What is Decision Making?

According to the Oxford Advanced Learner’s Dictionary the term decision making
means - the process of deciding about something important, especially in a group of
people or in an organization.
Or
Trewatha & Newport defines decision making process as follows: “Decision-making
involves the selection of a course of action from among two or more possible alternatives
in order to arrive at a solution for a given problem”
Nature of Decision Making:
Decision-Making as a management function
Organizations survive or disappear primarily thanks to the quality of management that
leads them. Decision-making is not the only, but the basic function of management that
contributes most to the success or failure of the organization. The manager is the one who
makes decisions and decision-making is the essence of planning. Planning is the first and
most important function of management as a process that determines all other functions:
organizing, managing human resources, managing and control. Techniques of decision-
making are associated with levels of management and with types of decisions taken at
each level of management.
Steps in Decision Making Process:
A lot of time is consumed while decisions are taken. In a management setting, decision
cannot be taken abruptly. It should follow the steps such as
 Defining the problem
 Gathering information and collecting data
 Developing and weighing the options
 Choosing best possible option
 Plan and execute
 Take follow up action

Conditions for Decision-Making:

Organizational decisions are made under three conditions, viz., certainly, risk and
uncertainty.

Decision Making Under Certainty:

When managers know with certainty what their possible alternatives are and what
conditions are associated with each alternative, a state of certainty exists.

Decision Making under Risk:

A more realistic decision-making situation is a state of risk. Under a state of risk, the
availability of each alternative and its potential pay-offs (rewards) and costs are all
associated with profitability estimates.

Decision Making under Uncertainty:

A state of uncertainty refers to a situation in which the decision maker does not know
what all the alternatives are, and the risks associated with each, or what consequences
each is likely to have.