There is a need to broaden our understanding about decision-making process. Decision making is not an independent entity and relies upon many other factors like precedence, social processes and random eventualities. It has three components; identification of the issue, the possible course of action and choosing the best amongst the choices of action available. The decision-making process is continuous since the business environment is dynamic and constantly poses challenges to the decision makers.
Organizations are viewed as “Garbage can models” of decision making, in which actions, decisions and outcome are randomly mixed in the flow of events. With this introduction let us proceed to know more about the nature and types of decision making.
NATURE OF DECISION-MAKING:
1. It is closely related to solving problems and issues
2. It is associated with all the important management functions like planning, organizing and controlling
3. Fayol and Urwick feels that decision-making is concerned only to the extent that it affects delegation and authority
4. Chester I Bernard in his “Functions of the Executive” says that the process is nothing but narrowing down of choice
5. Herbert A Simon considers decision-making as a process of intelligence, design and choice activities
6. According to Peter Drucker, it is a central part of the management process
THE DECISION-MAKING PROCESS:
The following steps are involved in the process of decision-making
· Recognizing the problem: Think about this; if there is a decline in the sales volume of your company or say if the value of your stock decreases, you are forced to make decisions to manage the contingency. In such situations, the first step would be to recognize or identify the problem area. A problem identified is half done. In this instance, the reason might be competitor strength or lack of necessary investment in the key strategic business units.
· Deciding priorities among the problems: A manager need not and cannot look after all the problems prevailing in the organization. He should know how to delegate authority and the responsibility that goes along with it. Subordinates can be entrusted with the handling of small and trivial problems while the manager can handle very important ones that might affect the functioning of the firm. He should ask the following questions to diagnose the situation.
1. What is the real problem?
2. What are the causes and effects of the problem?
3. Is this problem very important?
4. Can sub-ordinates handle this problem?
5. Which is the most pressing problem to be solved?
· Diagnosing the problem: Now the manager must start diagnosing the problem. Each and every individual has a different perspective and perceive the problem from a different angle. This depends upon the background orientations and training. The right way of approach for any manager would be to systematically analyze the problem for identifying the alternative courses of action.
· Developing alternative courses of action: This step involves creativity and innovative capabilities as the manager has to think from all possible angles and directions. Managers holding senior corporate positions are exposed to more of this kind of atmosphere where they are forced to make quick decisions in accordance with what the situation demands. Outside expert consultants are also put into use by some companies for developing choice alternatives.
The following are the five PSYCHOLOGICAL STEPS for developing alternatives:
1. Saturation– A manager must be thoroughly familiar with the problem
2. Deliberation– Analyzing the problem from several points of view
3. Incubation– Temporarily switching off the conscious search to relax for the purpose of clear thinking
4. Illumination– A flash of light may occur after sometime giving him the right insights and ideas.
5. Accommodation– The ideas are made into a concrete proposal
· Evaluating the alternatives: The pros and cons of each and every choice is thoroughly subjected to scrutiny in terms of cost, time, risk, results expected, deviations anticipated and resources available for implementation.
· Selecting the best alternative: This is the crucial step where the knowledge and experience of the manager helps him in selecting the best alternative that will fetch maximum returns with minimum cost.
· Effective implementation and Follow-up action: Proper implementation is the key to success and it is the manager’s responsibility to communicate, pool resources and start implementing the decisions taken. Organizations design their systems with built-in follow-up procedures to avoid negligence paving way for effectiveness in implementation.