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Decision Making

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Definition of DM

Decision Making is the Cognitive processleading to the selection of a Course Of

Action among Alternatives According to Rollinson:- Decision making is

the process of producing a solution to arecognized problem

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Cont.

Acc to Allen, Management decision-making is the work a manager performs to

arrive at conclusion and judgment. It is the choice made by the decision

maker about what should be or should notbe done in a given situation.

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Elements of Decision-makingprocess The Decision-maker

The Decision problem

The environment in which the decision is to be

made. The objective of the decision-maker

The alternative courses of action

The outcomes expected from variousalternatives

The final choice of the alternative

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Decision-making involves the entireprocess of establishing goals, defining

tasks, searching for alternatives, anddeveloping plans in order to find the bestanswer to the decision problems.

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CHARACTERISTICS OFDECISION-MAKING

It is the process of choosing the bestcourse of action from among the alternative

courses of action. It is a mental or intellectual process.

It is always purposive or goal-oriented.

It may be positive or negative. A decision may be expressed in words or

may be implied from behavior.

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Cont..

It is the end process preceded bydiscussions and deliberations andreasoning.

Decision making is a blend of thinking,deciding and action.

Decision-making involves certain

commitment. Decision-making involves a time decision

and a time lag.

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Cont..

It is always related to environment orcircumstances or situations.

Decision-making is both a managerialfunction and an organisational process.

Decision-making is rational.

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Importance of Decision-making

No business can survive without effectivedecision-making.

It is an essential part of every function ofmanagement.

It is the core of managerial activity.

Decision-making and planning are deeplyinterlinked.

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Cont..

Acc to Peter.F.Drucker, whatever a

manager does, he does through decision-

making.

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Stages in Rational Decision-making

Rational Decision is a ability to follow asystematic, logical, thorough approach in

decision-making. Judicious, sensible, scientific.

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Stages :-

Diagnosing and defining the problem Analysing the problem

Collection of data

Developing alternatives

Review of key factors

Selecting the best alternative

Putting the decision into practice

Follow up

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Diagnosing and defining theproblem

Identify what business practices are

causing the company to incur losses.

Are the prices too low or expenses toohigh?

Sufficient time should be spent on definingthe problem .

Clear definition of the problem is veryimportant as the right answer can be foundonly to a right question.

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Analysing the problem

Classifying the problem and gatheringinformation.

To know who should take the decision andwho should be consulted in taking it.

- the nature of the decision (strategic or

routine) -the impact of the decision on other

functions

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cont..

-the futurity of the decision

- the periodicity of the decision

The limiting or strategic factor relevant tothe decision.

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Collection of Data

Trying to analyse without facts is likeguessing directions at a crossing without

reading the highway signboards. Decision is as good as the information on

which it is based.

Money and time spent- to gatherinformation.

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Developing Alternatives

Alternatives exist for every decisionproblem.

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Review of Key Factors

A limiting factor- one which stands in theway of accomplishing the desired goal.

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Selecting the Best Alternative

Intuition choosing a solution that seemsto be good at that time.

Is to weigh the consequences of oneagainst the those of others.

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Acc to Peter Drucker - Criteria

Risk

Economy of Effort

Situation or Timing Limitation of Resources

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Putting the Decision into Practice

Implementationresistance by thesubordinates who are affected by the

decision. Make subordinates committed to the

decision.

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Follow Up Reasons are :-

If the decision is a good one, one will knowwhat to do if faced with the similar problem

again.

If the decision is bad one, one will knowwhat not to do the next time.

If the decision is a bad and one follows upsoon enough, corrective action may still bepossible.

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Kinds of Decision

Programmed Decisions and Non-Programmed Decisions

Strategic Decisions and Routine Decisions Policy Decisions and Operating Decisions

Major Decisions and Minor Decisions

Organisational Decisions and PersonalDecisions

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Cont

Individual Decisions and Group decisions

Departmental Decisions, Interdepartmental

Decisions and Enterprise Decisions Objective Decisions and Subjective

Decisions

Off-the-cuff Decisions and PlannedDecisions