15 Decision making, techniques and processes
Tejinder Sharma
1. Learning Outcomes
After studying this module, you shall be able to
• Describe the nature of Decision making.
• Learn about the various types of decision making
• Understand the concept, advantages, disadvantages and process of various types of decision making.
• Elaborate the process of decision making process.
2. Introduction
Decision making is an indispensible component of management process and manager’s life which is filled with making decisions after decisions. Managers see decision making as their central job because they constantly choose what is to be done, who is to do, when to do, where to do, and how to do. Looking at the role of decision making in management, William Moore has equated it with management when he says that “management means decision making.”
Decision: What is a Decision?
A decision is a choice from among two or more, alternatives.
Decision making: it can be defined as an act of choice by the manager from among two or more possible alternative courses in a given situation.
“Decision making is to solve any obstacle that stands between decision maker and accomplishment of organizational goals.” Hodge and Johnson
“Decision making is a process involving information, choice of alternative actions, implementation, and evaluation that is directed to the achievement of certain stated goals.” Szilagyi
In the words of Haynes and Massie, “A decision is a course of action which is consciously chosen for achieving a desired result”.
In other words, decision-making is the process by which the decision maker tries to jump over the obstacles between his current position and the desired future position. It should be noted that a decision is a choice between two or more alternatives while decision making is a sequence of certain steps leading to that selection.
3. Nature Of Decision Making
1. Selective process:- In decision making only the best possible alternative is chosen out of many alternatives available. The best choice can be made only by evaluation of alternatives.
2. Continuous activity:- It is a continuous and dynamic process. Managers have to take decisions on various policies and administrative matters.
3. Goal-oriented process:- Decisions are usually made to achieve some purpose or goal or objectives.
4. Risk taking and challenging:- It is not a mechanical job. It involves uncertainity.
5. Mental/Intellectual activity:- It requires knowledge, skills, experience and maturity on the part of decision-maker.
6. Goal-oriented process:- Decision making aims at providing solution to a given problem before organization.
7. Human and rational process:- it not only involves intellectual abilities but also of intuition, subjective values and judgment.
8. Based in reliable information:- Good decisions are always based on reliable information. The quality of the decisions can be improvised with the help of efficient management information system.
9. Time-consuming activity:- Any decision requires careful study and consideration before finalize any decision.
10.Require effective communication:- decision- taken needs to be communicated to all concerned parties for suitable follow-up actions.
11. Pervasive Process:- Means managers who are working at all levels have to take decisions in their jurisdiction.
12. Commitment:- Decision making involves a certain commitment. A decision results into the commitment of resources and reputation of the organisation.
4. Levels Of Decision Making
Decisions that take place at the top of the organization typically are labeled strategic or high-risk decisions. These may involve gathering intelligence, setting directions, uncovering alternatives, assessing these alternatives to choose a plan of action, or implementing a plan.
5. Types of Decisions
1. Programmed Decisions:-
i. These are repetitive in nature and do not require much deliberation.
ii. These types of decisions are to be handled through established rules, policies and standard operating procedures.
iii. These types of decisions are made by middle level or lower level management in accordance with some policies, rules and procedures.
iv. Programmed decisions are used for dealing with complex as well as with uncomplicated issues.
v. Decisions are action oriented and mistakes are not too costly.
vi. Resources required are less.
Example: Mc Donald’s employees are trained to Big Mac according to specific procedures. Starbucks, and many other organization use programmed decisions to purchase new supplies (coffee beans, napkins etc.)
2. Non- Programmed Decisions:-
- decisions which are non repetitive in nature and made by top level management like decision about mergers, acquisitions and takeovers, new facilities, new products, labor contracts and legal issues are non programmed decisions.
- these decisions are of long-term horizon.
- these decisions require high resources.
- these decisions are thinking-oriented and mistakes can put the company in jeopardy.
- Intuition and experience are major factors in this type of decisions.
Table -1.0 Programmed and Non-Programmed decision
| Programmed Decisions | Non- Programmed Decisions | |
| Type of Problem | Frequent, repetitive, routine, much certainty regarding cause-and-effect relationships. | Unstructured, Exceptional, much uncertainty regarding cause-and-effect relationships |
| Product | Dependence on policies, rules, and definite procedures | Necessity for creativity, intuition, creative problem solving |
| Examples | Business firm : Salary to a new plant supervisor | Business firm : Diversification into new products and markets |
Source: Gibson, et al. (1985)
3. Major and minor decisions: among different decisions some decisions are considerably more important than others and are prioritized. They are called major decisions. For example, replacement of man by machine, diversification of product etc. contrary to that, some of the remaining decisions are considerably less important than others and are not so prioritized. They are minor decisions. For example, store of raw materials etc.
4. Routine and Strategic Decisions:
Routine decisions are:-
a. tactical decisions
b. taken frequently to achieve high degree of efficiency in the organizational activities.
c. taken at middle or lower level of management, who are responsible for the supervision of actual operations.
d. of short term duration and affects a limited part of the organization.
Strategic Decisions are:-
a. Taken generally by the top management and middle management and these are related to policy matters.
b. Plant location, selection of distribution channels, decision relating to a new product etc. are some examples of strategic business decisions.
c. Seriously affect the interests of the business if any mistake occur.
d. Have a requirement of a good deal of deliberation and these are unique and one-time decisions which involve long-range commitments and huge investments.
5. Organizational and personal decision:
Organizational decisions are :
a. taken by top executives for official purpose.
b. they affect the organizational activities directly.
c. those in which power to take organizational decision can be delegated from
d. the superior to the subordinate.
Personal decisions are:-
a. concerned to an employee.
b. are taken by managers in their individual capacity and not as members of the organization.
c. are not delegated to authority.
6. Individual and Group decisions:- Individual decisions are:-
a. When a single employee is involved in decision making it is called individual decision.
b. This is the more traditional decision making approach and can work effectively for a manager when the group’s input is not required or in certain
cases,desired.
Advantages of individual decision making:
i. An individual generally makes prompt decisions. While a group is dominated by various people, making decision-making very time consuming. Moreover assembling group members consumes lot of time.
ii. Individuals do not escape responsibilities. They are accountable for their acts and performance.
iii. Individual decision making saves time, money and energy as individuals make prompt and logical decisions generally.
iv. Individual decisions are more focused and rational as compared to group.
Disadvantages of Individual Decision making:-
i. Less information is collected by individual.
ii. Poor decision making due to less number of views and approaches.
iii. lack of talent and competency.
iv. interest of a single member of the organization is to be taken.
Group Decision: when the decision is of group taken in a large organization where important and strategic decisions are taken then it is a group decision.
a. It is a type of participatory process in which multiple individuals acting collectively, analyze problems or situations, consider and evaluate alternative courses of action, and select from among the alternatives a solution or solutions. This type of decision making is also known as participative decision making.
b. A group can make decisions by consensus, in which all members come to agreement.
c. In consultation decision making opinions of all the members have to be taken into consideration while making a decision.
Advantages of Group Decision Making:-
i. Synergy is the idea that the whole is greater than the sum of its parts. When a group makes a decision collectively, its judgment can be keener than that of any of its members.
ii. The sharing of information among group members is another advantage of the group decision-making process.
iii. group can generate a greater number of alternatives that are of higher quality than the individual.
iv. this decision-making process will enhance employees’ skills and abilities, and help them to grow and develop as organizational members as all members are involved in it.
v. When employees contribute to the decision-making process, they tend to have a greater commitment to implementing a decision, because they understand the reasons behind the decision.
vi. The group decision making is more democratic in nature, while individual decision making is perceived to be more autocratic in nature.
Disadvantages of Group Decision making:-
i. Groups are generally slower to arrive at decisions than individuals, so sometimes it is difficult to utilize them in situations where decisions must be made very quickly.
ii. Group polarization is another potential disadvantage of group decision-making. This is the tendency of the group to converge on more extreme solutions to a problem.
iii. The decisions made by the group may not always be in accord with the goals and objectives of the organizations. This is especially true when the goals of the group and those of individuals do not reinforce each other.
iv. group decisions can make it easier for members to deny personal responsibility and blame others for bad decisions.
iv. Group think is a type of thinking that occurs when reaching agreement becomes more important to group members than arriving at around decision.
A. Brainstorming:-
• Developed by Alex Osborn in 1938 to stimulate idea generation for decision making.
• It is a conference technique involving 10-15 people by which a group attempts to find a solution for a specific problem by amassing all the ideas spontaneously contributed by its members.
• In this group leader states the problem in a clear manner so that it is understood by all participants. After that each member is asked to give ideas though which the problem can be solved. The members are expected to put their ideas for problem solution without taking into consideration limitations – financial, legal etc.
• Idea evaluation is deferred to a later stage because it does not flow in the direction of idea generation.
• Brainstorming technique is very effective when the problem is comparatively specific and can be simply defined. A complex problem can be broken up into parts and each part can be taken separately at a time.
B. Nominal Group Technique (NGT):-
• A technique which is developed by Andre Delbecq and Andrew Van de Ven
• It is a structured group meeting which restricts verbal communication and discussion among the members during the decision-making process.
• Group members are all physically present but members operate independently.
C. Delphi Technique:• It is a group decision-making process that can be used by decision-making groups when the individual members are in different physical locations.
• Developed by Norman Dalkey and Olaf Helmer at Rand Corporation.
• In this technique, members do not have face-to-face interaction for group decision. The decision is arrived at through written communication in the form of filling up questionnaires often through mails.
Process of Delphi Technique is as follows:-
The process is very time consuming and is primarily useful in illuminating broad range, long term complex issues such as future effects of energy shortages that might occur.
D. Electronic Meetings:- The most recent approach to group decision making blends the nominal group technique with sophisticated computer technology. It is called the electronic meeting.
• Members of the group interact with the help of computers through connected computer terminals.
• Projector screen is used to show the individual comments and votes on the issue.
• This method reduces group think and the time waste in socializing the meeting.
E. Dialectic Decision Technique: Dialectical inquiry is used for the improved and enhance group of decision making in which two groups are assigned with a specific problem and each of the group is responsible for the evaluation and determination of the alternative groups.
Advantages of Dialectical Approach
• Different range of ideas can be explored.
• Provides help while on emphasizing the point of contention that is the critical points.
• It provides with the incentive for bridging seemingly irreconcilable opposites.
• Various sorts of incentives are provided in order to determine factors of creativity.
Steps in dialectic decision making.
a. The dialectic process begins with a clear statement of a problem to be solved.
b. Based on this statement, alternative proposals are generated and participants identify the explicit and implicit assumptions underlying each proposal.
c. The group then breaks into advocacy sub-group to study the proposals in the light of the problem.
d. The entire group meets after this exercise for the final choice.
e. The choice may be made in terms of a particular proposal based on its pros and cons, or there may be compromise of different proposals or new alternatives may be proposed.
f. This method generates better understanding of the proposals, their underlying assumptions and their pros and cons.
g. The group members are likely to feel more confident about their choices.
7. Objective and Subjective Decisions:- Objective decision as a result of due deliberations and careful consideration of factors and forces pertinent to the issue or the problem to be solved, are termed as objective decisions. Subjective decisions made in an organization without conscious mental effort are called subjective decisions.
8. Policy and Operating Decisions:- Policy decisions are taken by top level management to change the rules, procedures, organizational structure etc and they have a long tern effect. Operational decisions are taken by low level management which have short term effect and which affect the day to day operation of the organization.
6. Decision Making Process
When a manager makes a decision, it is in effect the organization’s response to a problem. As such, decisions should be thought of as means rather than ends. Every decision is the outcome of a dynamic process which is influenced by multiple forces. This process is presented in Fig.
Process of Decision-making
a) Identify the problem: The first step of a decision-maker is to identify, define and state the problem in precise terms. A problem is a felt need, a question thrown forward for solution. A problem can be identified much clearly, if managers go through diagnosis and analysis of the problem.
Example: A supervisor in a retail shop may realize that he has too many employees on the floor compared with the day’s current sales volume, for example, requiring him to make a decision to keep costs under control.
b) Gather information: The analysis of the problem requires to find out who would make decision, what information would be needed and from where the information is available. The real trick in this step is to know what information is needed, the best sources of this information, and how to go about getting it. Some information must be sought from within yourself through a process of self-assessment; other information must be sought from outside yourself-from books, people, and a variety of other sources. This step, therefore, involves both internal and external “work”.
c) Identify Alternatives: A decision maker can use several sources for identifying alternatives i.e. his own past experience, practices followed by others, and using creative techniques. Copying from the experience of others is another way of generating alternatives.
d) Evaluation of the Alternatives:- After the alternatives are identified, the next step is to evaluate them and select the one that will meet the choice criteria. However, all the alternatives available for decision making will not be taken for detailed evaluation because of the obvious limitations of managers in evaluating all alternatives. In narrowing down the number of alternatives, two approaches can be followed: constraint on alternatives and grouping of alternatives of similar nature.
e) Make the best choice: A comparison is made among the likely outcomes of various alternatives and the best one is chosen. Choice aspect of decision making is related to deciding the most acceptable alternative which fits with the organizational objectives. it may be seen that the chosen alternative should be acceptable in the light of the organizational objectives.
f) Action: Once the alternative is selected, it is put into action. The actual process of decision making ends with the choice of an alternative through which the objectives can be achieved. Once the creative and analytical aspects of decision making through which an alternative has been chosen are over, the managerial priority is one of the converting the decision into something operationally effective.
g) Results: When the decision is put into action, it brings certain results. These results must correspond with objectives, the starting point of decision process, if good decision has been made and implemented properly. Thus, results provide indication whether decision and its implementation is proper. Therefore, managers should take up a follow-up action in the light of feedback received from the results.
7. SUMMARY
- Decision making is both managerial function and organizational process. It is managerial because it is a fundamental responsibility of every manager. It is organizational orocess because many decisions transcend the individual managers and become the product of groups, teams etc.
- Decision making is involved in every walk of life; it is relevant in organizational as well as non-organizational context. In organizational context, decisions may vary from the major ones like determination of organizational objectives or deciding about major projects to specific decisions about day-to-day operations.
- Types of decisions which are made by managers in organizations and for each type of decision, decision making variables and conditions differ.
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