What is Decision-Making?
Decision-making is the process of selecting the best course of action out of many available alternatives. It is a managerial function to solve organizational problems by choosing an exact course of action or plan.
Decision-making is an essential function of management. It is a rational and scientific method of choosing the best option. Every organization runs by operating decisions. In present made decisions define how will be the organization in the future.
It is also known as the heart of management. It helps in identifying and defining problems, developing alternative solutions, evaluating them in terms of possible consequences choosing the best solution among them, and implementing the decisions effectively. Because it is necessary to operate an organization smoothly and effectively to achieve defined objectives and goals.
During the life of an organization, many situations and problems may arise in the organization’s functional areas. These problems create obstruction and disturbance in the performance of the organization. The manager needs to solve these problems in the best possible way considering organizational interests and objectives.
Therefore a manager has to be continuously involved in the decision-making process while setting goals, determining plans and taking action, formulating strategies and policies, assigning jobs to subordinates, and evaluating their performance. So, it is a continuous function of a manager to achieve organizational goals.
The success of an organization depends upon the decision-making ability of the manager and its implementation in the practical field.
Definitions of Decision Making:
- According to “George R. Terry” – Decision making is the selection based on some criteria from two or more possible alternatives.
- Koontz and Weihrich – Decision-making is defined as the selection of a course of action among available alternatives.
- Joseph L. Massie – A decision is a course of action consciously chosen from the relevant alternative for the purpose of achieving desired goals.
- Ivancevich, Donnelly, and Gibson – Decision is the process of thought and deliberation that results in a decision to achieve some desired state.
Considering the above ideas and views, it can be concluded that decision-making is the process of solving organizational problems by choosing a specific alternative among various alternatives. When choosing the alternative there must be consideration of some criteria defined by the organization.
Characteristics of Decision-Making
The following 7 are the main natures of features of decision making.
It is the process of selecting a course of action among many alternatives to solve problems. A manager has to consider various factors before selecting a course of action. These factors may involve the capacity to implement the action, the organization’s nature, the existing work environment, the objectives of the organization, time factors, and so on.
Human and Rational
It is a human and rational process and is needed by all types of organizations. A manager has to make mental exercises to study the impact of the course of action before making a decision.
A manager has to invest his personal skills, experience, knowledge, and capability to study the alternatives from many angles. Hence, it is common in every organization.
While making a decision it is essential to consider the time factor and existing environment, wherever a course of action is taken. A manager has to take decisions at the right time for their effectiveness. Besides, he has to consider future environments, which may affect future activities. Therefore, it is not a static but dynamic process of management.
Without any goal made decision seems unrealistic. It focuses on organizational objectives. Many problems arise in an organization during its courses.
The manager has to solve all the problems at the proper time and also in a proper manner by considering organizational goals. Thus, the right decision at the right time contributes to achieving the predetermined objectives within the defined time and standard.
Decision-making is a continuous process till the existence of the organization. In the course of regular performance, many problems may arise at different times and situations. Managers have to solve those problems in the proper time so that organizational performance is smooth.
Freedom to Decision Maker
Managers have the freedom to take any kind of decision. As chief of the organization, a manager takes any course of action to solve a problem by using his own logic, idea, knowledge, and experience. But while taking any course of action he has to consider the organizational objectives.
Positive or Negative Impact
A course of action may either have a positive or negative impact on organizational performance. A manager has to consider as far as possible the positive impact of the action before concluding.
For this, the manager has to make a detailed study of the positive as well as negative impacts of the option. Further, he has to decide to select an option where a positive impact prevails more than a negative one.
Types of (Decision) Decision-Making
A manager’s task is to make a fruitful decision, during his presence in the organization, he makes different types of decisions. In general, he makes five common decisions, they are:
Programmed and Non-Programmed Decision
The programmed decision is the simplest form of decision, it is made for the repetitive task to perform. Such decision-making authority is also delegated to first-line managers, such as handling regular customer queries, handling normal disputes, etc.
The non-programmed decision is unique and novel in nature. It is made in an exceptional situation. In fact, it is called actually a managerial decision. It may be taken to handle issues like new investment, declining market share, etc.
Routine and Basic Decision
The routine decision is a decision that is made to perform the day-to-day activities of the organization. It is usually made by ground-level management and is efficient make smooth functioning at that level.
The basic decision means strategic decision, it is usually made for achieving the long-term goals of the organization. It is in the hand of top management and also requires careful consideration in making one.
Operational and Strategic Decision
The operational decision is of functional nature which is made at the present and relates to the present. Its basic goal is to make an efficient and smooth performance at the operational level of management. Whereas strategic decision focuses on the long-term goal, usually its period is more than 5 years and is also more costly than operational decisions.
Organizational and Personal Decision
An organizational decision means a decision taken by the manager considering the organizational issues, which are formal in nature. The decisions are usually for the betterment of the organization such as introducing new products, employee promotion, etc.
Sometimes managers make decisions on their own ignoring the organizational issues which is a personal decision. Though the manager is in the organization, however, his decision has no negative effect on the organization such as he ignores his promotion.
Individual and Group Decision
An individual decision means a decision taken by a single person. In most organizations, top management has only decision-making power, so he makes decisions individually. And, group decision means a decision taken by a group of people, such a decision needs mutual understanding. In a joint company’s management committee, the board of directors is involved in such decisions.
Conditions of Decision-Making
While making a decision a manager may be in various situations. A manager should know which situation he is in when he makes decisions. Usually, the manager seems to be in 3 conditions of decision-making. They are:
The condition of certainty means the manager is sure of his decision, he knows what will happen when he makes and implement his decision. In this condition, the results are known to the manager, here the chances of error in the decision are almost 0%.
Related: The 3 Conditions of Decision Making
It is a 50/50 condition for the manager, he knows the decision he made but is unsure about the likely consequences in the future. This may be a lack of complete information or an uncertain market situation which makes him difficult to forest the future. So there seems 50% chance of success and 50% failure.
This is the condition, in which the manager is totally unsure about the future, he has very little information about the decision alternatives. In this condition, the chance of success is just the opposite of the certainty condition, with almost 100% error.
Process of Decision-Making
How to make a decision? So far we discussed what decision-making is, its characteristics, conditions, and types. As it is a continuous and dynamic process. Before making a decision every manager has to go through a series of steps.
The Decision-making process is an intellectual process that helps to select the most feasible option out of many. For the most feasible, rational decision for the manager it is better to go through these steps:
The first step for a rational decision the manager should identify what is the main problem in the organization. The question is without a problem what will you solve? It is believed that once a problem is identified, half of the decision-making process completes. The manager must use his knowledge, skills, and intuition to come to actual problems that are preventing organizational success.
Once the problems are identified the next task of the manager is to analyze the identified problems. For effective analysis, he should collect relevant information, fact, and data. The problem’s reasons and their likely impact on the organization should be analyzed. The manager must come to find out the actual reasons for the problems.
It is obvious that a problem has many alternatives to solve. The manager must develop various possible alternatives and study all alternatives in terms of problem-solving, goal achievement, and costs. Further, he may also discuss with his subordinates, experts, customers, and other stakeholders, they may further give various alternative solutions.
The developed alternatives should be evaluated. It is the important task of that manager to carefully evaluate every alternative and choose the best one. The alternatives should be evaluated in terms of feasibility, problem-solving potentiality, costs, benefits, and organizational goals achievement.
Select The Best One
In this step of the decision-making process, the best alternative is selected from all evaluated (available) alternatives. The manager must select one which is beneficial for the organization. The alternative should provide short and long-run positive benefits to the organization, and satisfaction to customers, which is feasible and financially sound for the organization.
Only making the best decision is not beneficial unless it is not implemented. The manager should implement it in the field and ensure the decision’s success. The actual ability of the manager is judged here, the more effectively the decision is implemented, the more positive results it gives.
Once the decision is implemented it is not always sure that it will give positive results. Here, reviewing means knowing the actual performance of the implementation. The manager should review the performance periodically and take necessary actions if needed and ensure the problem solution and achievement of desired goals in the best possible way.
Importance of Decision-Making
Effective decision-making plays a crucial role in the success of an organization. Here are five key reasons that highlight the importance of decision-making:
Decision-making ensures the optimal utilization of available resources such as manpower, finances, materials, machinery, methods, and markets. By making informed choices, managers can allocate resources efficiently to achieve organizational objectives.
Problem Solving and Adaptation
Decision-making enables organizations to face and overcome challenges. By making quick and accurate decisions, problems can be identified, analyzed, and resolved effectively. It also helps organizations adapt to new situations and seize opportunities for growth.
Sound decision-making leads to improved resource utilization, effective problem-solving, and goal achievement, ultimately resulting in business growth. Well-informed decisions guide organizations toward profitability, market expansion, and sustainable success.
Rational decision-making promotes efficiency by maximizing returns while minimizing costs. By carefully evaluating alternatives and selecting the most favorable course of action, organizations can achieve higher productivity, cost savings, and improved operational efficiency.
Foster Innovation and Motivation
Decision-making encourages innovation by fostering a culture of creativity and new ideas. Rational decisions provide the platform for developing innovative products, processes, and strategies, enabling organizations to gain a competitive edge. Additionally, involving employees in the decision-making process and recognizing their contributions can enhance motivation and engagement within the organization.
Decision Making: Conclusion
Hence, decision-making is an unforgettable function of management. Every manager must be focused on the making of timely, effective, and rational decisions. And, everyone should realize the importance of effective decisions in the workplace.