IMPORTANCE OF DECISION MAKING
Decision making is an essential part of every function of management.
According to Peter F. Drucker, ‘Whatever a manager does, he does through
decision making’. Decision making lies deeply embedded in the process of
management, spreads over all the managerial functions and covers all the
areas of the organization. Management and decision making are bound up
and go side by side in every activity performed by manager. Whether
knowingly or unknowingly, every manager makes decisions constantly.
Right from the day when the size of the organization used to be very small
to the present day huge or mega size of the organization, the importance of
decision making has been there. The significant difference is that in today’s
complex organization structure, the decision making is getting more and
more complex. Whatever a manager does, he does through making
decisions. Some of the decisions are of routine and repetitive in nature and
it might be that the manager does not realize that he is taking decisions
whereas, other decisions which are of strategic nature may require a lot of
systematic and scientific analysis. The fact remains that management is
always a decision making process.
The most outstanding quality of successful manager is his/her ability to
make sound and effective decisions. A manager has to make up his/her
mind quickly on certain matters. It is not correct to say that he has to make
spur of the moment decisions all the time. For taking many decisions, he
gets enough time for careful fact finding, analysis of alternatives and choice
of the best alternative. Decision making is a human process. When one
decides, he chooses a course alternative which he thinks is the best.
Decision making is a proper blend of thinking, deciding and action. An
important executive decision is only one event in the process which
requires a succession of activities and routine decisions all along the way.
Decisions also have a time dimension and a time lag. A manager takes time
to collect facts and to weigh various alternatives. Moreover, after decides, it
takes still more time to carry out a decision and, often, it takes longer
before he can judge whether the decision was good or bad. It is also very
difficult to isolate the effects of any single decision.
13.5 STEPS IN DECISION MAKING PROCESS
The following process should be followed in arriving at a correct decision:
1. Setting objectives: Rational decision-making involves concrete
objectives. So the first step in decision-making is to know one’s
objectives. An objective is an expected outcome of future actions. So
before deciding upon the future course of efforts, it is necessary to
know beforehand what we are trying to achieve. Exact knowledge of
goals and objectives bring purpose in planning and harmony in
efforts. Moreover, objectives are the criteria by which final outcome is to be measured.
2. Defining the Problem: It is true to a large extent that a problem
well defined is half solved. A lot of bad decisions are made because
the person making the decision does not have a good grasp of the
problem. It is essential for the decision maker to find and define the
problem before he takes any decision.
Sufficient time and energy should be spent on defining the problem
as it is not always easy to define the problem and to see the
fundamental thing that is causing the trouble and that needs
correction. Practically, no problem ever presents itself in a manner
that an immediate decision may be taken. It is, therefore, essential to
define the problem before any action is taken, otherwise the manager
will answer the wrong question rather than the core problem. Clear
definition of the problem is very important as the right answer can
be found only to a right question.
3. Analyzing the problem: After defining the problem, the next step in
decision-making is analyzing it. The problem should be thoroughly
analyzed to find out adequate background information and data
relating to the situation. The problem should be divided into many
sub-problems and each element of the problem must be investigated
thoroughly and systematically. There can be a number of factors
involved with any problem, some of which are pertinent and others
are remote. These pertinent factors should be discussed in depth. It
will save time as well as money and efforts.
In order to classify any problem, we require lot of information. So
long as the required information is not available, any classification
would be misleading. This will also have an adverse impact on the
quality of the decision. Trying to analyze without facts is like
guessing directions at a crossing without reading the highway
signboards. Thus, collection of right type of information is very
important in decision making. It would not be an exaggeration to say
that a decision is as good as the information on which it is based.
Collection of facts and figures also requires certain decisions on the
part of the manager. He must decide what type of information he
requires and how he can obtain this.
4. Developing Alternatives: After defining and analyzing the problem,
the next step in the decision making process is the development of
alternative courses of action. Without resorting to the process of
developing alternatives, a manager is likely to be guided by his
limited imagination. It is rare for alternatives to be lacking for any
course of action. But sometimes a manager assumes that there is
only one way of doing a thing. In such a case, what the manager has
probably not done is to force himself consider other alternatives.
Unless he does so, he cannot reach the decision which is the best
possible. From this can be derived a key planning principle which
may be termed as the principle of alternatives. Alternatives exist for
every decision problem. Effective planning involves a search for the
alternatives towards the desired goal.
Once the manager starts developing alternatives, various
assumptions come to his mind, which he can bring to the conscious
level. Nevertheless, development of alternatives cannot provide a
person with the imagination, which he lacks. But most of us have
definitely more imagination than we generally use. It should also be
noted that 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.
While developing alternatives, the principle of limiting factor has to
be taken care of. A limiting factor is one which stands in the way of
accomplishing the desired goal. It is a key factor in decision making.
If such factors are properly identified, manager can confine his
search for alternative to those which will overcome the limiting
factors. In choosing from among alternatives, the more an individual
can recognize those factors which are limiting or critical to the
attainment of the desired goal the more clearly and accurately he or
she can select the most favorable alternatives.
5. Selecting the Best Alternative: After developing alternatives one
will have to evaluate all the possible alternatives in order to select
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 F. Drucker has
laid down four criteria in order to weigh the consequences of various
alternatives. They are:
(a) 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.
(b) Economy of Effort: The best manager is one who can mobilize the
resources for the achievement of results with the minimum of
efforts. The decision to be chosen should ensure the maximum
possible economy of efforts, money and time.
(c) Situation or Timing: The choice of a course of an 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.
(d) 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 of planning and decision making. There are three bases which
should be followed for selection of alternatives and these are
experience, experimentation and research and analysis which are
discussed below:
In making a choice, a manager is influenced to a great extent by his
past experience. He can give more reliance to past experience in case
of routine decisions; but in case of strategic decisions, he should not
rely fully on his past experience to reach at a rational decision.
Under experimentation, the manager tests the solution under actual
or simulated conditions. This approach has proved to be of
considerable help in many cases in test marketing of a new product.
But it is not always possible to put this technique into practice,
because it is very expensive.
Research and Analysis is considered to be the most effective
technique of selecting among alternatives, where a major decision is
involved. It involves a search for relationships among the more
critical variables, constraints and premises that bear upon the goal
sought.