Meaning of decision-making
Decision-making is a process of selecting the best among the different alternatives. It is the act of making a choice. There are so many alternatives found in the organization and departments. Decision-making is defined as the selection of choice of one best alternative. Before making decisions all alternatives should be evaluated from which advantages and disadvantages are known. It helps to make the best decisions. It is also one of the important functions of management. Without other management functions such as planning, Organizing, directing, controlling, staffing can’t be conducted because in this managerial function decision is very important. According to Stephen P. Robbins, “decision-making is defines as the selection of a preferred course of action from two or more alternatives.”
Importance of decision-making
- Implementation of managerial function: Without decision-making different managerial function such as planning, organizing, directing, controlling, staffing can’t be conducted. In other words, when an employee does, s/he does the work through decision-making function. Therefore, we can say that decision is important element to implement the managerial function.
- Pervasiveness of decision-making: The decision is made in all managerial activities and in all functions of the organization. It must be taken by all staff. Without decision-making any kinds of function is not possible. So it is pervasive.
- Evaluation of managerial performance: Decisions can evaluate managerial performance. When decision is correct it is understood that the manager is qualified, able and efficient. When the decision is wrong, it is understood that the manager is disqualified. So decision-making evaluate the managerial performance.
- Helpful in planning and policies: Any policy or plan is established through decision making. Without decision making, no plans and policies are performed. In the process of making plans, appropriate decisions must be made from so many alternatives. Therefore, decision making is an important process which is helpful in planning.
- Selecting the best alternatives: Decision making is the process of selecting the best alternatives. It is necessary in every organization because there are many alternatives. So decision makers evaluate various advantages and disadvantages of every alternative and select the best alternative.
- Successful operation of business: Every individual, departments and organization make the decisions. In this competitive world; organization can exist when the correct and appropriate decisions are made. Therefore, correct decisions help in successful operation of business.
Steps in decision-making
- Identification of problems: The first step of decision-making is identification of problems. First of all, managers must identify the problem. The problem has to be found and defined. Symptoms are identified and problems should be judged, symptoms are not problems. They are warning signs of problems. So, managers should search for symptoms for identification of problems. Such symptoms can be falling of sales, profit etc. It is said that problem identified is half solved is identification of problem should be effective.
- Analysis of problem: After identification of problems, the problem should be analyzed by the decision maker. It is the assembly of fact and clarifying it. Relevant information must be collected and analyzed according to the complexity and nature of problems.
- Developing the alternative solution: After identification and analysis of problems different probable solutions have to be developed which is known as developing the alternative solutions. There may be many alternative past experience, expert opinion, discussions etc. which may be helpful to develop the alternative.
- Evaluation of the best alternative: After developing the alternative solution evaluation of the best alternative is done. It is determined that which alternative has how much advantage and disadvantages. In other words, alternatives are evaluated in so many factors like cost factors, risk , benefits, facilities etc. therefore it is very important.
- Selection of the best alternative: After evaluating alternative, the best alternative is to be selected from various alternative. After developing alternative, the managers should taste each of them by imagining things that he has already put in effect. He should try to foresee the desirable consequences of adopting each alternative. It is done for best selection. Therefore, it is very important.
- Implementation of the best alternative: After selection of the finest alternative, it must be used in the organization effectively. Effectiveness of decisions in achieving the desired goals depends upon its implementation. It they are not implemented effectively then best results can’t be obtained. Therefore, proper implementation of the best alternative is necessary.
- Review of implementation: It is the last step of decision-making process. When the implementation of the best alternative is reviewed, the process of decision-making is finished. The result of implementation should be monitored and evaluated through which effectiveness can be measured.
Types of decision-making
- Programmed and non programmed decisions: Programmed decisions are those which are normally repetitive in nature and are taken as a routine job and responsibilities. These types of decisions are made by middle level management in accordance with some policies, rules and procedures. They have short term impact. For example: – granting a leave to an employee, purchasing office materials etc. non programmed decisions are non repetitively taken by top executives. They need to collect data and analyze them and forecast the strategic plans.
- Major and minor decisions: Among different decisions some decisions are considerably more important than others and are prioritized. They are called major decisions. For example, replacement of man by machine, diversification of product etc. contrary to that, some remaining decisions are considerably less important than others and are not so prioritized. They are minor decisions. For example, store of raw materials etc.
- Routine and strategic decisions: Routine decisions are those decisions which are considered as tactical decisions. They are taken frequently to achieve high degree of efficiency in the organizational activities. For example, parking facilities, lighting and canteen etc. strategic decisions are those which are related to lowering the prices of products, changing the product etc. they take more fund and degree of partials.
- Organizational and personal decision: Organizational decision is taken by top executives. For official purpose. They affect the organizational activities directly. Authority is also delegated. Personal decisions are concerned to an employee. The executives whenever takes the decisions personally that is known as personal decisions.
- Individual and group decisions: When a single employee is involved in decision-making it is called individual decision. They are taken by ole proprietor when the problem is of routine nature. On the other hand when the decision is taken in a large organization where important and strategic decisions are taken, it is a group decision.
- Policy and operating decisions: Policy decisions are taken by top-level management to change the rules, procedures, organizational structure etc., and they have a long tern effect. Operational decisions are taken by low level management which have short term effect and which affect the day-to-day operation of the organization.
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