Decision Making
Decision making is the process of selecting the best course of action among multiple alternatives. It
is a key managerial function guiding planning, problem solving, and achieving organizational goals.
Effective decision making increases efficiency, ensures goal attainment, and integrates various
managerial functions.
Nature of Decision Making:
- Selection of best alternatives
- Guide to decision making
- Leads to increased efficiency and effectiveness
- Integrated process
- Occurs at all levels of management
Types of Decisions
1. Programmed Decisions
- Routine and repetitive
- Follow established rules and procedures
- Suitable for structured problems
2. Non-Programmed Decisions
- New and unstructured
- Require creativity and judgement
- Used when problems are unfamiliar or complex
Factors Influencing Decision Making
Decision Maker Characteristics:
- Knowledge
- Ability
- Motivation
Problem Characteristics:
- Unfamiliarity
- Ambiguity
- Complexity
- Instability
Decision Environment Characteristics:
- Irreversibility
- Significance
- Accountability
- Time and monetary constraints
Steps in Decision Making
1. Identify the Problem
Recognize and clearly define the issue that requires a solution.
2. Generate Alternative Solutions
Develop multiple possible courses of action.
3. Evaluate and Choose Among Alternatives
Compare the alternatives based on criteria such as cost, feasibility, and impact.
4. Implement and Monitor the Chosen Solution
Execute the selected option and evaluate its effectiveness.
Additional Decision-Making Concepts
Business Decisions: Strategic, tactical, and operational decisions derived from mission, goals,
efficiency, effectiveness, and control factors.
Forecasting Techniques:
- Subjective methods: Delphi method, collective opinion, market research, historical analogy
- Time series methods: averaging models, trend analysis
- Causal methods: regression and correlation analysis, economic analysis