decision Making Process And Various Types Of Decision With Examples
This article will help you to get the answers of:
- What are the five steps in the decision making process?
- What are the 8 steps in the decision making process?
- What are the six steps in decision making?
- What are the functions of decision making?
- What are the 6 steps in the decision making process?
- What are the types of decision making?
- What are the 5 steps to making an ethical decision?
- What are the 5 steps in the consumer decision making process?
Answer 1. Process of Decision Making: Process, Steps and Stages:
Decision making is a complex mental process. It requires careful thinking. It is a dynamic process which is influenced by multiple forces.
Rational decision-making process contains the following steps:
1. Define the Problem:
A problem is a question put forward for solution. A problem may arise due to the unfilled goals or due to deviations from the desired state of affairs. Therefore, clear understanding of the problem is necessary for providing the right alternatives for solving a problem.
As the saying goes, “a problem well defined is a problem half-solved”. Wrong definition of the problem leads to wrong solutions. The problem has to be examined from different angles so as to identify the exact causes. Unless exact causes are identified, right decisions cannot be taken.
2. Analyze the Problem:
Problem is to be thoroughly analyzed to determine the causes and scope. This can be done through classification of the problem and collection of relevant information. The past events that contributed to the problem, the present situation and the impact of the problem on the future have to be examined.
Personal prejudices have to be avoided. An objective assessment of the situation is to be done. If the problem is of minor nature, subordinates can be authorized to solve it. If it is a major problem, manager can initiate the necessary steps. Sometimes, the problem may not warrant any decision. Leaving the problem as it is could be better solution.
3. Develop Alternatives:
There are number of ways in which a problem may be solved, but all of them may not be equally good. Effective decision-making depends on the development of, as many alternative solutions, as possible. The ability to identify and develop alternative courses of action depends on the manager’s creativity and imagination.
4. Evaluate Alternatives:
Development of alternatives does not give any guarantee of finding the best possible solution but it helps in weighing one alternative against others and thereby eliminated unwanted alternatives. Alternatives have to be evaluated in the light of the objectives to be achieved, and the resources required. Evaluation involves a thorough scrutiny of the relative merits and demerits of each of the alternatives in relation to the objectives sought to be achieved by solving the problem.
5. Select and Implement the Decision:
Scientific evaluation of the alternatives reveals the acceptability of various alternatives. It gives a clear picture as to how each alternative contributes towards solving the problem. The best alternative has to be selected and implemented. It may not always be possible to select the best alternative for want of complete information, time and resources. In such a case, the manager has to satisfy with limited information and optimize the yield under given circumstances.
Once an alternative is selected, that becomes the decision and it has to be implemented in a systematic way. The required resources for the implementation and the necessary cooperation from the people concerned have to be ensured. Otherwise, even the best decision may encounter resistance in the implementation stage.
6. Follow-Up and Feedback:
Once the- decision is implemented, it brings certain results and these results are to be compared with the expected results. It has to be closely monitored to find our whether decision taken is correct or not. Follow-up enables to identify the shortcomings of the decision. It provides valuable feedback on which the decision may be reviewed or reconsidered. The decision may not yield the desired results.
Constant follow-up helps to take corrective action as and when necessary.
Answer 2. Steps of Business Decision Making Process: Top 8 Steps:
Following are the important steps of a comprehensive decision making process:
Step 1 – Involves Identifying the Business Problem:
The first step involves identification the business problem. In this step endeavour is made to identify the problem so that there is an absolutely clear understanding on what is happening and what the business problem is about. In this step care is taken to define the business problem. This helps removal of all superfluous and irrelevant ideas and focus on the specific issue that needs to be solved.
Step 2 – Involves Collection of Data and Information:
A business problem may have many dimensions. Besides there may be many factors involved in the problem. In the second step effort is made to garner as much as information related to the factors associated with the problem.
Step 3 – Involves Determination of the Objectives:
In the third step the objectives of the Business firm are determined. There should be some basic objectives for the business firm. Even though profit maximization is one of the most important objectives, there are other goals like sales maximization, growth maximization which needs to be considered while determining the objectives. An organization may have multiple objectives to be pursued.
Step 4 – Involves Exploration of the Existing Alternatives:
This step involves the exercise of exploring all the possible and available options. A serious and comprehensive discussion is carried out to find out all the available alternatives. The decision making authority should consult the team members and specialists and come out with a list of the alternatives available.
Step 5 – Involves Assessment of the Possible Consequences of the Different Alternatives:
The different available alternatives selected and enlisted in the step 4 of the decision making process have their advantages and disadvantages. It is very crucial therefore to judge and evaluate the anticipated consequences of the various alternatives.
Step 6 – Involves Selection of the Best Possible Alternative:
In this step of the decision making process, the decision making authority needs to select the best alternative available. The best alternative will be the one that helps to achieve the recognized objectives of the business firm. Very often a variety of statistical and mathematical tools and techniques are used to arrive at the decision.
Step 7 – Involves Execution of the Chosen Alternative (the Decision):
The accomplishment of a decision making process is basically determined by the proper implementation and the execution of the decision. Once the best alternative is determined, it should be executed in a proper manner and appropriate time schedule. The proper implementation of the decision helps the business firm achieve the selected objectives determined in the decision making process.
Step 8 – Involves Evaluation and Monitoring of the Decision /Alternative Applied:
The effective implementation of the selected decision and alternative has to be evaluated. Besides, a constant monitoring is imperative so that the desired results from decision making process are arrived at.
Answer 3. Process of Decision Making:
Decision-making process involves the following steps:
1. Identify the Problem:
Decisions are made to solve problems. As a first step to decision-making, therefore, managers identify the problem. Problem is any deviation from a set of expectations. Managers scan the internal and external environment to see whether or not organisational operations conform to environmental standards. If not, it signals a problem.
If sales target is 10,000 units per annum but actual sales are 7,000 units, managers sense some problem in the company. The problem is identified with the marketing department of the company. Managers use their judgment, imagination and experience to identify the problem as wrong identification will lead to wrong decisions.
2. Diagnose the Problem:
Managers find causes of the problem by collecting facts and information that have resulted in the problem. Diagnosis helps to define the problem; its causes, dimensions, degree of severity and origin, so that remedial action can be taken smoothly. Managers get to the core of the problem and isolate the problem in a separate category of operations called the problem-solving area. In the above example, managers find reasons for low sales. It could be low quality, poor promotion, better product introduced by competitors etc. The exact reason is found and the problem is said to have been diagnosed.
3. Establish Objectives:
Objective is the end result that managers want to achieve through the decision-making process. Establishing objectives means resolving to solve the problem. The resolution forms the objective of decision-making. If the reason for low sales is diagnosed as poor salesmanship, managers form the objective of improving skills of the salesmen to promote sales.
4. Collect Information:
In order to generate alternatives to solve the problem, managers collect information from the internal and external environment. Information provides input for generating solutions. Information may be quantitative or qualitative. It should be reliable, adequate and timely so that right action can be taken at the right time.
5. Generate Alternatives:
Alternatives means developing two or more ways of solving the problem. Managers develop many solutions to choose the best, creative and most applicable alternative to solve the problem.
A.F. Osborn identifies four principles which help to generate alternatives:
(a) Do not criticize ideas while generating possible solutions – Managers should react positively to all the ideas. Criticism at the stage of generating solutions can limit the number of alternatives.
(b) Freewheel – Even the remote possible solutions which may not be relevant to the problem should be taken into consideration. These may not be acceptable in isolation but may be useful in the overall decision-making process.
(c) Offer as many ideas as possible – Managers should invite maximum ideas for generating solutions to the problem. Large number of ideas helps in framing the most effective solution to the problem.
(d) Combine and improve on ideas that have been offered – Combining all the ideas helps to arrive at the best solution.
6. Evaluate Alternatives:
All the alternatives are weighed for their strengths and weaknesses. They are useful if they help managers in achieving their objective. Alternatives are evaluated in terms of acceptable criteria to analyse their impact on the problem.
Various quantitative and qualitative criteria against which alternatives are evaluated are as follows:
(a) Costs – Alternatives should not be costly. Improving the skills of salesmen by firing the existing salesmen and hiring new ones involves huge strain on financial resources. Such alternatives should be avoided.
(b) Resources – The alternative should fit into organisation’s resource structure. It should be feasible with respect to budgets, policies and technology of the organisation.
(c) Acceptable – Alternative should be acceptable to decision-makers and those who are affected by the decisions. If managers want to increase sales by spending more on advertisement but finance department refuses to accept extra financial burden on advertisement, this alternative should be dropped.
(d) Reversible – A decision is reversible if it can be taken back and other measures can be adopted. In the above example, if decision to increase sales by increasing cost of advertisement is not acceptable, it can be reversed, but decision to invest in land and building cannot be easily reversed as huge amount of time, effort and money are involved in it. Reversibility of the decision is an important factor that helps to evaluate alternatives.
7. Select the Alternative:
After evaluating the alternatives against accepted criteria, managers screen non-feasible alternatives and select the most appropriate alternative to achieve the desired objective.
Alternatives can be selected through the following approaches:
(a) Experience – Past experience guides the future. Managers follow past actions, search for their successes and failures, analyses them in the context of future environment and select the most suitable alternative to fit the situation.
(b) Experimentation – An alternative to experience is experimentation where each alternative is put to practice and the most suitable alternative is selected. This method is costly as implementation of every alternative to the decision-making situation involves heavy expenditure. Testing each alternative, therefore, is not possible. This method may be suitable in the present circumstances only. The selected course of action should meet the future requirements also.
(c) Research and analysis – It helps to search and analyse the impact of future variables on the present situations, apply mathematical models and select the most suitable alternative. This method is more suitable and less costly, in terms of time and money, as compared to experimentation and experience.
8. Implement the Alternative:
The selected alternative should be implemented with least resistance from organisational members. Implementation should be planned. Those who will be affected by implementation should participate in the implementation process to make it effective and fruitful.
Implementation of alternative should ensure the following:
(a) The alternative should be communicated to everyone in the organisation.
(b) Changes in the organisation structure arising because of implementation should be communicated to everyone in the organisation.
(c) Authority and responsibility for implementation should be specifically assigned.
(d) Resources should be allocated to departments to carry out the decisions.
(e) Budgets, schedules, procedures and controls should be established to ensure effective implementation.
(f) A committed workforce should be promoted. Unless everyone is committed to the decision, the desired outcome will not be achieved.
9. Monitor the Implementation:
The implementation process should be regularly monitored to know its acceptability to the organisational members. The alternative should be monitored through progress reports to see whether the objective for which it was selected is achieved or not. If not, managers should make corrections wherever necessary or make changes in the implementation process. It may even restart the entire decision-making process. If yes, such alternative forms the basis for future decision-making.
Answer 4. Process of Decision Making:
There are different approaches to decision making, the research suggests us to understand the process of decision making, which actually takes place in organisations and give rise to decisions. There are five steps in the process of decision making.
Mostly individual employees identify the problems in various areas. Individuals, when they get a ‘gut feeling’ that something is wrong, they identify the problem. The awareness of a problem mostly occurs to employees at the grass-root level like sales people, machine operators, finance assistants, human resource assistants etc. This awareness is likely to develop through a period of ‘incubations’ in which managers sense various stimuli that confirm and define a developing picture of a problem.
Norburn and Grinyer call this stimuli as ‘signals’ or ‘ear twitchers’ and are of three types:
i. Internal performance measurements like level of turnover or profit performance.
ii. Customer reaction particularly to the quality and price of the products and/or services and
iii. Changes in the environment, particularly in terms of competitive action, technological change and economic conditions.
These three factors together provide a picture of the deviation of an organisation’s circumstances from the planned or expected one. This can be the deviation from a normal trading pattern.
The accumulation of stimuli will clearly indicate the existence of the problem in the organisation. This ‘triggering point,’ will soon be highlighted by the formal information system in the form of decline in sales, profit and increase in the rejection level in the production department.
Successful business performance depends upon the ability of the management in sensing its environment. Therefore, managers should respond when the problem is identified by the individual employees at the bottom level.
After the individual employees are aware of the problem and it is informed to the managers, managers will gather the information and define the problem.
Information may be gathered in the following ways:
(i) Information may be explored to determine the facts of the problem in detail. Such information may be gathered on a verbal and informal basis.
(ii) Rationalise the information and stimuli relevant to the problem so as to clarify the situation.
(iii) Act diplomatically to establish peer groups or those of political support for individual views of the problem.
Try to define the problem through debates and discussions and also get an organisational view or consensus on the problem to be solved. The problem, then may take a clear shape by interweaving managerial experience of the executives and political process in the organisations.
Some executives may not accept to proceed or define the problem and ask for additional information or the triggering of a different problem owing to different managerial experience and different views in view of social and political process. In such a situation, the process reverts back to the stage of triggering.
After the problem is diagnosed clearly, the tendency of managers is that of searching for ready-made solutions. They do this process- (i) through memory search in which the managers seek for known, existing or attempted solutions, or (ii) passive search which entails waiting for possible solutions to be offered. If the managers fail in these two searches, they search for the past experiences of themselves and other managers. If they fail to find a solution even through this method, they attempt to designing solutions.
They start designing or developing solutions through a vague idea gradually improve it, refine it by recycling it through selection routes back into problem identification or through further searches. This process of developing solutions takes place through discussions, debates, consultations and brainstorming sessions and by sharing management wisdom and experience.
This can take place both in the form of structured and unstructured team works. The solutions once developed are to be refined until they are developed to the stage of perfection within the available human and other resources of the organisation.
After the alternative solutions are developed, the solutions have to be formally evaluated based on their inherent strengths and weaknesses and also based on the environmental threats and opportunities for implementation. The solutions are to be ranked on the basis of their weights in terms of strengths and opportunities after eliminating the non-viable solutions in view of their weaknesses and environmental threats for implementation.
After the formal evaluation and ranking is completed, the managers tend to re-evaluate the solutions based on the managerial judgement followed by political bargaining as the formal evaluation is not the predominant criterion for assessing the feasibility in practice. Therefore, the techniques for evaluation of solutions also include social and political process.
Quinn suggests that successful managers actively adopt consultation bargaining process in order to challenge prevailing strategic inclinations and generate information from other parts of the organisation. The solutions may also be referred to the senior level to seek authorisation.
David Hickson and his colleagues in their study identified three broad types of decision making processes.
i. Sporadic processes characterised by many delays and impediments, many sources of influence and information on decision, and therefore, protracted personal interactions and informal negotiation. This type of process exists mostly in public sector organisations
ii. Fluid processes in which there are fewer delays and sources of influence, and more formal channels of communication which takes rather less time and
iii. Constricted processes in which information sources are more readily available and decisions can be taken within groups or by individuals without extensive reference to others in the organisation. This might be the case in a business with a dominant chief executive or where there is an issue which relates primarily to one part of an organisation.
The managers should keep in mind the various processes discussed above while selecting the solution for implementation. If the managers fail to arrive at a consensus, the process may be recycled to search for new designs.
Implementation of the selected solution is a part of the decision making process as the process may be required to be recycled due to impediments in the process of implementation. The managers should secure the support of the top management for allocation of resources, time etc. regarding the implementation of the decision.
A detailed programme of action should be formulated, specifying the minute details of action, people who will execute it, when it will be implemented, who will provide all necessary resources, how it will be implemented and who will coordinate the work. Employees concerned will be entrusted with the work and relevant information should be fed to them beforehand.
The managers should also ensure for getting the information back about the progress of implementation. If the decision cannot be implemented due to major hurdles in the implementation process, the process may be recycled for possible modification.
Answer 5. The Rational Decision Making Process:
The decision making process is said to be rational, when a decision maker evaluates problems systematically, develops alternatives and chooses the most suitable one on the basis of available data. When decisions are arrived at based on hunch or intuition and are not based on relevant facts and figures they tend to be irrational.
Irrational decisions follow the hit or miss kind of route and the outcomes could turn out to be unproductive and negative on most occasions. They tend to be judgmental in nature, because the decision maker has not bothered to examine relevant data closely. Rational decisions are products of careful planning, evaluation of relevant facts and examination of evidence closely.
1. Awareness of a Problem:
The first step in the decision making process is recognizing the problem. Problems generally arise because of disparity between what is and what should be. To identify the gaps between the current and desired state of affairs, managers should look for problems that require a solution. They must focus attention defining the problem correctly instead of trying to find answers right away. In order to recognize problems, a manager is expected to monitor the decision-making environment, understand the possible causes and try to define the real problem carefully.
2. Diagnose and State the Problem:
A successful manager must have the ability to weed out the wheat from the chaff before deciding on a specific course of action. Once aware of a problem, he must state the real problem. He must try to solve the problem, not the symptoms.
In order to state the true problems, the following questions should be looked into carefully:
i. What is the problem? What is the difference between, what is and what should be? The difference between the current state and the desired state of affairs indicates the problem for the firm.
ii. Which problems to solve? At this stage the focus must be on problems that merit immediate attention and those that can be postponed for a future date.
iii. What is the real cause of the problem? To avoid the danger of prescribing a wrong medicine for the organization, the manager should consider the decision environment properly. A well-defined problem, as experts say, is already half-solved. Managers need to put the finger on the problem causing trouble by taking a 360 degree of view of everything that impacts a decision.
According to Drucker, ‘critical factor analysis’ helps in identifying the causes properly. The critical factor spells the difference between actual and desired results. If a machine goes out of order due to non-availability of an essential component, the component is the strategic or critical factor.
According to Barnard, the nature of the strategic factor will shift when the problem is defined correctly. After defining the problem, that is non-availability of the component, a new situation will arise, where the new limiting factor would be obtaining the component and so on.
The important point is to list all the possible causes and testing each cause; trying to decide whether one is more likely than another; to have created the deviation between the current and desired state of affairs. To define the problem correctly, the decision maker should collect as many facts as he can and try to separate these facts from beliefs, opinions and preconceived notions.
3. Develop the Alternatives:
Quite often managers rush to marry the first available option. They exhibit indecent haste to marry a comforting solution that looks like a real winner. Developing a sufficiently large number of alternative solutions at this stage, therefore, guarantees adequate focus and attention on the problem at hand. Managers should encourage age people to come with varied points of view, alternative ways of doing things and encourage dissent in an effective manner.
The ability to develop alternatives is as important as making a right decision among alternatives. Ingenuity, research and creative imagination are required to make sure that the best alternative is considered before a course of action is selected. The number of alternatives to be generated depends on various factors- time available to the decision maker, cost of each alternative and the importance of the decision itself. Within these constraints, managers should develop all possible alternative solutions because if the correct alternative is not considered and put into action, the problem cannot be solved.
4. Evaluate the Alternatives:
In this step, the decision maker tries to outline the advantages and disadvantages of each alternative. The consequences of each alternative would also be considered. The ‘opportunity cost’ method is suggested, quite frequently, in order to evaluate each alternative.
When one alternative is selected in place of another—like choosing a scooter in place of a motor cycle—the cost of the selected one (scooter) is measured in terms of the benefits available from the rejected one (motor cycle) The point is that subjective judgment invariably creeps into the decision- making process. The final decision in most of the cases is a product of deliberation, evaluation and thought.
5. Select the Best (Most Beneficial) Alternative:
In this step, the decision maker merely selects the alternative that will maximize the results in terms of existing objectives. This steps essentially involves questions such as the anticipated costs and benefits of each listed alternative, estimating the uncertainties and risks associated with each alternative, and picking up an alternative that would bring a firm nearer to its goals. Choosing consists of selecting the alternative with the highest possible pay off based on the benefits, costs, risks and uncertainties of all alternatives.
6. Implement and Verify the Decision:
After making a decision, the manager must implement it. He must see, whether it has actually worked out or not. In other words, he must seek feedback regarding the effectiveness of the implemented solutions. Feedback allows managers to become aware of the recent problems associated with the solution. It permits managers to monitor the effects of their acts, to gauge their success. They can evaluate their own decision-making abilities. It would be better to establish follow-up procedures to evaluate the decision.
Managers can set up a budget; allocate time and money; assign responsibility for individuals to work out the specific tasks involved. They can fix up a time for obtaining the periodic progress reports, regarding how the decision is actually implemented. If the decision is not yielding the desired results and the decision turns out to be a poor one, they should not hesitate to reverse the trend. They should not hesitate to ride out a decision that does not accomplish its objective.
Answer 6. Steps in Decision-Making Process:
Decision-making is a systematic process and involves a series of steps.
Any decision- making process consists basically of the following seven steps:
1. Identifying the Problem:
The first step in the decision-making process is identifying the problem. Prior to identifying the problem, it is essential to first recognize that a problem exists. Identification of the problem involves three stages- Scanning, categorization and diagnosis. The scanning stage involves monitoring the work environment for changes that may indicate the emergence of a problem. At this stage, a manager may have a very faint idea that an environmental change could lead to a problem or that an existing situation is posing a problem.
When an organization fails to achieve its goals, there is a performance gap between the predicted or expected level of performance and the actual performance level. The categorization stage attempts to understand this performance gap. At this point, the manager attempts to categorize the situation as problematic or not. The diagnosis stage involves gathering relevant facts and other additional information pertaining to the problem.
It also specifies both the nature and the causes of the problem. At this stage, the problem should be stated in terms of the discrepancy that exists between the current conditions and the desired conditions and the causes for the discrepancy should also be specified. Proper diagnosis is very essential for the success of the decision-making process.
2. Identifying Resources and Constraints:
Once the problem is identified and diagnosed, the manager should identify the resources and constraints relevant to the problem. Anything that can be used to solve the problem is a resource. These include people, money, material, time, equipment, expertise and information. On the other hand, constraints are the factors that limit managers ‘ efforts to solve the problem. They are hindrances to problem solving. Examples of constraints include lack of adequate resources, etc.
Organizations generally face more than one problem at a time. These problems compete for the manager’s attention and for the scarce resources of the organization. Making an explicit list of the organization’s resources allows the manager to allocate the resources in such a way that they are utilized to the maximum extent possible.
The listing of constraints alerts managers to the presence of various bottlenecks that could create problems. Organizations sometimes face situations in which the absence of a specific resource or the presence of a particular constraint poses a problem for conducting its business.
3. Generating Alternative Solutions:
Once the problem, resources and constraints of the organization are identified, the next step would be to generate feasible alternatives to the problem. Managers should not take any major decision without exploring all the possible alternatives. The temptation to accept the first feasible alternative often prevents managers from finding the best solution to the problem. Generating a number of alternatives allows them to resist the temptation of finding a speedy solution to the problem and increases the chances of reaching an effective decision.
Tile development of alternatives can often be facilitated through brainstorming, a group decision-making technique that encourages members of a group to generate as many feasible ideas as possible on a given topic, without carefully evaluating each one of them. In a brainstorming session, none of the ideas offered is criticized. Each idea is recorded for later evaluation.
Since there are always alternatives waiting to be discovered, the process of generating alternatives could go on forever. Two factors must be taken into consideration when determining the appropriate amount of time to be spent on generating alternatives. The first is the importance of the problem. The greater the importance of the problem, greater will be the value of any improvements that can be made to the solution of the problem.
The second factor relates to how accurately the manager is able to differentiate between alternatives. This depends on the availability of data and the cost of evaluating the data. When sufficient data is available, it is relatively easy to distinguish between alternatives and to determine their relative effectiveness. Managers should not devote too much time to generating alternatives when the data available is very limited. Similarly, a manager prefers fewer alternatives when the cost of evaluating the data is high.
4. Evaluating Alternatives:
The generation of alternatives should be followed by a thorough analysis of the pros and cons of each alternative. In other words, alternatives should be evaluated in order to see how effective each would be. Generally, there are five criteria on the basis of which alternatives are evaluated- feasibility, quality, acceptability, cost and ethics. Feasibility refers to the degree to which an organization can accomplish a particular goal within the related organizational constraints (such as time, budget, technology and policies).
Alternatives that do not seem feasible should not be considered any further. Quality refers to the extent to which an alternative finds an effective solution to the problem under consideration. Alternatives that only partially solve the problem are eliminated at this stage. Acceptability refers to the degree of support extended to the chosen alternative by the decision-makers and those who would be affected by its implementation. This criterion is considered to be very important in evaluating alternatives.
The costs criterion refers to the resources required and also the degree to which the alternative may produce undesirable side effects. Thus, the term ‘costs’ not only includes monetary expenditures that the company incurs but also some intangible issues such as retaliation from competitors. Ethics refers to the degree of compatibility of an alternative with the ethical standards and social responsibilities of the organization.
5. Selecting an Alternative:
After evaluating the alternatives, the next step in the decision-making process would be to select the best alternative. Managers can make use of three basic approaches for selecting among alternatives. These are – (i) experience, (ii) experimentation and (iii) research and analysis. When taking decisions, managers tend to rely on past experience to a great extent. Many managers believe that their previous accomplishments and mistakes are infallible guides to the future.
Though experience is the best teacher, excessive reliance on it can be dangerous, especially since many managers fail to recognize the underlying reasons for their mistakes or failure. Moreover, the solutions to new problems may be very different and the lessons from one’s experience may not be valid in every situation. For one to take good decisions, these have to be evaluated in terms of the future.
Experience can be useful only when the decision-maker learns the fundamental reasons for success or failure from experience. A successful program, a profitable product promotion, or any other decision that turns out well, may provide avenues for such learning.
Another way to decide among alternatives is to try one of them and see the consequences. Experimentation is often used in scientific inquiry. Most people recommend that it should be employed more often in managing and that it should be the only way by which a manager can make sure that the plans are right. The experimentation approach can be quite expensive, especially if a program requires heavy capital expenditure and if several alternatives have to be tried out.
Moreover, after experimenting, doubts may still linger as to what the experiment proved. Thus, this technique must be used only after considering other techniques. Experimentation can, however, be used in other ways. For instance, a firm may test a new product in a certain market before launching it nationwide. Organizational techniques are often tried out in a branch office before being implemented throughout the company.
When important decisions are involved, one of the most effective techniques to select an alternative is through research and analysis. This approach attempts to solve a problem by first understanding it. It tries to find relationships among the critical variables, constraints and premises which have a direct effect on the goal to be accomplished. In this approach, the decision-maker develops a model simulating the problem.
He may also represent the variables in a problem situation through mathematical terms and relationships. One of the most comprehensive research and analysis approaches to decision-making is operations research.
Whatever approach the decision-maker may adopt in selecting an alternative, he must bear in mind that the selected alternative should be acceptable to those who must implement it and those who will be affected by the decision. Failure to meet this condition is one of the most likely reasons for failure of the decision-making process.
6. Implementing the Decision:
Once the best among the available alternatives has been selected, it must be implemented properly to achieve the objective for which it was selected. It is possible for a good decision to become ineffective due to poor implementation. Successful implementation of a decision usually depends on two factors – careful planning and sensitivity to those who will implement the decision and/or those who will be affected by it.
Minor changes require only a little planning, whereas major changes require extensive planning efforts, such as written plans, special funding arrangements and careful coordination with units inside and outside the organization. Decisions can be implemented smoothly by being sensitive to the reactions of those whom the decision will affect.
The decision-makers should anticipate potential resistance at various stages of the implementation process; they should also realize that unanticipated consequences may arise despite the fact that precise evaluation of all alternatives and carefully consideration of the consequences of each alternative have been undertaken.
After the process of implementing the decision has begun, any number of situations, such as unexpected effects on cash flow or operating expenses, can arise. Managers must, therefore, have contingency plans ready to deal with such situations. In order to overcome resistance to change, the people who will be implementing the decision should be given careful orientation and training.
A participative approach may be an effective way for the successful implementation of certain decisions. Most managerial problems require the combined efforts of many members of the organization; each should understand what role he or she is to play during each phase of the implementation process.
7. Monitoring the Decision:
Managers are required to monitor the process of implementation of the decision so as to make sure that everything is progressing according to plan. It should also be ensured that the problem that initiated the decision-making process has been resolved. Monitoring decisions involves gathering information to evaluate how the decision is working.
Thus, feedback is an essential component of the decision process. It allows the decision-maker to determine the effectiveness of the chosen alternative in solving the problem or in moving the organization closer to the attainment of its goals.
In order to evaluate the effectiveness of a decision, there should be a set of standards against which actual performance can be compared. A second requirement is the availability of performance data for comparison with the set of standards.
Finally, a data analysis strategy, which includes a formal plan outlining how the data will be used, should be developed. By reviewing the decisions, the decision-maker will recognize the mistakes he has made and learn where and how to avoid them in the future. This will also help him sharpen his decision-making skills.
Types of Managerial Decisions:
Managerial decisions may be classified into following categories:
1. Programmed and Non-Programmed Decisions:
According to Herbert Simon, programmed decisions are concerned with relatively routine and repetitive problems. Information on these problems is already available and can be processed in a preplanned manner. Such decisions have short-term impact and are relatively simple. They are, therefore, made at lower levels of management. Decision rules and procedures are established to save time and effort on such decisions. These decisions require little thought and judgment.
The decision-maker identifies the problems and applies the pre-determined solutions. Non- programmed or non-repetitive problems cannot be tackled in a pre-determined answer for such problems. Therefore, a high degree of executive judgment and deliberation is required to solve them. Locations of plant, takeover of a sick mill, opening of a new branch, development of a new product are examples of such decisions.
2. Routine and Strategic Decisions:
Routine or operating decisions are of repetitive nature. They involve short-term commitments and have minor impact on the future of the organization. Therefore, these decisions are generally made at lower levels of management. These decisions relate to day-to-day operations of business. Usually standard procedures are established to make such decisions quickly.
For example, a supervisor can decide whether an employee is entitles to overtime pay or not. Strategic or policy decisions involve long-term commitments and large investments. These exercise a permanent influence on the future of the organization as a whole. Much deliberation and judgment are required because such basic decisions deal with unique problems and policy issues. Therefore, these decisions are made at higher levels. Launching a new product, location of a new plant, installation of a computer system are examples of strategic decisions.
3. Organizational and Personal Decisions:
Organizational decisions are made to further the interests of the organization. They are made by managers in their official capacity as allocates of resources. These decisions are based on rationally, judgment and experience. Such decisions can be delegated to lower levels. These decisions affect the functioning of the organization. Personal decisions are made by managers as individuals and on their own behalf. Such decisions cannot be delegated.
Decisions to marry, to buy a house, to send children in a boarding school are examples of personal decisions. Such decisions affect the personal life of a manager but may affect the organization indirectly or directly. For example, the decisions of the chief executive to retire early may have a direct effect on his company.
4. Individual and Group Decisions:
Individual decisions are taken by a single individual. These are concerned mainly with routine problems for which broad policies are available. In such decisions analysis of various variables is relatively simple. Group decisions are those taken by a group, Board of directors or a committee is examples of group decisions.
These decisions are generally important for the organization. Group decision-making generally results in more realistic and well-balanced decisions and encourages participative decisions-making. But it involves delay and makes it difficult to fix responsibility for such decisions.
Answer 7. Decision Making Process: 6 Steps
The decision-making process can be studied under the following heads:
1. Defining the problem.
2. Making analysis of the problem and to find facts.
3. To suggests alternative courses of action.
4. Selecting the best alternative.
5. Putting the decision into practice.
6. Follow-up the decisions.
Step # 1. Defining the Problem:
The first and the most important task before the decision maker is to find and define the problem before he takes any decision. Eminent authors of the subject are of this opinion that a problem well defined is half solved and a good decision cannot be taken up unless the decision taker has a good grasp of the problem.
For example- suppose a company is suffering loss. How the loss can be avoided is a symptom? The actual problem is to pin point and identify what business practices are causing the company to suffer losses. Are the prices low or expenses too high? Therefore, it is important for the decision-maker to find and define the problem before he takes any decision.
Therefore, the manager must take proper care in defining the problem. If sufficient “care is not taken then it may ultimately turn out to be a mere symptom. For instance, a doctor has to take into account all the symptoms before deciding the medicine to be given to the patient. Similarly, a manager should also examine and think carefully in order to diagnose the problem.
But in business, situational factors are very important. In one case, the reason of suffering losses may be low prices and in another case, it may be high costs. Therefore, there is no guarantee that symptoms will always lead to the same problem. So, the manager should try to have an overall view of all situations to find the real problem. It is very important that the objectives of the business, both immediate and long-run be taken into consideration when we are defining the problem.
Further, sufficient time should be given over thinking and defining the problem as it is not easy to define the problem and to see the fundamental thing that is causing difficulty and that needs correction. Practically, no problem ever presents itself in the manner that an immediate decision be taken. Therefore, it is essential to define the problem before any action is taken, otherwise the manager will answer the wrong question rather than the core problem. Right answer to the right question we can have by only having clear definition.
Step # 2. Making Analysis of the Problem and to Find Facts:
The next phase of decision making is the analysis of the problem which involves classifying of the problem and collecting information. Classification is essential because without proper classification, the effectiveness of the decision may be jeopardised.
The problem should be classified keeping in mind the following factors:
(a) The nature of the decision – whether strategic or routine,
(b) The impact of the decision on other functions,
(c) The periodicity of the decision,
(d) The futurity of the decision, and
(e) The strategic factor relevant to the decision.
Role of Information and Collection of Facts in Decision-Making:
Collection of facts and figures also requires certain decisions on the part of the manager. He must decide in advance what type of information he requires and how can he obtain this. It is not always possible to get all the information which is needed for defining and classifying the problem.
In such circumstances, a manager has to judge and decide as to how much risk the decision involves as well as the degree of precision and rigidity that the proposed course of action can afford. He must lay down the various alternatives first and then proceed to collect facts which will help in making comparison.
Collection of right type of information is very important in decision-making. So long as the required information is not available, any classification would be misleading. This will also have an adverse effect on the quality of the decision. Trying to analyse without facts is like guessing directions at a crossing without reading the highway signboards.
Further, this should also be clear in the mind of the manager as to how much money and time he can spend in gathering the information he needs. It should also be clear to the manager that simply collection of information is not enough; he should also know how to use it.
Step # 3. To Suggest Alternative Courses of Action:
After defining and analysing the problem, the next step in the decision-making process is the development of alternative courses of action. Without developing alternatives, a manager is likely to be guided by his limited imagination. It is very rare that alternatives of any courses are not available. But sometimes, a manager assumes that there is only one way of doing a thing.
In such a case, what the manager has probably not done is to force himself, to consider other alternatives. Unless he does so, the best possible decision cannot be taken by him. Effective planning needs a search for the alternatives towards the desired goal. But it should also be noted that development of alternatives is no guarantee of finding the best possible decision, but it certainly helps in weighing one alternative against others and thus minimising uncertainties.
Principles of Limiting in Factor in Decision-Making:
What is Limiting Factor? A limiting factor is one which stands in the way of accomplishing the desired goal. It is very important factor rather a key factor in decision-making. If such factors are clearly and properly identified, a manager can confine his search for alternatives to those which will overcome the limiting factors.
In selecting from among alternatives, the more an individual can recognise and solve those factors which are limiting on critical to the attainment of the desired goal the more clearly and accurately he can select the most favourable alternatives. It is not always necessary that the alternative solutions should lead to taking some action.
To decide to take no action is also a decision as much as to take a specific action. For example- if there is an unnecessary post in a department, the alternative not to fill it will be the best one. The ability to develop alternative is often as important as making a right choice among the alternatives. If the development of alternatives is thorough, then the manager will have to take the help of certain mathematical techniques and electronic computer to make a choice among the alternatives.
Step # 4. Selecting the Best Alternative:
To evaluate the all possible alternatives one will have to make a final choice of the best alternatives. For that the popular is “through invitation”, it means selecting a solution that seems to be good at the time. In this process there is danger that a manager’s intuition may be wrong on certain occasions.
In this connection Peter Drucker has suggested four methods to study the consequences of various alternatives.
These are as follows:
(a) Risk Involved:
The manager should assess the risks involved in each course of action against the expected gains. If we study from close, it is definite that risks are involved in all the alternatives. But one has to assess the intensity of different types of risks involved in various alternatives.
(b) Economy of Effort:
While taking decision the manager should ensure the maximum possible economy of efforts, money and time. He is considered the best manager who has the capacity to mobilise the resources for the achievement of results with the minimum of efforts.
(c) Limitation of Resources:
In selecting the alternatives primary attention must be given to those factors which are strategic to the decision involved. Discovery of the various limiting factors lies at the basis of selection from the alternatives, so planning and decision-making is essential for the proper utilisation of limited resources.
(d) Situation or Condition Prevailing at a Particular Time:
The choice of a course of action very much depends upon the situation prevailing at a particular point of time. If the situation prevailing has great urgency, the preferable course of action will alarm the organisation that something important is happening. If a long and consistent effort is needed, a ‘slow start will gather momentum and this approach will be preferable.
Further, Koontz, 0′ Donnell and Weihrich have suggested three criteria which should be followed by a manager while selecting the alternatives.
(ii) Experimentation, and
(iii) Research and analysis
Experience no doubt influence to a great extent in taking decision of certain matters. But undue importance need not be attached to past experience. A manager must take sufficient care while depending upon his past experience. He should compare both present and past situations in which he has to take the decision.
Eminent authors of management have said that a manager may give more reliance to past experience in case of routine decisions: but in the case of strategic decisions, he should give less weightage to his past experience to reach at a rational and final decision.
Under this criteria, the manager tests the situation under actual and prevailing conditions. This criteria has been considered as more helpful in many cases particularly in test marketing of a new product.
But this is not correct to put this technique into practice, because, it has been considered as very expensive. It is used as the last resort. It can be used as a small scale to test the effectiveness of the decision. For Example – A company may test a new product in a certain region before expanding its sale throughout the country.
(iii) Research and Analysis:
This criteria involves a search of relationships among the more critical variables, constraints and premises that bear upon the goal sought. It is called the pencil and paper approach to decision-making. To analyse the relationships we may take the help of computers and certain mathematical techniques. It can weigh various alternatives by making models and this makes more rational and objective approach.
Step # 5. Putting the Decision into Practice:
The decision taken by the management will not serve the purpose if it is not executed into action for the development of the purpose for which decision has been taken. It is the duty of the manager to see and think as to how the decision will be implemented. He should try to ensure that the systematic steps are taken to implement the decision.
It is just possible that the manager may face at the implementation stage, the resistance by the sub-ordinates who are affected by the decision. If the manager is not in a position to tackle the resistance then the efforts consumed in decision-making will go waste.
Therefore, the manager must try to make the people understand what the decision involves, what is expected from them and what they should expect from the management. The principle of slow and steady progress should be followed in order to bring about a change in the behaviour of the sub-ordinates and the people.
Further, the sub-ordinates should be allowed to participate in the decision making process. They should be given opportunities to ask questions and give their suggestions. But here the question arises as to what extent the subordinates be allowed to participate in the activities and to put questions? Normally the subordinates be allowed and should participate in the development of alternatives. They should be encouraged to suggest alternatives.
This opportunity will make them feel that they are attached and a part and parcel to the decision. Eminent authors of management are of this opinion that group discussion and group participation does not necessarily improve the quality of the decision, but sometimes impairs it.
Group decision is like a train in which every passenger has a brake. Further, all employees and all sub-ordinates are not competent to participate in decision-making. Therefore, participative management has been recommended and are providing more successful than the other styles of management. This will be more useful and helpful in the effective implementation of the decision.
Step # 6. Follow-Up the Decisions:
Kenneth H. Killer, has emphatically written in his book that it is always better to check the results after putting the decision into practice.
He has given reasons for following up of decisions and they are as follows:
(a) If the decision is a good one, one will know what to do if faced with the same problem again.
(b) If the decision is a bad one, one will know what not to do the next time.
(c) If the decision is bad and one follows-up soon enough, corrective action may still be possible.
In order to achieve proper follow-up, the management should devise an efficient system of feedback information. This information will be very useful in taking the corrective measures and in taking right decisions in the future”.