Decision is made at every level of management to ensure organizational or business goals are achieved. Further, the decisions make up one of the core functional values that every organization adopts and implements to ensure optimum growth and drivability in terms of services and or products offered.
The thought process of selecting a logical choice from the available options. When trying to make a good decision, a person must weight the positives and negatives of each option, and consider all the alternatives. For effective decision making, a person must be able to forecast the outcome of each option as well, and based on all these items, determine which option is the best for a particular situation.
The word decision has been derived from the Latin word decider which means cutting away or cutting off.
Decision-making is a process of selection from a set of alternative courses of action, which is thought to fulfill the objectives of the decision problem more satisfactorily than others.
Decision making can be regarded as the cognitive process resulting in the selection of a course of action among several alternatives. Every decision-making process produces a final choice.
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Decision making includes three aspects of human behavior:
Cognition- Activities of mind associated with knowledge.
Connation - Willing, desire
Affectation - Emotions, feelings.
CHARACTERISTICS OF DECISION-MAKING
Decision-making implies choice:
It is choosing from among two or more alternative courses of action. Thus, it is the process of selection of 1 solution out of many available. For any business problem, alternative solutions are available. The manager has to consider these alternatives and select the best one for actual execution.
It is a continuous and dynamic process. It pervades all organizational activities. Managers have to make decisions on various policy and administrative matters. It is a never-ending activity in business management.
It is mental as well as an intellectual activity and requires knowledge, skills, experience, and maturity on the part of decision-maker.it essentially human activity.
Based on reliable information:
Good decision is always based on reliable information. the quality of decision making at all levels of the organization can be improved with the support of an effective and efficient management information system (MIS)
Goals oriented process:
It aims at providing a solution to a given problem before a business enterprise. It is a goal-oriented process and provides solutions to problems faced by business unit.
Means and not the end:
It Is a means for solving a problem or for achieving a target and not the plan in itself.
It is time-consuming activity as aspects need careful consideration before taking final decision. for decision-maker, various steps are required to be completed. This making decision-making time-consuming activity.
TYPE OF DECISION-MAKING
1. PROGRAMMED DECISION MAKING:
It is a routine, repetitive and are made within the framework of organizational policies & rules. Policies and rules are prepared in advance. It is static & well structured, short term and made by lower level of managers.
2. NON-PROGRAMMED DECISION MAKING:
It is solving unique & unusual problems and alternatives and is not made in advance. It is not well structured, non-recurring, dynamic, uncertain and prepared by the higher-level manager.
3. STRATEGIC DECISION MAKING:
It is just like non-programmed decision making.
4. TACTICAL DECISION MAKING:
It is just like programmed decision making. It relates to day to day operations of the organization & has to be taken frequently, repetitive and narrow part of the organization.
5. ORGANIZATIONAL AND PERSONAL DECISION:
When a person takes a decision in the organization as an executive it will be an organizational decision.
An executive can also take decision about himself. Such decisions are known as personal decisions.
6. INDIVIDUAL AND GROUP DECISION:
If the decision is taken by the one person it is known as an individual decision. in small concerns only the owner takes an all-important decision.
A group decision is taken by a group of persons. The decision of the board of director or committees come under the category. These are, generally, important decisions and relate to policy matters.
The first kind of decision a manager might face is an irreversible one. Such a decision cannot be undone or changed. Once NASA pushes the launch button, there is no turning back.
A reversible decision can be changed or totally revoked at any time. If it is deemed to be a mistake. For example, coca-cola discontinued ‘New Coke’ with a new formula was reintroducing classic coke to the market.
Experimental decisions cannot be finalized until the result of the preliminary data are in. NASA will not proceed with its plan to build a station on the moon until early mission reveal if scientist can find or make water there.
10. TRIAL AND ERROR:
Through trial and error, the knowledge gained from a mistake is used to fine-tune the proper course. The early choice might be blind or wild guesses, but eventually, things became clear.
A conditional decision remains effective as long as no external factors develop that make it unwise or no longer useful, at which point the manager changes the decision. EX, bank A may decide to close on Saturday to save money, hoping bank B will follow if it doesn’t bank A open on Saturday again.
This style of decision-making comes from the top. In this, the decision comes from the top in a decisive way. EX, When the CEO, the president, and other leader has all the facts and is the undisputed expert on the topic or situation, he can arrive at a decision effectively.
The facilitative process is a joint collaboration between the leader and his subordinates. Often the department heads and employees may have first-hand knowledge, experience, and expertise that can enhance the decision-making process. The first phase involves a presentation of information, followed by a deliberative phase. Finally, a group arrives at a consensus jointly in the form of a final decision.
It is similar to the first phase of the facilitative style, with the authoritative style coming in at the end. A leader may ask for advice from his subordinates or outside sources however, in the end, he is the sole decision-maker.
Sometime a leader may use the delegative style of decision-making to pass off the responsibility for the decision to a subordinate or subordinates. This may be wise if the subordinate or team of subordinates has a great experience, but manager normally reserves this for the lesser decisions involved with the everyday management of the system in a large organization.
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TECHNIQUES FOR IMPROVING GROUP DECISION MAKING
It is given by Osborn. The technique to stimulate idea generation for decision making. Using the brain to storm the problem. It is a conference technique by which group attempts to find a solution for a specific problem by amassing all the ideas spontaneously contributed by its members. 10-15 persons are needed. Each member is asked to give ideas through which the problem can be solved. Emphasis on the number of ideas & quality may follow later. It is useful for all types of decisions, it is more useful for simple well-defined problems.
2) Nominal group technique:
It is a structured group meeting that restricts verbal communication among members during the decision-making process. Each member writes down his ideas silently and independently & presents his best single idea on the problem. It is widely used in health service, industry, education, and government organization.
3) DELPHI TECHNIQUE:
The name Delphi indicates a shrine at which the ancient Greeks used to pray for information about the future. These members do not have face to face interaction for group decisions. The decision is arrived at through written Consensus mapping communication in the form of filling up questionnaires often through mail. It is a time-consuming process.
4) STRAWMAN MAP:
Consolidation of different schemes developed by subgroups into a representative scheme that acts as a Strawman map. Members work to revise Strawman map until the whole group arrives at a single, consolidated map & final decision. It tries to pool the ideas generated by several task subgroups to arrive at decision. The technique begins after a task group has developed clarified & evaluated a list of idea.
THEORIES OF DECISION-MAKING
This theory stresses on profit maximization. The economist who propounded this theory says that profits will be maximum only when marginal costs of inputs are equal to marginal revenue. Marginal cost represents the personal cost of producing an additional unit and marginal revenue is the extra revenue from that product. When the marginal costs and revenue differ, the profits can not be maximum. Either more additional revenues will be earned at less additional costs or vice versa. In practice, it is very difficult to locate the marginal point for each factor of production because these are carried on with the co-operation of everyone in the organization.
The thrust of this theory is on the maximization of customer satisfaction. The manager acts as an “administrative man” rather than an “economic man”. A good manager will try to protect the economic interest of the enterprise besides maximizing consumer satisfaction. These alternatives may be selected which will help the consumers. According to this theory, the consumer’s interests should be a top priority in the mind of the decision-maker.
This theory is based on the models. This is also known as operations research theory. The techniques generally used include linear programming theory of probability, simulation models, monte Carlo technique, germs theory, network theory, etc. the analyst defines the problem area, uses symbols for unknown data and then tries to solve it. This theory is more systematic as compared to other theories.