What does Decision Making mean? Decision making means to select a course of action from two or more alternatives. A decision may be defined as “A course of action which is consciously chosen from among a set of alternatives to achieve the desired result.” It represents a well-balanced judgment and a commitment to action. Discussing of Topic; Decision Making; Explanation of Decision Making, Meaning of Decision Making, Definition of Decision Making, Nature and Characteristics of Decision Making, and finally the Principles of Decision Making.
Know and Understand the Explanation of Decision Making; Meaning, Definition, Nature, Characteristics, and Principles.
Decision Making is an important function in management since decision-making is related to the problem, effective decision-making helps to achieve the desired goals or objectives by solving such problems. Thus the decision-making lies all over the enterprise and covers all the areas of the enterprise. What does Welfare Economics mean? Measuring and Value decisions!
It is rightly said that the first important function of management is to take decisions on problems and situations. Decision-making pervades all managerial actions. It is a continuous process. Decision-making is an indispensable component of the management process itself. This clearly suggests that decision-making is necessary for planning, organizing, directing, controlling and staffing.
For example, in planning alternative plans are prepared to meet different possible situations. Out of such alternative plans, the best one (an i.e., plan which most appropriate under the available business environment) is to be selected. Here, the planner has to take the correct decision. This suggests that decision-making is the core of the planning function. In the same way, decisions are required to be taken while performing other functions of management such as organizing, directing, staffing, etc. This suggests the importance of decision-making in the whole process of management. The effectiveness of management depends on the quality of decision-making.
In this sense, management is rightly described as a decision-making process. According to R. C. Davis, “Management is a decision-making process.” Decision-making is an intellectual process which involves selection of one course of action out of many alternatives. Decision-making will be followed by the second function of management called planning. The other elements which follow planning are many such as organizing, directing, coordinating, controlling and motivating.
Meaning of Decision Making:
Decision Making is an important function in management since decision-making is related to the problem, effective decision-making helps to achieve the desired goals or objectives by solving such problems. Thus the decision-making lies all over the enterprise and covers all the areas of the enterprise.
Scientific decision-making is the well-tried process of arriving at the best possible choice for a solution with a reasonable period of time. The decision means to cut off deliberations and to come to a conclusion. Decision-making involves two or more alternatives because if there is only one alternative there is no decision to be made.
Decision-making has priority over planning function. According to Peter Drucker, it is the top management which is responsible for all strategic decisions such as the objectives of the business, capital expenditure decisions as well as such operating decisions as training of manpower and so on. Without such decisions, no action can take place and naturally the resources would remain idle and unproductive. The managerial decisions should be correct to the maximum extent possible.
Definitions of Decision Making:
According to Trewatha & Newport,
“Decision-making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem.”
R.S. Davar defined decision-making as,
“The election based on some criteria of one behavior alternative hum two or more possible alternatives. To decide means ‘to cut off’ or in practical content to come to a conclusion.”
Henry Sisk and Cliffton Williams defined,
“A decision is the election of a course of action from two or more alternatives; the decision-making process is a sequence of steps leading lo I hat selection.”
George Terry defines,
“As the selection of one behavior alternative from two or more possible alternatives.”
In the words of D. E. Mcfarland,
“A decision is an act of choice wherein an executive forms a conclusion about what must be done in a given situation. A decision represents behavior chosen from a number of alternatives.”
Nature and Characteristics of Decision Making:
Nature of Decision Making: A decision is always related to some problem, difficulty or conflict. Decisions help in solving problems or resolving conflicts. There are always differences of opinions, judgments, etc. The managerial decision helps in maintaining group effectiveness. All problems may not require decision- making but merely the supply of information may be sufficient.
For example, when will different groups report for re-orientation? The supply of information about the training programme may be enough. Decision problems necessitate a choice from different alternatives. A number of possibilities are selected before making a final selection. Decision-making requires something more than a selection. The material requiring a decision may be available but still, a decision may not be reached.
A decision needs some sort of prediction for the future on the basis of past and present available information. The effect of a decision is to be felt in the future so it requires proper analysis of available material and a prediction for the future. If decision premises do not come true, then the decision itself may be wrong. Sometimes decisions are influenced by adopting a follow-the-leader practice.
The leader of the group or an important manager of a concern sets the precedent and others silently follow that decision. Whatever has been decided by the leader becomes a guide for others and they also follow suit. The decisions may also emerge from answers to pertinent questions about the problem. Such answers try to narrow down the choice and help in making a decision.
Now discuss the Characteristics of Decision Making:
The following Characteristics below are;
Decision-making is a continuous and dynamic process. It pervades all organizational activity. Managers have to take decisions on various policy and administrative matters. It is a never-ending activity in business management.
Based on reliable information/feedback.
Good decisions are always based on reliable information. The quality of decision-making at all levels of the Organisation can be improved with the support of an effective and efficient management information system (MIS).
Decision-making is a time-consuming activity as various aspects need careful consideration before taking the final decision. For decision makers, various steps are required to be completed. This makes decision-making a time-consuming activity.
Needs effective communication.
Decision-taken needs to be communicated to all concerned parties for suitable follow-up actions. Decisions taken will remain on paper if they are not communicated to concerned persons. Following actions will not be possible in the absence of effective communication.
Decision-making is a responsible job as wrong decisions prove to be too costly to the Organisation. Decision-makers should be matured, experienced, knowledgeable and rational in their approach. Decision-making need not be treated as routing and casual activity. It is a delicate and responsible job.
Decision making implies choice.
Decision making is choosing from among two or more alternative courses of action. Thus, it is the process of selection of one solution out of many available. For any business problem, alternative solutions are available. Managers have to consider these alternatives and select the best one for actual execution. Here, planners/ decision-makers have to consider the business environment available and select the promising alternative plan to deal with the business problem effectively.
It is rightly said that “Decision-making is fundamentally choosing between the alternatives”. In decision-making, various alternatives are to be considered critically and the best one is to be selected. Here, the available business environment also needs careful consideration. The alternative selected may be correct or may not be correct. This will be decided in the future, as per the results available from the decision already taken.
In short, decision-making is fundamentally a process of choosing between the alternatives (two or more) available. Moreover, in the decision-making process, information is collected; alternative solutions are decided and considered critically in order to find out the best solution among the available.
Every problem can be solved by different methods. These are the alternatives and a decision-maker has to select one alternative which he considers as most appropriate. This clearly suggests that decision-making is basically/fundamentally choosing between the alternatives. The alternatives may be two or more. Out of such alternatives, the most suitable is to be selected for actual use. The manager needs the capacity to select the best alternative. The benefits of correct decision-making will be available only when the best alternative is selected for actual use.
Principles of Decision Making:
The effective decision involves two important aspects—the purpose for which it is intended, and the environmental situation in which it is taken. Even the best and correct decision may become ineffective if these aspects are ignored; because in decision-making, there are so many inside and outside chains of unavoidable reactions. If certain principles are followed for decision-making, such multidimensional reactions can mostly be overcome.
These principles are stated as follows:
Decisional matters or problems may be divided into groups consisting of programmed and non-programmed problems. Programmed problems, being of routine nature, repetitive and well-founded, are easily definable and, as such, require a simple and easy solution. The decision arrived in such programmed problems has, thus, a continuing effect. But in non-programmed problems, there is no continuing effect because they are non-repetitive, non-routine, and novel. Every event in such problems requires individual attention and analysis and its decision is to be arrived at according to its special features and circumstances.
The organizational structure, having an important bearing on decision-making, should be readily understood. If the organizational structure is rigid and highly centralized, decision-making authority will remain confined to the top management level. This may result in a delayed and confusing decision and create suspicion among the employees.
On the contrary, if the organizational structure provides scope for adequate delegation and decentralization of authority, decision-making will be flexible and the decision-making authority will be close to the operating centers. In such a situation, decision-making will be prompt and expected to be more effective and acceptable.
Objectives and Policies.
Proper analysis of the objectives and policies is needed for decision-making. The clear definition of objectives and policies is the basis that guides the direction of decision-making. Without this basis, decision-making will be aimless and unproductive.
Analytical Study of the Alternatives.
For decision-making, analytical study of all possible alternatives of a problem with their merits and demerits is essential. This is necessary to make out a correct selection of decision from among the alternatives.
Proper Communication System.
Effective decision-making demands a piece of machinery for proper communication of information to all responsibility centers in the organization. Unless this structure is built up, ignorance of decision or ill-informed decision will result in misunderstanding and lose coordination.
Time of Sufficient.
Effective decision-making requires sufficient time. It is a matter of common experience that it is usually helpful to think over various ideas and possibilities of a problem for the purpose of identifying and evaluating it properly. But in no case a decision can be delayed for an indefinite period, rather it should be completed well in advance of the scheduled dates.
Study of the Impact of a Decision.
The decision is intended to be carried out for the realization of the objectives of the organization. A decision in any particular area may react adversely in other areas of the organization. As all business activities are inter-related and require coordination, it is necessary that a study and analysis of the impact of any decision should precede its application.
Participation in the work of the decision-maker.
The decision-maker should not only be an observer while others will perform as per his decision. He should also participate in completing the work for which decision was taken by him. This experience will help him in decision-making in the future. The principle of participation in the work of the decision-maker will enable him to understand whether the decision taken is practical and also guide him in forthcoming decisional matters.
The flexibility of Mind for decision.
This is essential in decision-making because decisions cannot satisfy everybody. Rigid mental set-up of the decision-maker may upset the decisions. The flexible mental disposition of the decision-maker enables him to change the decision and win over the co-operation of all the diverse groups.
Consideration of the Chain of Actions.
There is a chain relationship in all the activities of any organization. Different activities are tied up in a chain sequence. Any decision to change a particular work brings change in other related works also. Similarly, decision-making also proceeds following the chain of action in different activities. Therefore, before taking a decision one should consider the chain relationship among different activities.