Decision-Making

Decision making:

It is a process of choosing an option from various possible alternatives to attain best possible outcome.

Decision making process is continuous and indispensable component of managing any organization or business activities.

Managers should possess the ability to take quick and right decisions.

“Decision-making involves the selection of a course of action from among two or more possible alternatives to arrive at a solution for a given problem”- By Trewartha & Newport.
Like POLC, decision making process also has:

·         Premising

·         Identifying alternatives

·         Evaluating alternatives (in respect to goals and objectives)

·         Choosing an alternative (which gives desired result)

Barriers to decision making:

·         Likes and dislikes

·         Absence of logic

·         Personal gain

·         Greed

·         Conceptual ability

·         Outlook

·         Personal and circumstantial situations

Rationality in decision making: 
Refers to good reasoning and consistent with the purpose. It involves Knowing the problem, Alternatives, finding the best alternative.

Steps for rational decision making:

Perception of the problem: Refers to how one views and understands the problem. An unbiased perception of problem is essential for rational decision making.

Analysis of the problem: Decision should not be taken on impression or subjective information. Background information and date relating to source of the problem.

Modified ‘P-D-C-A’ (plan-do-check-analyse): 
It is a popular non-quantitative problem analysis technique. This tool involves:

1.    Identification of the problem

2.    Finding out the present status of the problem

3.    Analyse the problem to identify various alternatives

4.    Examination of the alternatives and choose one

5.    Implementation of the remedial measures and monitor.

6.    Confirmation of the solution, measure the benefits and control so that the problem does not occur again.

Develop alternate solutions: This is called creative phase of managerial work for decision making. Identify different alternative solutions for arriving at the best or optimal solution.

Analysis of the alternatives and choosing the best: Analyse the alternatives and choose the most appropriate one. Criteria for selecting alternatives-

1.    Risk involved with the decision

2.    Cost and economy of the decision

3.    Timing and urgency

4.    Limitation of the resources

Implementation of the control:

1.    Gaining the acceptance of the people who are directly influenced by the decision

2.    Ensuring the decision is being carried out

a)    Communication of the decision all concerned parties.

b)    Motivating people about good effects of the decision

c)    Coordination of efforts

Evaluation of the alternative: 
It is the most crucial phase for quality decision making.

Quantitative and qualitative factors:
1.Quantitative factors can be measured and expressed numerically..
2.Qualitative factors are intangible factors which are difficult to measure numerically.

For decision making both type of factors are important.
Techniques for selecting an alternative:

·         Experience

·         Experimentation

·         Research and analysis

Koontz referred it as an interactive process where information and data should flow from one scanning step to the other.
Operation research(OR) techniques in decision making:
Advanced analytical techniques to improve decision making. Techniques are:

·         Linear programming

·         Simulation

·         Queuing theory

·         Game theory

·         Probability theory
Decision making environment- uncertainty and risk:

Managerial decisions are made in uncertain environments. Higher the uncertainty higher the degree of the risk factor. Rather than concentrating on the terms where certainty is possible, consider only uncertain factors to attack. Time is a major factor for uncertainty.

Special techniques and measures for effective decision making in uncertain environment:

·         Risk analysis

·         Decision tree analysis

·         Preference theory

a.    position

b.    Hierarchy

c.     Size of the uncertainty

"Doing the right things is more important than doing things right." - Peter Drucker.