12 DECISION MAKING

S. Alamelu Mangai

     1. INTRODUCTION

In a food service organization, decision making is the integral and heart of managing the tasks, functions of every functional department. In the process of decision making the managers at all levels are continuously engaged in setting goals, determining plans and courses of action;   formulating strategies, policies and procedures; hiring, promoting, firing and transferring employees; assigning jobs and goals to subordinates; supervising and guiding them, and evaluating their performance, etc.

2. LEARNING OBJECTIVES

In this module the learner will be able to understand the definitions, concept of decision making and types of decision and its significance, the theories involved in decision making process and the various stages of scientific decision making and the techniques of decision making.

3.    Definitions and Concept of Decision Making

According to George R.Terry: “Decision making is the selecting of an alternative from two or more alternatives, to determine an opinion or a course of action.” . This process involves understanding the problem, collecting information, developing and evaluating alternatives, choice of a solution and its evaluation. Above definitions reveal the following characteristics of decision making:

1. A decision is goal oriented activity and can be considered good or bad only in relation to specific goal that is aimed by the organization.

2. Among alternative courses of action it undergoes a process of selection.

3.It is a conscious and human process. The choice implies freedom to choose from among alternatives without externally imposed coercion.

4.It involves commitment in the face of uncertainty as the final result of each possible course of action is uncertain.

5.It involves use of careful thinking and deliberation, analysis and verification. It requires resolution of conflict.

6. It is both an art and a science. It contains both conscious and unconscious aspects. It is a science so far as deductive reasoning is concerned. But it is an art in the sense that involves judgment and intuition of the decision-maker.

7. It can be both positive and negative.

8. It involves a time dimension and a time lag.

9.As it is situational a manager may take one decision under particular circumstances and another in a different situation.

10.  It is a continuous process. A manager has to continuously make decision of one type or the other.

4.      TYPES OF DECISIONS

Decisions may be classified according to different bases which are discussed below:

4.1 Routine and Strategic Decisions

Routine or tactical of decisions is made repetitively following certain established rules, procedures and policies. They neither require collection of new data nor conferring with people nor can be taken without much deliberation. Though complicated these decisions always remain dimensional. Such decisions are generally taken by the managers at middle and lower management level and do not need much effort.

Strategic or basic decisions are taken generally by top management and middle management as they remain very important. The higher the level of a manager, the more strategic decisions he required to take. The strategic decisions relate to policy matters and so require a thorough fact finding and analysis of the possible alternatives. Identifying the exact problem is very necessary by the managers and they too are more serious about such decisions as they influence decision – making at the lower levels.

4.2 Policy and Operating Decisions

Policy decisions are taken by top level management and are of vital importance. But operating decisions are taken by the lower level management in order to put into action the policy decisions. For instance, the bonus issue is a policy matter which is to be decided by the top management, and calculation of bonus is an operating decision which is taken at lower levels to execute the policy decision.

4.3 Organizational and Personal Decisions

Organizational decisions are those which a manager takes in his official capacity where the decisions can be delegated. But personal decisions, which relate to the manager as an individual and not as a member of the organization, cannot be delegated.

4.4 Programmed and Non- programmed decisions

The programmed decisions are of a routine and repetitive nature which is to be dealt with according to the specific procedures. But the non –programmed decisions arise because of unstructured problems. There is no standard procedure for handling such problems.

For instance, if an employee absents himself from his work for a long time without any intimation, the supervisor need not refer this matter to the chief executive. He can deal with such an employee’s according to the standard procedure which may include charge-sheet, suspension, etc. But if a large number of employees absent themselves from work without any intimation, such a problem has to be considered as unstructured and the chief executive has to take the decision using scientific analysis of the situational factors. There has to be adequate probing and analysis of various alternatives before taking such decisions.

4.5 Individual and Group Decisions

When a decision is taken by an individual in the organization it is known as individual decision. This kind is in practice in small food service organization and in where autocratic style of management prevails. Groups or collective decisions refer to the decisions which are taken by a group of organizational members, such as board of directors or a committee.

4.6 Crisis and Research

4.7 Decisions

Crisis decisions are those which are made to meet unanticipated situations and have to be made instantaneously under pressure of circumstances in the organization .It does not allow much scope for extensive investigation and analysis of the factors relevant to them. As against this, research decisions are those which are made after a thorough analysis of pros and cons without any pressure.

4.8 Problem and Opportunity Decisions

Problem decisions are concerned with resolving problem situations which have arisen as anticipated, or other-wise. On the other hand, opportunity for increased profits, growth, etc. The frequency of opportunity decisions will depend on how far manager is prepared to take risks and his skill for recognition of an opportunity.

5. STEPS IN RATIONAL DECISION – MAKING

A rational decision in food service industry have to be taken following the eight steps based on scientific process .These decisions can be justified on a logical basis and does not suffer from the personal bias of the decision – maker.

Scientific decision making involves the following stages:

5.1 Diagnosing and defining the problem.

5.2 Analyzing the problem.

5.3 Collection of data.

5.4 Developing alternatives.

5.5 Review of key factors.

5.6 Selecting the best alternative.

5.7 Putting the decision into practice.

5.8 Follow up

5.1 Diagnosing and Defining the problem

The problem in any functional areas in food service establishments when well defined and understood by the manager is half-solved to a large extent. Wrong decisions are made because the person making the decision does not have a good grasp of the problem. Too often what managers consider as problems are really symptoms of problems.

For instance, in a restaurant if there is loss of money, its problem can’t be stated as “How can we stop losing money?”Because that is only a symptom. The real problem is to identify what practices in the restaurant are causing the loss. Are the prices too low or expense too high? Therefore, it is essential for the decision – maker to find and define the problem before he takes any decision.

It is not easy to define the problem. Taking sufficient time, the decision maker should understand the underlying factor or things that cause problem and that needs correction. Otherwise the managers might give answer for the wrong question rather than the main problem. Always a clear recognition of problem alone will give right answer for the right question.

5.2 Analyzing the problem

After clearly recognizing the problem, the next step of decision- making is the analysis of the problem which involves classifying the problem and gathering information. Classification is necessary in order to know who should take the decision and who should be consulted in taking it. The effectiveness of the decision may be jeopardized without proper classification. The problem should be classified keeping in view the following factors:

5.2.1    The nature of the decision i.e whether it is strategic or it is routine,

5.2.2     The impact of the decision on other functions,

5.2.3     The futurity of the decision,

5.2.4    The periodicity of the decision, and

5.2.5      The limiting or strategic factor relevant to the decision.

5.3     Collection of Data

The next step in decision making is collection of data. To classify any problem a lot of information is required. The problem could be misleading and might have adverse impact on the quality of decision as long as the required information is not available. Collection of right type of information is very important in the process of decision making. Otherwise it remains like guessing directions at a crossing without reading the highway signboards. Collection of right type of information thus becomes very important in decision making. Decision is as good as the information on which it is based.

Also it becomes necessary for managers to take correct decision during collection of facts and figures. The method in which he is to collect the information and the time and money needed to do it should also be decided. In order to analyze the problem he needs to gather facts. He must also be aware of the several alternatives for the problem and know to use it by comparing the alternatives. As it is not always possible to get all the information that is needed for defining and classifying the problem, a manager has to judge how much risk the decision involves as well as the degree of precision and rigidity that the proposed course of action can afford and should be solution-oriented.

5.4 Developing Alternatives

The next step in the process of decision-making process is the development of alternative courses of action. Without resorting to the process of developing alternatives, a manager might likely be guided by his limited imagination. A manager should understand that there are so many ways of doing a thing, as each and every problem has many alternative solutions. Unless he does so, he cannot reach the decision which is the best possible. From this he can derive a key planning principle which may be termed as the principle of alternatives. Effective planning involves a search for the alternatives towards the desired goal. Development of alternatives is no guarantee of finding the best possible decision, but it certainly helps in weighing one alternative against others and, thus, minimizing uncertainties.

In this stage of reviewing of key factor, the principle of limiting factor has to be taken care of during the development of alternatives. A limiting factor is one which stands in the way of accomplishing the desired goal which is a key factor in decision making. If such factors are properly identified, manager can confine his search for alternatives to those which will overcome the limiting factors.

Sometimes taking no action towards the problem may be the best alternative instead of taking certain action and it is imperative that any food service organization should consider this. For instance, if there is an unnecessary post in a house keeping department, the alternative not fill it will be the best one. The ability to develop alternatives is often as important as making a right decision among the alternatives. The development of alternatives, if thorough, will often unearth so many choices that the manager cannot possibly consider them all.

5.6 Selecting the Best Alternative

A manger has to evaluate all possible alternatives in order to make the final choice of the best alternative. There are various ways to evaluate alternatives. The most common method is through intuition, i.e., choosing a solution that seems to be good at that time. There is an inherent danger in this process because a manager’s intuition may be wrong on several occasions.

The second way to choose the best alternative is to weigh the consequences of one against those of the others. Peter Drucker has laid down four criteria in order to weigh the consequences of various alternatives. They are:

5.6.1 Risk: A manager should weigh the risks of each course of action against the expected gains. As a, matter of fact, risks are involved in all the solutions. What matters is the intensity of different types of risks in various solutions.

5.6.2 Economy of Effort: The best manager is one who can mobilize the resources for achieving results with minimum effort. Decision to be chosen should ensure the maximum possible economy of efforts, money and time.

5.6.3 Situation or Timing: The choice of a course of action will depend upon the situation prevailing at a particular point of time. If the situation has great urgency, the preferable course of action is one that alarms the organization that something important is happening. If a long and consistent effort is needed, a slow start gathers momentum’ approach may be preferable.

5.6.4 Limitation of Resources: In choosing among the alternatives, primary attention must be given to those factors that are limiting or strategic to the decision involved. The search for limiting factors in decision making should be a never ending process. Discovery of the limiting factor lies at the basis of selection from the alternatives and hence planning and decision making.

5.7    Putting the Decision into Practice

Until put into practice the choice of an alternative will not serve any purpose. The manager should be concerned with taking a decision, as well as with its implementation. He should try to ensure that systematic steps are taken to implement the decision. The main problem which the manager may face at the implementation stage is the resistance by the subordinates who are affected by the decision. If the manager is unable to overcome this resistance, the energy and efforts consumed in decision making will go waste.

Thus to make the decision acceptable, it is necessary for the manger to make the people understand what the decision involves, what is expected of them and what they should expect from the management. The principle of slow and steady progress should be followed to bring about a change in the behaviour of the subordinates. To make the subordinates accept the decision , they also should be allowed to participate in the process of decision making at the right time,thus getting good support from them for implementation.

Always it is better to check the results after putting the decision into practice. The reasons for following up of decisions are as follows:

• If the decision is a good one, one will know what to do if faced with the similar problem again.
• If the decision is bad one, one will know what not to do the next time.
• If the decision is a bad and one follows up soon enough, corrective action may still be possible.

In order to achieve proper follow up, the management should devise an efficient system of feedback information. This information will be every useful in taking the corrective, measures and in taking right decision in the future.

TECHNIQUES OF DECISION – MAKING

Certain quantitative techniques have been developed to evaluate the alternatives which facilitate making objective decisions. Some of these techniques are discussed below:

5.9 Marginal Cost Analysis

The technique is also known as marginal costing as additional revenues from additional costs are compared. The profits are maximum at level where marginal revenues and marginal costs are equal. For instance, in order to find the optimum output of a machine, one can vary inputs against output until the additional inputs equal the additional output. This would be the point of maximum efficiency of the machine. Break –even analysis is the modification of this technique which tells the management the point of production where there is no profit and no loss.

5.10  Cost – benefit Analysis

This is a technique of weighing alternatives where the optimum solution cannot conveniently reduced to monetary terms as in the case of marginal cost analysis. It is used to identify a preferred choice when objectives are far less specific than those expressed by such clear quantities as sales, costs or profits. For instance, social objectives may be developed to reduce pollution of air and water which lacks precision. Cost models may be developed to show cost estimates for each alternative and its effectiveness. Then, synthesizing models, combining these results, may be made to show the relationships of costs and effectiveness for each alternative.

5.11     Operations Research

Operations research used in modern business organization, has been defined as the scientific method of analysis of decision problems to provide the executive the needed quantitative information in making these decisions. Executive decisions used to be taken on the basis of intuition, subjectivity or past experience even in big organizations. Operations research seeks to replace this process by an analytic, objective and quantitative basis based on information supplied by the system in operation and possibly disturbing the operation.

5.12     Linear Programming

Linear programming is a technique devised for determining the optimum combination of limited resources to achieve a given objective. It is based on the assumption that there exists a linear relationship between variables and that the limits of variations could be ascertained. It is particularly helpful where input data can be quantified and objectives are subject to definite measurement. It is applicable in such problems areas as production planning, transportation, warehouse location and utilization of production and warehousing facilities at an overall minimum cost. Linear programming involves maximization or minimization of a linear function of several primary variables known as objective function subject to set of some real or assumed restrictions known as constraints.

5.13      Network Analysis

Network analysis is used for planning and controlling the project activities. Under this, a project is broken down to small operations which are engaged in a logical cycle followed by sequence of operations to be performed. A network diagram may be drawn to present the relationship between all the operations involved. The diagram will reveal gaps in the flow plans. The inter-dependence of various activities of project and the activities which should be completed before the others are initiated will also be shown. A number of network techniques have been developed of which PERT (Programme Evaluation and Review Technique) and CPM (Critical Path Method) have become very popular.

6. SUMMARY

Decision making is an integral part in any food service establishments. Managers should be aware about the tangible and intangible factors in decision making for choosing appropriate alternatives .And based on the theories, system and approaches to decision analysis, decision makers should take it as continuous process and they should be alert and precise in taking apt decision for the defined problem.

REFERENCES

1. Dinkar Pagare, Business Organisation and Management, Published by Sultan Chand & Sons, Reprint 2002, ISBN 81-7014-675-5,P 124–140
2. Dr.T.N.Chhabra, Principles & Practice of Management , Published by Dhanpat Rai & Co.(P)Ltd,Reprint 2006,ISBN: 81-7700-032-2, p 213 -227
3. R D Agarwal , Organisation and management , Published by Tata McGraw-Hill Publishing company limited, ISBN 0-07-451506-3, P-224-233