2. DECISION MAKING is defined as the selection of a course of
action from among alternatives; it is at the core of planning. A plan
cannot be said to exist unless a decision – a commitment of
resources, direction, or reputation – has been made. Until that point
there are only planning studies and analyses. Managers sometimes
see decision making as their central job because they must constantly
choose WHAT is to be done, WHO is to do it, and WHEN,
WHERE, and occasionally even HOW it will be done.
3. It is important to differentiate between
problem analysis and decision making. The
concepts are completely separate from one
another. Problem analysis must be done first,
then the information gathered in that process
may be used towards decision making .
Whereas, in general, Decision making is the
process of making choices between a number
of options and committing to a future course
of actions.
4. There are 8 steps of decision making :-
1. Identification of Problem
2. Information gathering
3. Principles for judging the alternatives
4. Brainstorm & analyze the choices
5. Evaluation of alternatives
6. Select the best alternative
7. Execute the decision
8. Evaluate the results
5. In this step, the problem is thoroughly analyzed. There
are a couple of questions one should ask when it
comes to identifying the purpose of the decision.
What exactly is the problem?
Why the problem should be solved?
Who are the affected parties of the problem?
Does the problem have a deadline or a specific time-
line?
6. Define the problem:
The first and the foremost step in the decision-making process are to define the real
problem. A problem can be explained as a question for and appropriate solution. The
manager should consider critical or strategic factors in defining the problem. These
factors are, in fact, obstacles in the way of finding proper solution. These are also
known as limiting factors.
For example, if a machine stops working due to non-availability of screw, screw is the
limiting factor in this case. Similarly fuse is a limiting or critical factor in house
lighting. While selecting alternative or probable solution to the problem, the more the
decision-making takes into account those factors that are limiting or critical to the
alternative solutions, the easier it becomes to take the best decision.
Other examples of critical or limiting factor may be materials, money, managerial
skill, technical know-how, employee morale and customer demand, political situation
and government regulations, etc.
7. Analyzing the problem:
After defining the problem, the next important step is a systematic analysis of
the available data. Sound decisions are based on proper collection, classification
and analysis of facts and figures.
There are three principles relating to the analysis and classification as explained
below:
1. The futurity of the decision. This means to what length of time, the decision
will be applicable to a course of action.
2. The impact of decision on other functions and areas of the business.
3. The qualitative considerations which come into the picture.
8. A problem of an organization will have many
stakeholders. In addition, there can be dozens of factors
involved and affected by the problem.
In the process of solving the problem, you will have to
gather as much as information related to the factors and
stakeholders involved in the problem. For the process of
information gathering, tools such as 'Check Sheets' can
be effectively used.
9. In this step, the baseline criteria for judging the alternatives should be set up.
When it comes to defining the criteria, organizational goals as well as the
corporate culture should be taken into consideration.
As an example, profit is one of the main concerns in every decision making
process. Companies usually do not make decisions that reduce profits, unless
it is an exceptional case. Likewise, baseline principles should be identified
related to the problem in hand.
10. The following are some of the important points to be kept in mind in
evaluating the best from various alternatives:
♠ Risk element involved in each course of action against the expected
gain.
♠ Economy of effort involved in each alternative, i.e. securing desired
results with the least efforts.
♠ Proper timing of the decision and action.
♠ Final selection of decision is also affected by the limited resources
available at our disposal. Human resources are always limited. We must
have right type of people to carry out our decisions. Their caliber,
understanding, intelligence and skill will finally determine what they
can and cannot do.
11. Brainstorming:
Creativity can be taught. Creative thoughts are often the fruits of
extensive efforts. Some techniques focus on group interaction,
others on individual actions.
One of the best known techniques for facilitating creativity was
developed by Alex F. Osborn, who has been called the ‘father
of brainstorming’. The purpose of this approach is to improve
problem solving by finding new & unusual solutions.
12. The rules of brainstorming are as follow:-
No ideas are ever criticized.
The more radical the ideas, the better they are.
The quantity of idea production is stressed.
The improvement of ideas by others is encouraged.
13. For this step, brainstorming to list down all the ideas is the
best option. Before the idea generation step, it is vital to
understand the causes of the problem and prioritization of
causes.
For this, you can make use of Cause-and-Effect diagrams and
Pareto Chart tool. Cause-and-Effect diagram helps you to
identify all possible causes of the problem and Pareto chart
helps you to prioritize and identify the causes with highest
effect.
Then, you can move on generating all possible solutions
(alternatives) for the problem in hand.
14. Once appropriate alternatives have been found, the next step in planning
is to evaluate them and select the one that will best contribute to the goal.
Use your judgement principles and decision-making criteria to evaluate
each alternative. This is the point of ultimate decision making, although
decisions must also be made in the other
steps of planning – in setting goals, in
choosing critical premises, and even in
selecting alternatives. In this step,
experience and effectiveness of the
judgement principles come into play.
You need to compare each alternative
for their positives and negatives.
15. In comparing alternative plans for achieving the objective, people are likely
to think exclusively of quantitative factors. These are factors which can be
measured in numeric terms, such as time or various fixed and operating
cost. But, the success of venture would be endangered if intangible and
qualitative factors are ignored. Qualitative or intangible factors are the
factors that are difficult to measure numerically, such as quality of labor
relations, risk of technological change etc..
There are too many instances in which an excellent quantitative plan was
destroyed by an unforeseen war, a fine marketing plan made inoperable by
a long transportation strike, or a rational borrowing plan hampered by an
economic recession. Therefore, it is recommended that quantitative factors
should also be considered while evaluating the alternatives.
Consideration of quantitative factors:
16. When selecting from among alternatives, manager can use 3 basic
approaches:-
i. Experience
ii. Experimentation
iii.Research and analyses
17. Experience:
Experienced managers usually believe,
often without realizing is, that the things
they have successfully accomplished and
the mistakes they have made furnish,
almost infallible guides to the future. This
attitude is likely to be more pronounced the
more experience the manager has had, and
the higher he or she has risen in an
organization.
To some extent, experience is the best
teacher, but relying on past experience as a
guide for future action can be too
dangerous.
18. EXPERIMENTATION:
An obvious way to decide among alternatives is to try one of them and see
what happens. Experimentation is often used in scientific enquiry. People
often argue that it should be employed more often in managing and that the
only way a manager can make sure some plans are right – especially in view
of the intangible factors – is to try the various alternatives and see which is
best.
19. Research & analysis:
One of the most effective techniques for selecting from alternatives when
major decisions are involved is research and analysis. This approach
means solving a problem by first comprehending it. It thus involves a
search for relationships among the more critical of variables, constraints,
and premises that bear upon the goal sought. It is the pencil-and-paper (or,
better, the computer-and-printout) approach to decision making.
20. Convert your decision into a plan or a sequence of activities. Execute your
plan by yourself or with the help of subordinates. Under this step, a
manager has to put the selected decision into action.
For proper and effective execution of the decision, three things are very
important i.e.,
(a) Proper and effective communication of decisions to the subordinates.
Decisions should be communicated in clear, concise and understandable
manner.
21. (b) Acceptance of decision by the
subordinates is important. Group
participation and involvement of the
employees will facilitate the smooth
execution of decisions.
(c) Correct timing in the execution of
decision minimizes the resistance to
change. Almost every decision
introduces a change and people are
hesitant to accept a change.
Implementation of the decision at the
proper time plays an important role in
the execution of the decision.
22. Evaluate the outcome of your decision. See whether there is anything you
should learn and then correct in future decision making. This is one of the
best practices that will improve your decision-making skills. This can be
done by 3 ways:-
a. Follow up
b. Monitoring
c. Feedback
23. Follow up:-
A follow up system ensures the achievement of the
objectives. It is exercised through control. Simply stated it is
concerned with the process of checking the proper
implementation of decision. Follow up is indispensable so as
to modify and improve upon the decisions at the earliest
opportunity.
24. Monitoring:-
According to Peter Drucker, the monitoring system should be
such that the manager can go and look for himself for first
hand information which is always
better than the written reports
or other second-hand sources. In
many situations, however,
computers are very successfully
used in monitoring since the
information retrieval process is
very quick and accurate and in
some instances the self-
correcting is instantaneous.
25. feedback:-
Feedback provides the means of determining the effectiveness
of the implemented decision. If possible, a mechanism should
be built which would give periodic reports on the success of
the implementation. In addition, the mechanisms should also
serve as an instrument of “preventive maintenance”, so that
the problems can be prevented before they occur.
26. Decision-making is the selection of a course of action from among
alternatives; it is the core of planning. Managers must make choices on
the basis of limited, or bounded rationality – that is, in light of everything
they can learn about a situation, which may not be everything they should
know. Satisficing is a term sometimes used to describe picking a course
of action that is satisfactory under the circumstances.
Because there are almost always alternatives – usually many – to a
course of action, managers need to narrow them down to those few that
deal with the limiting factors. These are the factors that stand in the way
of achieving a desired objective. Alternatives are then evaluated in terms
of qualitative and quantitative factors. Other techniques for evaluating
alternatives include marginal analysis and cost-effectiveness
27. analysis. Experience, experimentation, and research and analysis come into
play in selecting an alternative.
Virtually all decisions are made in an environment of at least some
uncertainty involving the interaction of a number of important variables, and
there are certain risks involved in making decisions. Managers dealing with
uncertainty should know the degree and nature of the risk they are taking in
choosing a course of action.
Creativity, the ability and power to develop new ideas, is important for
effective managing. Innovation is the use of these ideas. The creative
process consists of four overlapping phases; unconscious scanning,
intuition, insight, and logical formulation. A popular technique for
enhancing creativity is brainstorming. Creative individuals can make a great
contribution to the enterprise. At the same time, they can be disruptive by
not following commonly accepted rules of behavior.
28. When it comes to making decisions, one should always weigh the positive
and negative business consequences and should favor the positive outcomes.
This avoids the possible losses to the organization and keeps the company
running with a sustained growth. Sometimes, avoiding decision making
seems easier; especially, when you get
into a lot of confrontation after
making the tough decision.
But, making the decisions and
accepting its consequences is the only
way to stay in control of your
corporate life and time.
