Decision-making
Individuals in organizations make decisions. That is, they make choices from among two or
more alternatives. Decision-making is almost universally defined as choosing between
alternatives. Decision-making is a critical activity in the lives of managers. The decisions a
manager faces can range from very simple, routine matters for which the manager has an
established decision rule (programmed decisions) to new and complex decisions that require
creative solutions (non-programmed decisions).
The word "decision" is derived from the Latin words "de ciso" which means, "cutting away" or to
come to a conclusion. A decision is the selection of a course of action.
According to Felex MLopez, "a decision represents a judgement; a final resolution of a conflict of needs,
means or
goals; and a commitment to action made in the face of uncertainty, complexity or even irrationality."
Managers have to make decisions, whether they are simple or extremely complex. Making a
good decision is a difficult exercise. It is the product of deliberation, evaluation and thought. To
make good decisions, managers should invariably follow a sequential set of steps. Decisionmaking
is a process involving a series of steps
First Step: The first step is recognition of the problem. The manager must become aware that a
problem exists and that it is important enough for managerial action. Identification of the real
problem is important; otherwise, the manager may be reacting to symptoms and fire fighting
rather than dealing with the root cause of the problem. In order to monitor the problem situation
(decision-making environment), managers may have to look into management reports, check
progress against budgets, compare the results against industry competitors, and assess factors
contributing to employee efficiency or inefficiency, etc. They have to use judgement and experience
in order to identify the exact nature of the problem. In other words, the manager must determine
what is to be accomplished by the decision.
Second Step: The second step in the decision-making process is gathering information relevant
to the problem. A successful manager must have the ability to weed out the wheat from the chaff
before deciding on a specific course of action. Once aware of a problem, he must state the real
problem. He must try to solve the problem, not the symptoms. The manager must pull together
sufficient information about why the problem occurred. This involves conducting a thorough
diagnosis of the situation and going on a fact-finding mission.
Third Step: The third step is listing and evaluating alternative courses of action. Developing
alternative solutions (to the problem) guarantees adequate focus and attention on the problem.
It helps managers to fully test the soundness of every proposal before it is finally translated into
action. During this step, a thorough "what if" analysis should also be conducted to determine the
various factors that could influence the outcome. It is important to generate a wide range of
options and creative solutions in order to be able to move on to the next step. Therefore,
managers should encourage people to develop different solutions for the same problem. The
ability to develop alternatives is as important as making a right decision among alternatives.
The development of alternatives is a creative, innovative activity. It calls for divergent thinking;
it calls for "systems thinking". In other words, managers should try to seek solutions outside the
present realm of their knowledge; they are forced to look into all the relevant factors before
coming up with a novel solution.
Fourth Step: Next, the manager selects the alternative that best meets the decision objective.
If the problem has been diagnosed correctly and sufficient alternatives have been identified, this
step is much easier. Peter Drucker has offered the following four criteria for making the right
choice among available alternatives:
1. The manager has to weigh the risks of each course of action against the expected gains.
2. The alternative that will give the greatest output for the least inputs in terms of material
and human resources is obviously the best one to be selected.
Individuals in organizations make decisions. That is, they make choices from among two or
more alternatives. Decision-making is almost universally defined as choosing between
alternatives. Decision-making is a critical activity in the lives of managers. The decisions a
manager faces can range from very simple, routine matters for which the manager has an
established decision rule (programmed decisions) to new and complex decisions that require
creative solutions (non-programmed decisions).
The word "decision" is derived from the Latin words "de ciso" which means, "cutting away" or to
come to a conclusion. A decision is the selection of a course of action.
According to Felex MLopez, "a decision represents a judgement; a final resolution of a conflict of needs,
means or
goals; and a commitment to action made in the face of uncertainty, complexity or even irrationality."
Managers have to make decisions, whether they are simple or extremely complex. Making a
good decision is a difficult exercise. It is the product of deliberation, evaluation and thought. To
make good decisions, managers should invariably follow a sequential set of steps. Decisionmaking
is a process involving a series of steps
First Step: The first step is recognition of the problem. The manager must become aware that a
problem exists and that it is important enough for managerial action. Identification of the real
problem is important; otherwise, the manager may be reacting to symptoms and fire fighting
rather than dealing with the root cause of the problem. In order to monitor the problem situation
(decision-making environment), managers may have to look into management reports, check
progress against budgets, compare the results against industry competitors, and assess factors
contributing to employee efficiency or inefficiency, etc. They have to use judgement and experience
in order to identify the exact nature of the problem. In other words, the manager must determine
what is to be accomplished by the decision.
Second Step: The second step in the decision-making process is gathering information relevant
to the problem. A successful manager must have the ability to weed out the wheat from the chaff
before deciding on a specific course of action. Once aware of a problem, he must state the real
problem. He must try to solve the problem, not the symptoms. The manager must pull together
sufficient information about why the problem occurred. This involves conducting a thorough
diagnosis of the situation and going on a fact-finding mission.
Third Step: The third step is listing and evaluating alternative courses of action. Developing
alternative solutions (to the problem) guarantees adequate focus and attention on the problem.
It helps managers to fully test the soundness of every proposal before it is finally translated into
action. During this step, a thorough "what if" analysis should also be conducted to determine the
various factors that could influence the outcome. It is important to generate a wide range of
options and creative solutions in order to be able to move on to the next step. Therefore,
managers should encourage people to develop different solutions for the same problem. The
ability to develop alternatives is as important as making a right decision among alternatives.
The development of alternatives is a creative, innovative activity. It calls for divergent thinking;
it calls for "systems thinking". In other words, managers should try to seek solutions outside the
present realm of their knowledge; they are forced to look into all the relevant factors before
coming up with a novel solution.
Fourth Step: Next, the manager selects the alternative that best meets the decision objective.
If the problem has been diagnosed correctly and sufficient alternatives have been identified, this
step is much easier. Peter Drucker has offered the following four criteria for making the right
choice among available alternatives:
1. The manager has to weigh the risks of each course of action against the expected gains.
2. The alternative that will give the greatest output for the least inputs in terms of material
and human resources is obviously the best one to be selected.
