Decision-Making

A decision is a choice made from available alternatives. It includes defining problems, gathering information, generating alternatives, and choosing course of action.

 Decision making is the process by which individuals select a course of action among several alternatives, to produce alternative results.

The process of decision making

Decision making is a systematic process and involves a series of steps Identify the problem Identifying resources and constraints Generating alternative solutions Evaluating and selecting alternatives Implementing the decision Monitoring the decision

Rational decision making

Managers should try to be as rational as possible in making decision. It rests on assumption that managers are logical and rational in order to make decisions in the interest of organization.

 Manager gather the relevant information needed to take decisions. They are also aware of different possible alternatives and outcomes.

Significance of rational decision making

Mangers who use a rational, intelligent, and systematic approach are more likely to come up with high quality solutions. Rational decision makers have a clear understanding of alternative course of action to accomplish a goal under a particular set of circumstances Rational decision making is based on the information available with the decision makers and their ability to evaluate alternatives.

Decision making under conditions/environment

There are different conditions in which decision/circumstances must be made. Managers making decisions must be sure to learn as much as possible about the situation/ environment. The environment may be of three types Certainty Risk Uncertainty

Decision making under certainty

This condition means that both the problem and alternative solutions are known and future is highly predictable.
Such conditions exist in case of routine and repetitive decisions concerning day-to-day operations.

Decision making under risk

When a manager lacks perfect information asymmetry exists, risk assizes. While making decision under a state of risk, manager must determine the probability associated with each alternative on the basis of the available information and his experience.

Decision making under uncertainty

Most significant decisions made in todays complex and unpredictable environment are formulated under the state of uncertainty.
Under such condition manager needs to make certain assumptions about the situation. They have to depend upon their judgment and experience of making decision.

Types of decision making Programmed & Nonprogrammed

A programmed decision is one that is relatively structured or results with some frequency. Nonprogrammed decision, on the other hand, are relatively unstructured and occur much less often. Most of the decision made by top managers involving some strategic and organization design are nonprogrammed.

Programmed Decision Problems are routine and repetitive Solutions are offered in accordance with some habit, rule, or procedure

Nonprogrammed decision Problems are unique and novel There are no preestablished policies or procedures to rely on. Each situation is different and needs a creative a solution The conditions are highly uncertain

The conditions for such decisions are highly certain

Group decision making

In group decision-making, several individual members contribute their ideas before a decision is made.
The group has more information and a greater number of alternatives available to it and it is relatively easy to implement such decision.

Advantages
Increased acceptance by those affected Easier coordination Easier communication More information processed Gp decisions are generally better decisions in most of the situations.

Disadvantages
Gp decision take longer time Groups can be indecisive Gp decisions sometimes may be compromise decisions Groups can be dominated by a strong leader
Group can generate more discussion.

Individual Vs Group decision making

1. Groups are possibly superior to individuals because of the greater amount of knowledge available in group.

2. In identifying alternatives, the individual effort of group

members are necessary to ensure a broad search in the various functional areas of the organization.

3. In evaluating alternatives, the collective judgment of the

group, with its wider range of view points, seems superior to that of the individual decision maker.

4. In choosing an alternative, group interaction and

achievement of consensuses usually result in the acceptance of more risk than would be accepted by an individual decision maker. 5. Implementation of decision is usually accomplished by individual manager. (the responsibility for implementation necessarily rests with the individual manager)

Decisions are an integral part of all management activities, but they are perhaps most central to the planning process.