Paper: 05, Principles and practices of management

Module: 16, Decision making, techniques and processes

Page 1 of 3
Paper 10
Principles and Practices of Management
Module No. Title
1 Management: The Conceptual Framework
2 Managers: Types, Roles, Skills Prof. S P Bansal
3 Evolution of Management:
Principal Classical Thought
Investigator Vice Chancellor
4 Taylor’s Scientific Management
Maharaja Agrasen University, Baddi
5 Henri Fayol’s Principles of Management
6 Behavioural Schools of Management
7 Systems Approach to Management
8 Contingency Theory of Management
Prof YoginderVerma
Co-Principal Investigator
9 Theory Z Pro–Vice Chancellor
Central University of Himachal Pradesh. Kangra. H.P.
10 Contemporary Applied Perspectives in Management
11 Functions of Management
12 Goals, Objectives, Resources and Strategies Prof. Tejinder Sharma
Paper Coordinator
13 Planning Department of Commerce
14 Strategic Planning Kurushetra university,Kurukshetra
15 Management by Objectives
16 Decision Making Techniques & Processes
17 Organizing Prof. Tejinder Sharma
18 Organization: Meaning
Content Writer and Types Department of Commerce
19 Authority and Responsibility Kurushetra university,Kurukshetra
20 Delegation and Decentralization

Page 2 of 3
21 Functional Organizations
22 Borderless Organizations
23 Organizational Design
24 Staffing
25 Direction
26 Coordination
27 Leadership: Concept, Styles, Traits
28 Motivation
29 Communication: Process, Types, Barriers
30 Technology and Communication
31 Controlling: Process and Types
32 Techniques of Controlling
33 Efficiency and Effectiveness
34 Human Values in Management
35 Globalization and Management
36 Indian Thought and Management
37 Japanese Management
38 Management Styles
39 Management Information Systems
40 Quality of Work Life

Page 3 of 3
Paper: 10Paper Title:
PRINCIPLES & PRACTICES OF MANAGEMENT
Paper Coordinator: Prof. TejinderSharma,
KurukshetraUniversity, Kurukshetra
Module-1Module-2Module-3Module-4Module-5
Management: The
Conceptual Framework
Managers: Types, Roles, SkillsEvolution of Management:
Classical Thought
Items Description of Module
Subject Name Management
Paper Name Principles and practices of management
Module Title Decision making techniques and processes
Module Id Module no.-16
Pre- Requisites Basic knowledge of what is Decision making, techniques and processes
Objectives To study the basic concepts of Decision making, techniques and processes
Keywords

1. Learning Outcomes
2. Introduction: Decision making
3. Nature of Decision Making
4. Types of Decision making
5. Levels of Decision making
6. Process of Decision making
7. Summary
8. Self-Assessment Questions
QUADRANT-I

1. Learning Outcomes
After studying this module, you shall be able to

 Describe the nature of Decision making.

 Learn about the various types of decision making
 Understand the concept, advantages, disadvantages and process of various types of decision
making.
 Elaborate the process of decision making process.

2. Introduction
Decision making is an indispensible component of management process and manager’s life which is
filled with making decisions after decisions. Managers see decision making as their central job
because they constantly choose what is to be done, who is to do, when to do, where to do, and how to
do. Looking at the role of decision making in management, William Moore has equated it with
management when he says that “management means decision making.”

Decision: What is a Decision?

A decision is a choice from among two or more, alternatives.

Decision making: it can be defined as an act of choice by the manager from among two or more
possible alternative courses in a given situation.
“Decision making is to solve any obstacle that stands between decision maker and accomplishment of
organizational goals.” Hodge and Johnson

“Decision making is a process involving information, choice of alternative actions, implementation,

and evaluation that is directed to the achievement of certain stated goals.”
Szilagyi

In the words of Haynes and Massie, “A decision is a course of action which is consciously chosen
for achieving a desired result”.

In other words, decision-making is the process by which the decision maker tries to jump over the
obstacles between his current position and the desired future position. It should be noted that a
decision is a choice between two or more alternatives while decision making is a sequence of certain
steps leading to that selection.
3. Nature Of Decision Making
1. Selective process: . In decision making only the best possible alternative is chosen out of many
alternatives available. The best choice can be made only by evaluation of alternatives.
2. Continuous activity:- It is a continuous and dynamic process. Managers have to take decisions
on various policies and administrative matters.
3. Goal-oriented process:- Decisions are usually made to achieve some purpose or goal or
objectives.
4. Risk taking and challenging:- It is not a mechanical job. It involves uncertainity.
5. Mental/Intellectual activity:- It requires knowledge, skills, experience and maturity on the part
of decision-maker.
6. Goal-oriented process:- Decision making aims at providing solution to a given problem before
organization.
7. Human and rational process:- it not only involves intellectual abilities but also of intuition,
subjective values and judgment.
8. Based in reliable information:- Good decisions are always based on reliable information. The
quality of the decisions can be improvised with the help of efficient management information
system.
9. Time-consuming activity: Any decision requires careful study and consideration before finalize
any decision.
10.Require effective communication: decision- taken needs to be communicated to all concerned
parties for suitable follow-up actions.
11. Pervasive Process:- Means managers who are working at all levels have to take decisions in
their jurisdiction.
12. Commitment:- Decision making involves a certain commitment. A decision results into the
commitment of resources and reputation of the organisation.

4. Levels Of Decision Making

Decisions that take place at the top of the organization typically are labeled strategic or high-risk
decisions. These may involve gathering intelligence, setting directions, uncovering alternatives,
assessing these alternatives to choose a plan of action, or implementing a plan.
 Top Management
Non programmed and Uncertain
Decisions

Middle Management
Nonprogrammed Decisions;
Risky and Certain Decisions

Lower Management
Programmed and Certain Decisions

Uncertainty Risk

Decisions at Various Organizational Levels

Low risk decisions involve less uncertainty and occasionally permit a degree of delegation.

5. Types of Decisions

1. Programmed Decisions:-

i. These are repetitive in nature and do not require much deliberation.

ii. These types of decisions are to be handled through established rules, policies and standard
operating procedures.
iii. These types of decisions are made by middle level or lower level management in
accordance with some policies, rules and procedures.
iv. Programmed decisions are used for dealing with complex as well as with uncomplicated
issues.
v. Decisions are action oriented and mistakes are not too costly.
vi. Resources required are less.

Example: Mc Donald’s employees are trained to Big Mac according to specific procedures.
Starbucks, and many other organization use programmed decisions to purchase new supplies
(coffee beans, napkins etc.)

2. Non- Programmed Decisions:-

i. decisions which are non repetitive in nature and made by top level management like decision
about mergers, acquisitions and takeovers, new facilities, new products, labor contracts and
legal issues are non programmed decisions.
ii. these decisions are of long-term horizon.
iii. these decisions require high resources.
iv. these decisions are thinking-oriented and mistakes can put the company in jeopardy.
v. Intuition and experience are major factors in this type of decisions.

Table -1.0 Programmed and Non-Programmed decision

Programmed Decisions Non- Programmed Decisions

 Type of Problem Frequent, repetitive, routine,
much certainty regarding cause-
and-effect relationships.
Procedure Dependence on policies, rules,
and definite procedures
Examples Business firm : Salary to a new
plant supervisor
Unstructured, Exceptional, much
uncertainty regarding cause-and-
effect relationships
Necessity for creativity, intuition,
creative problem solving
Business firm : Diversification
into new products and markets

Source: Gibson, et al. (1985)

3. 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 of the
remaining decisions are considerably less important than others and are not so prioritized. They are
minor decisions. For example, store of raw materials etc.

4. Routine and Strategic Decisions:

Routine decisions are:-

a. tactical decisions
b. taken frequently to achieve high degree of efficiency in the organizational activities.
c. taken at middle or lower level of management, who are responsible for the supervision of
actual operations.
d. of short term duration and affects a limited part of the organization.

Strategic Decisions are:-

a. Taken generally by the top management and middle management and these are related to
policy matters.
b. Plant location, selection of distribution channels, decision relating to a new product etc.
are some examples of strategic business decisions.
c. Seriously affect the interests of the business if any mistake occur.
d. Have a requirement of a good deal of deliberation and these are unique and one-time
decisions which involve long-range commitments and huge investments.

5. Organizational and personal decision:

Organizational decisions are :

a. taken by top executives for official purpose.
b. they affect the organizational activities directly.
c. those in which power to take organizational decision can be delegated from
d. the superior to the subordinate.

Personal decisions are:-

a. concerned to an employee.
b. are taken by managers in their individual capacity and not as members of the
organization.
c. are not delegated to authority.

6. Individual and Group decisions:- Individual decisions are:-

a. When a single employee is involved in decision making it is called individual
decision.
b. This is the more traditional decision making approach and can work
effectively for a manager when the group's input is not required or in certain
 cases,desired.

Advantages of individual decision making:

i. An individual generally makes prompt decisions. While a group is dominated by various
people, making decision-making very time consuming. Moreover assembling group
members consumes lot of time.
ii. Individuals do not escape responsibilities. They are accountable for their acts and
performance.
iii. Individual decision making saves time, money and energy as individuals make prompt and
logical decisions generally.
iv. Individual decisions are more focused and rational as compared to group.

Disadvantages of Individual Decision making:-

i. Less information is collected by individual.
ii. Poor decision making due to less number of views and approaches.
iii. lack of talent and competency.
iv. interest of a single member of the organization is to be taken.

Group Decision: when the decision is of group taken in a large organization where important and
strategic decisions are taken then it is a group decision.

a. It is a type of participatory process in which multiple individuals acting collectively, analyze

problems or situations, consider and evaluate alternative courses of action, and select from
among the alternatives a solution or solutions. This type of decision making is also known as
participative decision making.
b. A group can make decisions by consensus, in which all members come to agreement.
c. In consultation decision making opinions of all the members have to be taken into
consideration while making a decision.

Models of Group Decision

making

Consensus Consultation
decision Decision
making making

Advantages of Group Decision Making:-

i. Synergy is the idea that the whole is greater than the sum of its parts. When a group
makes a decision collectively, its judgment can be keener than that of any of its members.
ii. The sharing of information among group members is another advantage of the group
decision-making process.
iii. group can generate a greater number of alternatives that are of higher quality than the
individual.
iv. this decision-making process will enhance employees’ skills and abilities, and help them
to grow and develop as organizational members as all members are involved in it.
v. When employees contribute to the decision-making process, they tend to have a greater
commitment to implementing a decision, because they understand the reasons behind the decision.
 vi. The group decision making is more democratic in nature, while individual decision
making is perceived to be more autocratic in nature.

Disadvantages of Group Decision making:-

i. Groups are generally slower to arrive at decisions than individuals, so sometimes it is difficult
to utilize them in situations where decisions must be made very quickly.
ii. Group polarization is another potential disadvantage of group decision-making. This is the
tendency of the group to converge on more extreme solutions to a problem.
iii. The decisions made by the group may not always be in accord with the goals and objectives
of the organizations. This is especially true when the goals of the group and those of
individuals do not reinforce each other.
iv. group decisions can make it easier for members to deny personal responsibility and
blame others for bad decisions.
iv. Group think is a type of thinking that occurs when reaching agreement becomes more
important to group members than arriving at around decision.

Techniques of Group Decision making:

Brainstorming
Nominal Group
Technique Dialectic
Decision
Technique
Group Decision
Making
Techniques

Electronic Meetings
Delphi
Technique

A. Brainstorming:-
 Developed by Alex Osborn in 1938 to stimulate idea generation for decision making.
 It is a conference technique involving 10-15 people by which a group attempts to find
a solution for a specific problem by amassing all the ideas spontaneously contributed
by its members.
 In this group leader states the problem in a clear manner so that it is understood by all
participants. After that each member is asked to give ideas though which the problem
can be solved. The members are expected to put their ideas for problem solution
without taking into consideration limitations – financial, legal etc.
 Idea evaluation is deferred to a later stage because it does not flow in the direction of
idea generation.
 Brainstorming technique is very effective when the problem is comparatively specific
and can be simply defined. A complex problem can be broken up into parts and each
part can be taken separately at a time.

 B. Nominal Group Technique (NGT):-
 A technique which is developed by Andre Delbecq and Andrew Van de Ven
 It is a structured group meeting which restricts verbal communication and discussion
among the members during the decision-making process.
 Group members are all physically present but members operate independently.

Process of Nominal Group Techniques is as follows:-

write down presented

outline the the ideas the ideas rank the
Process of problem on the for ideas for
NGT requiring problem discussion decision
decision independe- and making
ntly evaluation

C. Delphi Technique:
 It is a group decision-making process that can be used by decision-making groups
when the individual members are in different physical locations.
 Developed by Norman Dalkey and Olaf Helmer at Rand Corporation.
 In this technique, members do not have face-to-face interaction for group decision.
The decision is arrived at through written communication in the form of filling up
questionnaires often through mails.

Process of Delphi Technique is as follows:-

Proposed
Problem is problem to
compilatio Review the process is
identified experts for
n of results from repeated until
and solutions the a consensus is
questionna
experts are through questionnaire reached
ire and
gathered questionna
ire
.

The process is very time consuming and is primarily useful in illuminating broad range, long term
complex issues such as future effects of energy shortages that might occur.

D. Electronic Meetings:- The most recent approach to group decision making blends the
nominal group technique with sophisticated computer technology. It is called the electronic
meeting.

 Members of the group interact with the help of computers through connected
computer terminals.
 Projector screen is used to show the individual comments and votes on the issue.
 This method reduces group think and the time waste in socializing the meeting.
 Electronic meeting

E. Dialectic Decision Technique: Dialectical inquiry is used for the improved and enhance
group of decision making in which two groups are assigned with a specific problem and each
of the group is responsible for the evaluation and determination of the alternative groups.
Advantages of Dialectical Approach
• Different range of ideas can be explored.
• Provides help while on emphasizing the point of contention that is the critical points.
• It provides with the incentive for bridging seemingly irreconcilable opposites.
• Various sorts of incentives are provided in order to determine factors of creativity.

Steps in dialectic decision making

Problem

Proposal A generated Proposal B generated

Assumptions underlying A Assumptions underlying B

identified identified

Presentation of Pros and Presentation of pros and

cons of A cons of B

Choice

A or B Compromise of New
A and B Alternatives

a. The dialectic process begins with a clear statement of a problem to be solved.

b. Based on this statement, alternative proposals are generated and participants identify the
explicit and implicit assumptions underlying each proposal.
c. The group then breaks into advocacy sub-group to study the proposals in the light of the
problem.
d. The entire group meets after this exercise for the final choice.
 e. The choice may be made in terms of a particular proposal based on its pros and cons, or there
may be compromise of different proposals or new alternatives may be proposed.
f. This method generates better understanding of the proposals, their underlying assumptions
and their pros and cons.
g. The group members are likely to feel more confident about their choices.

7. Objective and Subjective Decisions:- Objective decision as a result of due deliberations and
careful consideration of factors and forces pertinent to the issue or the problem to be solved, are
termed as objective decisions. Subjective decisions made in an organization without conscious mental
effort are called subjective decisions.

8. 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.

6. Decision Making Process

When a manager makes a decision, it is in effect the organization’s response to a problem. As such,
decisions should be thought of as means rather than ends. Every decision is the outcome of a dynamic
process which is influenced by multiple forces. This process is presented in Fig.

Process of Decision-making

a) Identify the problem: The first step of a decision-maker is to identify, define and state the
problem in precise terms. A problem is a felt need, a question thrown forward for solution. A
problem can be identified much clearly, if managers go through diagnosis and analysis of the
problem.
 Example: A supervisor in a retail shop may realize that he has too many employees on the floor
compared with the day's current sales volume, for example, requiring him to make a decision to
keep costs under control.

b) Gather information: The analysis of the problem requires to find out who would make
decision, what information would be needed and from where the information is available. The
real trick in this step is to know what information is needed, the best sources of this information,
and how to go about getting it. Some information must be sought from within yourself through a
process of self-assessment; other information must be sought from outside yourself-from books,
people, and a variety of other sources. This step, therefore, involves both internal and external
“work”.
c) Identify Alternatives: A decision maker can use several sources for identifying alternatives i.e.
his own past experience, practices followed by others, and using creative techniques. Copying
from the experience of others is another way of generating alternatives.
d) Evaluation of the Alternatives:- After the alternatives are identified, the next step is to evaluate
them and select the one that will meet the choice criteria. However, all the alternatives available
for decision making will not be taken for detailed evaluation because of the obvious limitations
of managers in evaluating all alternatives. In narrowing down the number of alternatives, two
approaches can be followed: constraint on alternatives and grouping of alternatives of similar
nature.
e) e. Make the best choice: A comparison is made among the likely outcomes of various
alternatives and the best one is chosen. Choice aspect of decision making is related to deciding
the most acceptable alternative which fits with the organizational objectives. it may be seen that
the chosen alternative should be acceptable in the light of the organizational objectives.
f) f. Action: Once the alternative is selected, it is put into action. The actual process of decision
making ends with the choice of an alternative through which the objectives can be achieved.
Once the creative and analytical aspects of decision making through which an alternative has
been chosen are over, the managerial priority is one of the converting the decision into
something operationally effective.
g) Results: When the decision is put into action, it brings certain results. These results must
correspond with objectives, the starting point of decision process, if good decision has been
made and implemented properly. Thus, results provide indication whether decision and its
implementation is proper. Therefore, managers should take up a follow-up action in the light of
feedback received from the results.

7. SUMMARY

 Decision making is both managerial function and organizational process. It is managerial

because it is a fundamental responsibility of every manager. It is organizational orocess
because many decisions transcend the individual managers and become the product of groups,
teams etc.
 Decision making is involved in every walk of life; it is relevant in organizational as well as
non-organizational context. In organizational context, decisions may vary from the major
ones like determination of organizational objectives or deciding about major projects to
specific decisions about day-to-day operations. Therefore, there are different
 Types of decisions which are made by managers in organizations and for each type of
decision, decision making variables and conditions differ
8. Self -Assessment Questions

Q.1. What are the major characteristics of decision making? Discuss.

Q.2. Discuss the different types of decision making with examples.
Q.3. Explain the concept of group decision making and its st yles with suitable
examples.
Q.4. Describe the process of decision making in management.