Answer:
Meaning
Decision-making is the process of selecting one alternative from among a number of alternatives available.
The need for decision-making will arise only when there are options. If there is only one way of doing a task, there is nothing to decide. For example, a business enterprise that wants to buy a machinery may find several models of the machinery. As it can buy only one model, it has to decide which model to buy. It will select the best model by examining the merits and demerits of all the alternative models and will select the one that offers maximum benefits.
The process of selecting the best model among the available alternative models is called decision making.
Definition of Decision-Making
According to Haynes and Massie, ’Decision-making is a process of selection from a set of alternative courses of action which is thought to fulfill the objective of the decision-problem more satisfactorily than others’.
In the words of George Terry, ‘Decision-making is selecting an alternative, from two or more alternatives, to determine an opinion or a course of action’.
Characteristics of Decision –Making
The important characteristics or features of decision-making are given below:
1. It is a goal-oriented activity
The objective of decision-making is always to attain a specific goal. For example, a student, whose goal is to become a Commerce graduate, has to be admitted in a college. He may be admitted either in the Day college or in the Evening College depending upon his credentials. It is also possible that he may study by correspondence. There again, he can choose the University from among the various Universities that offer correspondence courses. Thus, a series of decisions needs to be taken by the student.
2. Existence of alternative courses of action
As mentioned earlier, the need for decision-making would arise only when there are alternative ways of performing a task. If there is only one course of action available there is nothing to decide. For example, an outdated product, which cannot be updated, has to be abandoned by a business enterprise and there are no alternatives. Similarly, a worker, who is inefficient and without, commitment has to be sent out of the organisation. In both these cases, there is no scope for decision-making at all. On the other hand, a product, that offers scope for alteration or modification, may be altered and thereby updated. Likewise, a worker, who is showing commitment for work, but is not picking up things fast, may be given additional training to enable him to do better.
3. It may be positive or negative
Another interesting feature of decision-making is that the decision made may be either positive or negative. For example, if the employees in an organisation want their pay scales revised and decide to go on strike if their demand is not conceded, the decision of the management may either be positive or negative. It is positive, if it decides to consider or concede the demands. It is negative, if the management is not prepared to concede the demands or decides to take disciplinary action against the employees for resorting to strike.
4. It may also be a decision not to decide
It is always difficult to take a quick decision on a sensitive issue. An immediate ‘yes’ or ‘no’ is not always possible in all matters. In such a case, the tendency will be to defer the decision to the extent possible. The decision, therefore, is ‘no decision’.
5. Decision-making is both a science and an art
As a science, decision-making requires knowledge of method, rule or principle concerning the problem. As an art, it requires skill for making the decision a success. For example, a revision of pay scales of employees in an organisation has to be done by evolving or following a suitable method, formula or principle. But it requires skill to make the employees accept the revised pay scales.
6. It is situational
It means that the decision-maker may make different decisions for the same problem under different situations. For example, a teacher may permit a student coming late to enter the class on a particular day but may not allow him on another day. Likewise, a worker may be sanctioned leave on a particular day but may be refused leave on another day.
7. It may be voluntary or induced
When the decision-maker makes the decision himself and is not pressurized by anyone, such a decision is known as a voluntary decision. He makes the decision spontaneously and with an open mind. On the other hand, when he is pressurized either by individuals or by the situation to evolve a decision to solve a problem, the decision becomes induced. For example, if a manufacturer, whose production activity pollutes the environment, comes forward to install a pollution control device on his own, such a decision is a voluntary one. If he is careless about the adverse effect his production process has on the environment, he may be required by the Pollution Control Authority to install a pollution control device. The decision then becomes an induced one.
8. It is a complex mental exercise
Decision-making involves careful consideration of the alternative courses of action, evaluation of the same and selection of the best course of action. The entire process of decision-making requires application of mind and intelligence. Then only, he can take best decision.
9. It is an ongoing activity
Decision-making is a continuous process. Decisions are to be taken in everyone’s life right from cradle to grave. In a business organisation too several decisions need to be taken right from its inception to dissolution.
Types of managerial decision:
Managerial decisions may be classified into the following categories:
A. Organisational and personal Decisions
Organisational decisions are those which an executive takes in his official capacity and on behalf of the organisation. On the other hand personal decisions are those which an executive takes in his individual capacity and not as a member of the organisation.
1. Routine and strategic decisions
Routine or tactical decisions are of a repetitive or recurring nature. They cover shorterm period and affect only a small segment of the organisation. Strategic or basic decisions involve long term commitments, large investment of funds and are of permanent nature.
2. Programmed and Non-programmed decisions
According to simon, programmed decisions are of routine and repetitive nature for which systematic procedures already exist in the organisation. Non-programmed decisions are of unstructured nature. Such decision are generally made at higher level of management.
3. Policy and operating decisions
Policy decisions are of fundamental nature as they affect the whole organisation. Operating decisions are made for executing policy decisions.
4.Individual and group decisions
Decisions taken by a single individual are individual decisions. Group decisions are those taken by a group of persons.
The process of Decision-making:
The steps involved in decision-making process are given below:
A. Defining the Problem
The first step in decision-making is that of recognising and identifying the problem. The problem may arise due to unfulfilled goals or due to deviation from the desired state of affairs. The real problem may be inappropriate product, unsuitable price policy, faulty distribution or lack of sales promotion. Clear understanding of the problem is necessary.
B. Analysing the problem
Analysis of the problem involves determining its causes and scope. The quality of decision will depend upon the quality of information used. Therefore, collection of accurate and appropriate data is very important in decision making.
C. Developing Alternative solutions
After defining and analysing the problem with the help of relevant information, the decision maker has to develop alternative solutions for the problem.
D. Evaluating the Alternatives
The various developed alternatives are compared and scrutinised to identify the pros and cons of each alternatives. Before evaluation, the criteria for evaluation should be specified. Peter Drucker has suggested the following factors for evaluating alternative courses of action.
- Risk
- Economy of effort
- Timing
- Limitation of resources
E. Selecting the Best Solution
Choosing the best alternative is the most critical part of the decision-making process. Koontz and O’ Donnel have suggested the following basis for selection among alternatives.
- Experience
- Experimentation
- Research and Analysis
F. Implementing the Decision
Once a decision is taken, it needs to be put into practice. Implementation involves several steps. First the decision should be communicated to all concerned employees. Secondly, responsibility for carrying out the decision is assigned to specific individuals. Thirdly, any resistance to the decision has to be overcome.
G. Feedback and control
Once the decision has been put into practice, actual results of action should be compared with the expected results. If there is any deviation the same should be analysed to identify the causes.
Merits :
1. Decision making helps to adopt best course of action.
Decision making makes it possible to adopt the best course of action in carrying out a given task. When there are different ways of performing a task, it becomes necessary to find out the best way and that is what decision-making is all about. The course of action finally selected should produce the best results.
2. Optimum use of resources.
By choosing the best method of doing any work, decision making ensures optimum use of the enterprise resources, namely, men machines, materials and money. Resources are always scarce and therefore, it is necessary to make a proper use of the same.
3. It helps to find a solution.
Decision-making helps to find a solution to any problem in a work place. The actual cause of the problem must be identified after which corrective action may be taken. The management may have to decide on the right course of action to be adopted. Thus decision making helps management in finding solution.
4. It helps to promote efficiency.
Identification of best course of action in each given situation promotes the efficiency of the organisation. Then the course of action is acceptable to both the workers and management. It results in higher output which is followed by a share in gain to the workers. Thus there is an improvement in the overall efficiency of the organisation.
5. It helps to resolve conflicts.
The management has to resolve the conflicts between the workers on their views regarding better pay and improved working conditions. If the management avoids taking a decision on this matter the workers will not be satisfied. Here the decision should not be a one-sided one. So the management has to evolve a formulae that is acceptable to the workers as well.
De-merits :
1. Decision maker is unaware of the alternatives available.
Often the decision maker is oblivious of the alternatives available. So he selects the option according to his intuition. Best decisions can be made only if all the alternatives are properly evaluated.
As the decision maker is unaware of the alternatives available, the decisions made by him will not give the expected results.
2. Indecisiveness.
It may not be possible for some managers to arrive at a decision easily. This may result in loss of business opportunities. Sometimes they may take hasty decisions at the last minute and such a decision may not produce the desired results.
3. Failure to make correct diagnosis.
A person suffering from headache may take a tablet to get rid of it. It may give him relief sometimes but not always. If he gets headache often, the same tablet may not give him relief. Proper diagnosis, in such case, is necessary. Likewise, in a work place, lack of employee motivation cannot always be attributed to lack of tangible benefits. The actual cause of problem therefore, has to be identified and only then remedy can be provided.
4. Quick decision.
The decision-maker cannot always take his own time for making decisions. Certain problems may be so urgent that a quick decision may be necessary. A stitch in time saves nine. But only some managers are capable of making correct quick decisions. If the decision is not made at the right moment, the enterprise may have to suffer.
5. Unavailability of necessary information.
The information needed for the purpose of decision may not be easily available. In such a situation, the correct decision cannot be made. There may also be delay in arriving at a decision. For example, if a business wants to consider giving credit to an old customer who has approached after a long time, the decision can be made only if information on his credit worthiness is readily available.
6. Resistance
In certain organisations, there may always be resistance by the subordinate staff to any decision. They think that the decisions are made in the interest of the organisation and be detrimental to their personal interest. Overcoming this resistance to any decision also poses problems.
7. Making decision by itself cannot solve any problem.
Implementation of the decision and periodical review alone can produce the expected results. Implementation of decision will not solve the problem. Periodical review about the process and follow- ups will only produce the expected results.
