Decision Making

Definition of DM

Decision Making is the Cognitive process leading to the selection of a Course Of Action among Alternatives According to Rollinson:- Decision making is the process of producing a solution to a recognized problem

Cont.

Acc to Allen, Management decisionmaking is the work a manager performs to arrive at conclusion and judgment. It is the choice made by the decision maker about what should be or should not be done in a given situation.

Elements of Decision-making process

The Decision-maker The Decision problem The environment in which the decision is to be made. The objective of the decision-maker The alternative courses of action The outcomes expected from various alternatives The final choice of the alternative

Decision-making involves the entire process of establishing goals, defining tasks, searching for alternatives, and developing plans in order to find the best answer to the decision problems.

CHARACTERISTICS OF DECISION-MAKING
It is the process of choosing the best course of action from among the alternative courses of action. It is a mental or intellectual process. It is always purposive or goal-oriented. It may be positive or negative. A decision may be expressed in words or may be implied from behavior.

Cont..
It is the end process preceded by discussions and deliberations and reasoning. Decision making is a blend of thinking, deciding and action. Decision-making involves certain commitment. Decision-making involves a time decision and a time lag.

Cont..

It is always related to environment or circumstances or situations. Decision-making is both a managerial function and an organisational process. Decision-making is rational.

Importance of Decision-making

No business can survive without effective decision-making. It is an essential part of every function of management. It is the core of managerial activity. Decision-making and planning are deeply interlinked.

Cont..

Acc to Peter.F.Drucker, whatever a manager does, he does through decisionmaking.

Stages in Rational Decisionmaking

Rational Decision is a ability to follow a systematic, logical, thorough approach in decision-making. Judicious, sensible, scientific.

Stages :

Diagnosing and defining the problem Analysing the problem Collection of data Developing alternatives Review of key factors Selecting the best alternative Putting the decision into practice Follow up

Diagnosing and defining the problem

Identify what business practices are causing the company to incur losses. Are the prices too low or expenses too high? Sufficient time should be spent on defining the problem . Clear definition of the problem is very important as the right answer can be found only to a right question.

Analysing the problem

Classifying the problem and gathering information. To know who should take the decision and who should be consulted in taking it. - the nature of the decision (strategic or routine) -the impact of the decision on other functions

cont..

-the futurity of the decision - the periodicity of the decision The limiting or strategic factor relevant to the decision.

Collection of Data

Trying to analyse without facts is like guessing directions at a crossing without reading the highway signboards. Decision is as good as the information on which it is based. Money and time spent- to gather information.

Developing Alternatives

Alternatives exist for every decision problem.

Review of Key Factors

A limiting factor- one which stands in the way of accomplishing the desired goal.

Selecting the Best Alternative

Intuition choosing a solution that seems to be good at that time. Is to weigh the consequences of one against the those of others.

Acc to Peter Drucker - Criteria

Risk Economy of Effort Situation or Timing Limitation of Resources

Putting the Decision into Practice

Implementation resistance by the subordinates who are affected by the decision. Make subordinates committed to the decision.

Follow Up

Reasons are :If the decision is a good one, one will know what to do if faced with the similar problem again. If the decision is bad one, one will know what not to do the next time. If the decision is a bad and one follows up soon enough, corrective action may still be possible.

Kinds of Decision
Programmed Decisions and NonProgrammed Decisions Strategic Decisions and Routine Decisions Policy Decisions and Operating Decisions Major Decisions and Minor Decisions Organisational Decisions and Personal Decisions

Cont
Individual Decisions and Group decisions Departmental Decisions, Interdepartmental Decisions and Enterprise Decisions Objective Decisions and Subjective Decisions Off-the-cuff Decisions and Planned Decisions