Decision Making in Management: Meaning, Definition, Features, Approaches

  • Post last modified:12 May 2022
  • Reading time:26 mins read

What is Decision Making?

Decision making is a process of solving a problem and the process ends with choosing a solution to the problem. Hence, the process of making decisions is a mental process, which is a thought process that is based on implicit or explicit assumptions.

Decision making is an important part of the management function as decisions are used for planning and taking key decisions. The management of enterprises needs to take many decisions for taking care of their operational needs and requirements. Decision making is essential in all the functions of the management and covers all parts of the business.

In other words, Decisions making is an integral part of human lives where we make decisions every day consciously or unconsciously for some reason or the other. To take decisions, there are several choices and we choose the one that seems to be the most effective for the given situation.


Definition of Decision Making

Some definition of decision making process are as follows:

Decision making is a process of identifying and choosing alternative courses of action in a manner appropriate to the demand of the situation.

Kreitner

A decision is an act of choice – wherein an executive forms a conclusion about what must not be done in a given situation. A decision represents a course of behaviour chosen from many possible alternatives.

D. E. McFarland

Decision making is the selection based on some criteria from two or more possible alternatives.

George R. Terry

Features of Decision Making Process

The main features of decision making process are as follows:

  1. Rational Thinking
  2. Process
  3. Positive Impact
  4. Reconsidered
  5. Fosters opportunity
  6. Selective
  7. Accountability
  8. Systematic

Rational Thinking

Decision-making is a human activity. As the human brain has the ability to learn, remember and relate many complex factors, which makes rationality possible in decision-making. So, decision-making is invariably based upon rational thinking.

Process

Decision-making is the process followed by discussions and reasoning.

Positive Impact

Decision-making should positively impact the other related factors of the organisation. Positive decisions make organisations grow, succeed and help, motivate employees, etc.

Reconsidered

Decision-making should be based upon the factor of revising the decisions as and when required. A decision taken should be able to be reconsidered again.

Fosters opportunity

Decision-making should be confined to making decisions that foster opportunities for others by allowing and involving others to act.

Selective

Decision-making involves the selection of the best option from among the available alternative options that are recognised by the decision-maker. Hence, decision-making is regarded as a selective activity.

Accountability

Decision-making cannot be done without the authority and responsibility to make decisions. A decision should also ensure accountability as per the provided authority and responsibility.

Systematic

Decision-making should be done in a systematic way. A decision must be taken in a systematic manner as time and resources are involved in decision-making.


Approaches to Decision Making

There are two basic models or approaches to decisions making adopted by managers. Which are given below:

  1. Normative Approach Theory
  2. Descriptive Decision Theory

Normative Approach Theory

It is a method used for systematically selecting the best choice from various alternatives that are based on reason and pieces of evidence. It is an approach that uses a sequence of analytical phases to assess related facts, observations and results before selecting a proper course of action.

Descriptive Decision Theory

It is used for explaining the different choices that people make and also for analysing the reasons for making those choices and their consequences.


Types of Decisions

The types of decisions are classified under various categories based on different sections:

  1. Based on the Nature of Decisions
  2. Based on the Levels of Management
  3. Based on the Capacity of Individuals

Based on the Nature of Decisions

On the basis of nature, there are two types of decisions, which are explained as follows:

Programmed Decisions

Programmed decisions are normally repetitive in nature. These decisions are based on regular procedures and common habits and relate to certain standard operating procedures of an enterprise.

These decisions deal with the regular operating procedures in an organisation and include purchasing procedures, financial procedures etc.

Non-programmed Decisions

Non-programmed decisions are not regular procedures in nature. They are concerned with unusual situations and need to be handled as and when they come. Such decisions do not have any standard procedures.

The decisions in these cases can relate to the competition in the market or the declining value of company shares. Non-programmed decisions are taken by the top-level management of the organisation.

Based on the Levels of Management

There are different types of decisions made at different levels of management. We have here discussed two major types of decisions based on the level of management:

Strategic Decisions

Strategic decisions, are more significant and are generally taken by the upper-level management of organisations (like the CEO, managing directors, etc). They relate to important policy decisions regarding entering new markets, forming alliances with external sources and companies, etc.

They require a thorough analysis of the situation with some possible alternatives. Strategic decisions can also relate to the introduction of a new project, the set up of a new plant, the installation of a computer system and more. These decisions are very crucial for the survival and growth of an organisation.

Operational Decisions

Operational decisions are made to increase the efficiency of the operations and are based on regular rules, policies and processes. They are concerned with the up-time of the machines, uses of resources, the efficiency of functional procedures and various other processes involved during production, and more. Such decisions are taken by operational managers and are pertaining to the daily operations of an organisation.

Based on the Capacity of Individuals

Based on the capacity of individuals, types of decisions are categorised as follows:

Personal and Organisational Decisions

Personal decisions are those decisions that a working individual takes in an organisation for himself. These decisions generally affect the life of the person making the decision. Sometimes, they also affect the enterprise such as decisions to quit the organisation. The authority to make personal decisions is with the individual and that right cannot be given to others.

Organisational decisions relate to the working of the organisation. These decisions are taken by the managers to improve the efficiency and working of the organisation.

Individual and Group Decisions

Individual Decisions: A decision taken by an individual in his own capacity is referred to as an individual decision. Individual decisions are mostly concerned with routine problems.

Group Decisions: These decisions are taken by a group of people created for the purpose to sit together and work on a solution. These decisions are taken by the top management of the company.


Process of Decision Making

The process of decision making involves the various steps, which are given below:

  1. Identify the Problem
  2. Collect the Relevant Information
  3. Identify Alternatives
  4. Select and Develop Alternative Solutions
  5. Implement the Decision
  6. Take Action
  7. Review the Decision

Identify the Problem

The first step requires identifying the problem, which is an important part of decision making. It is necessary to consider the important and strategic factors in de- fining a problem. There can be many obstacles that limit the process of identifying a problem. It is necessary to search for the reason for the source of the problem to get the correct picture for taking a decision.

Collect the Relevant Information

The next step is to study the problem well and collect all information connected with it. It is important to collect these details so that the problem can be well analysed and understood. The important things to be kept in mind are:

  • Impact of the decision in times to come

  • Decisions affecting the people

  • Total options available

  • Clarity of the decision

Identify Alternatives

Once the total information relevant to the problem is gathered, the manager has to identify a proper solution to take care of the problem. He has many options available to him and has to select the right option for solving the problem. While taking a decision, he has to take into account several factors in terms of cost and time, government rules and regulations and other social and psychological issues.

Select and Develop Alternative Solutions

Once the problem is defined and analysed, the next stage is to select the right option from the different solutions available. The main objective of looking for alternative solutions is to find the best possible solution from the various available alternative courses of action.

Implement the Decision

This is an important stage where the best solution is selected for the problem and the decision is implemented after it is informed and communicated to the others involved. The decision needs to be implemented and put into action because if it is not put into action, then there is no meaning to the decision taken.

Take Action

It is necessary for the decision to work and for that the manager should develop a plan for making the decision actionable and achievable. The plans related to the decision should be well projected for the people to understand their roles and responsibilities with their tasks.

Review the Decision

The last step in the process entails reviewing the decision and collecting feedback, which is an important aspect of decision making. It gives an accurate picture of the decision taken and lets the manager know whether his decision was right and if has been accepted by others.

In case, there is a problem with the decision taken, the manager can look at its shortcomings and find remedial measures for solving the issue.


FAQs

What is Decision Making?

Decision making is a process of solving a problem and the process ends with choosing a solution to the problem. Decision making is an important part of the management function as decisions are used for planning and taking key decisions.

What are the Features of Decision Making Process?

The main features of decision making process are as follows:
1. Decision-Making Process is based on Rational Thinking
2. Decision Making is the process of identifying and choosing alternative courses of action
3. Decision-Making Process provides a Positive Impact
4. A Decision taken should be able to be Reconsidered Again.
5. Decision Making Process involves selection
6. Decision-Making Process ensures Accountability as per Authority and Responsibility
7. Decision-Making Process should be done in a systematic way

What are the Steps to Effective Decision Making Process?

The steps to an effective decision making process are as follows:
1. Identify the Problem
2. Collect the Relevant Information
3. Identify Alternatives
4. Select and Develop Alternative Solutions
5. Implement the Decision
6. Take Action
7. Review the Decision


Management Topics

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