Decision‐Making

We all make decisions of varying importance every day, so the idea that decision making can be
a rather sophisticated art may at first seem strange. However, studies have shown that most
people are much poorer at decision making than they think. An understanding of what decision
making involves, together with a few effective techniques, will help you make better decisions.

What is Decision Making?

Some Definitions
A good place to start is with some standard definitions of decision making.

1. Decision making is the study of identifying and choosing alternatives based on the values
and preferences of the decision maker.

Making a decision implies that there are alternative choices to be considered, and in such a case
we want not only to identify as many of these alternatives as possible but to choose the one that
(1) has the highest probability of success or effectiveness and (2) best fits with our goals, desires,
lifestyle, values, and so on. The two important ideas here are that first, there must be some
genuine alternatives to choose from among. Note that "Do it" or "Don't do it" does not qualify as
a set of alternatives. Only "Do this" or "Do something else" really qualifies. Second, every
decision must be made in the light of some standard of judgment. This standard usually gets
expressed in the form of criteria, which reflect the values and preferences of the decision maker.
These values and preferences are often influenced by corporate rules or culture, law, best
practices, and so forth.

2. Decision making is the process of sufficiently reducing uncertainty and doubt about
alternatives to allow a reasonable choice to be made from among them. This definition
stresses the information-gathering function of decision making. It should be noted here that
uncertainty is reduced rather than eliminated. Very few decisions are made with absolute
certainty because complete knowledge about all the alternatives is seldom possible. Thus, every
decision involves a certain amount of risk. If there is no uncertainty, you do not have a decision;
you have an algorithm--a set of steps or a recipe that is followed to bring about a fixed result.

Quite literally, organizations operate by people making decisions. A manager plans, organizes,
staffs, leads, and controls her team by executing decisions. The effectiveness and quality of those
decisions determine how successful a manager will be.

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Managers are constantly called upon to make decisions in order to solve problems. Decision
making and problem solving are ongoing processes of evaluating situations or problems,
considering alternatives, making choices, and following them up with the necessary actions.
Sometimes the decision‐making process is extremely short, and mental reflection is essentially
instantaneous. In other situations, the process can drag on for weeks or even months. The entire
decision‐making process is dependent upon the right information being available to the right
people at the right times.

Decision Making Process

The decision‐making process involves the following steps:

1. Define the problem.

2. Identify limiting factors.

3. Develop potential alternatives.

4. Analyze the alternatives.

5. Select the best alternative.

6. Implement the decision.

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7. Establish a control and evaluation system.

Define the problem

The decision‐making process begins when a manager identifies the real problem. The accurate
definition of the problem affects all the steps that follow; if the problem is inaccurately defined,
every step in the decision‐making process will be based on an incorrect starting point. One way
that a manager can help determine the true problem in a situation is by identifying the problem
separately from its symptoms.

The most obviously troubling situations found in an organization can usually be identified as
symptoms of underlying problems. (See Table for some examples of symptoms.) These
symptoms all indicate that something is wrong with an organization, but they don't identify root
causes. A successful manager doesn't just attack symptoms; he works to uncover the factors that
cause these symptoms.

All managers want to make the best decisions. To do so, managers need to have the ideal
resources — information, time, personnel, equipment, and supplies — and identify any limiting
factors. Realistically, managers operate in an environment that normally doesn't provide ideal
resources. For example, they may lack the proper budget or may not have the most accurate

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information or any extra time. So, they must choose to satisfice — to make the best decision
possible with the information, resources, and time available.

Time pressures frequently cause a manager to move forward after considering only the first or
most obvious answers. However, successful problem solving requires thorough examination of
the challenge, and a quick answer may not result in a permanent solution. Thus, a manager
should think through and investigate several alternative solutions to a single problem before
making a quick decision.

One of the best known methods for developing alternatives is through brainstorming, where a
group works together to generate ideas and alternative solutions. The assumption behind
brainstorming is that the group dynamic stimulates thinking — one person's ideas, no matter how
outrageous, can generate ideas from the others in the group. Ideally, this spawning of ideas is
contagious, and before long, lots of suggestions and ideas flow. Brainstorming usually requires
30 minutes to an hour. The following specific rules should be followed during brainstorming
sessions:
Concentrate on the problem at hand. This rule keeps the discussion very specific and avoids
the group's tendency to address the events leading up to the current problem.
Entertain all ideas. In fact, the more ideas that come up, the better. In other words, there are no
bad ideas. Encouragement of the group to freely offer all thoughts on the subject is important.
Participants should be encouraged to present ideas no matter how ridiculous they seem, because
such ideas may spark a creative thought on the part of someone else.
Refrain from allowing members to evaluate others' ideas on the spot. All judgments should
be deferred until all thoughts are presented, and the group concurs on the best ideas.

Although brainstorming is the most common technique to develop alternative solutions,

managers can use several other ways to help develop solutions. Here are some examples:

Nominal group technique. This method involves the use of a highly structured meeting,
complete with an agenda, and restricts discussion or interpersonal communication during the
decision‐making process. This technique is useful because it ensures that every group member
has equal input in the decision‐making process. It also avoids some of the pitfalls, such as
pressure to conform, group dominance, hostility, and conflict, that can plague a more interactive,
spontaneous, unstructured forum such as brainstorming.
Delphi technique. With this technique, participants never meet, but a group leader uses written
questionnaires to conduct the decision making.

No matter what technique is used, group decision making has clear advantages and
disadvantages when compared with individual decision making. The following are among the
advantages:

Groups provide a broader perspective.

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Employees are more likely to be satisfied and to support the final decision.
Opportunities for discussion help to answer questions and reduce uncertainties for the decision
makers.

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Regardless of the method used, a manager needs to evaluate each alternative in terms of its

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In a typical decision making situation, as you move from step to step here, you will probably find
yourself moving back and forth also.

1. Identify the decision to be made together with the goals it should achieve. Determine the
scope and limitations of the decision. Is the new job to be permanent or temporary or is that not
yet known (thus requiring another decision later)? Is the new package for the product to be put
into all markets or just into a test market? How might the scope of the decision be changed--that
is, what are its possible parameters?

When thinking about the decision, be sure to include a clarification of goals: We must decide
whom to hire for our new secretary, one who will be able to create an efficient and organized
office. Or, We must decide where to go on vacation, where we can relax and get some rest from
the fast pace of society.

2. Get the facts. But remember that you cannot get all the facts. Get as many facts as possible
about a decision within the limits of time imposed on you and your ability to process them, but
remember that virtually every decision must be made in partial ignorance. Lack of complete
information must not be allowed to paralyze your decision. A decision based on partial
knowledge is usually better than not making the decision when a decision is really needed. The
proverb that "any decision is better than no decision," while perhaps extreme, shows the
importance of choosing. When you are racing toward a bridge support, you must decide to turn
away to the right or to the left. Which way you turn is less important than the fact that you do
indeed turn.

As part of your collection of facts, list your feelings, hunches, and intuitive urges. Many
decisions must ultimately rely on or be influenced by intuition because of the remaining degree
of uncertainty involved in the situation.

Also as part of your collection of facts, consult those who will be affected by and who will have
to implement your decision. Input from these people not only helps supply you with information
and help in making the decision but it begins to produce the acceptance necessary in the
implementers because they feel that they are part of the decision making process. As Russell
Ackoff noted in The Art of Problem Solving, not consulting people involved in a decision is often
perceived as an act of aggression.

3. Develop alternatives. Make a list of all the possible choices you have, including the choice of
doing nothing. Not choosing one of the candidates or one of the building sites is in itself a
decision. Often a non-decision is harmful as we mentioned above--not choosing to turn either
right or left is to choose to drive into the bridge. But sometimes the decision to do nothing is
useful or at least better than the alternatives, so it should always be consciously included in the
decision making process.

Also be sure to think about not just identifying available alternatives but creating alternatives that
don't yet exist. For example, if you want to choose which major to pursue in college, think not
only of the available ones in the catalog, but of designing your own course of study.

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4. Rate each alternative. This is the evaluation of the value of each alternative. Consider the
negative of each alternative (cost, consequences, problems created, time needed, etc.) and the
positive of each (money saved, time saved, added creativity or happiness to company or
employees, etc.). Remember here that the alternative that you might like best or that would in the
best of all possible worlds be an obvious choice will, however, not be functional in the real world
because of too much cost, time, or lack of acceptance by others.

Also don't forget to include indirect factors in the rating. If you are deciding between machines
X, Y, and Z and you already have an employee who knows how to operate machine Z, that fact
should be considered. If you are choosing an investigative team to send to Japan to look at plant
sites and you have very qualified candidates A, B, and C, the fact that B is a very fast typist, a
superior photographer or has some other side benefit in addition to being a qualified team
member, should be considered. In fact, what you put on your hobbies and interests line on your
resume can be quite important when you apply for a job just because employers are interested in
getting people with a good collection of additional abilities.

5. Rate the risk of each alternative. In problem solving, you hunt around for a solution that best
solves a particular problem, and by such a hunt you are pretty sure that the solution will work. In
decision making, however, there is always some degree of uncertainty in any choice. Will Bill
really work out as the new supervisor? If we decide to expand into Canada, will our sales and
profits really increase? If we let Jane date Fred at age fifteen, will the experience be good? If you
decide to marry person X or buy car Y or go to school Z, will that be the best or at least a
successful choice?

Risks can be rated as percentages, ratios, rankings, grades or in any other form that allows them
to be compared. See the section on risk evaluation for more details on risking.

6. Make the decision. If you are making an individual decision, apply your preferences (which
may take into account the preferences of others). Choose the path to follow, whether it includes
one of the alternatives, more than one of them (a multiple decision) or the decision to choose
none.

And of course, don't forget to implement the decision and then evaluate the implementation, just
as you would in a problem solving experience.

One important item often overlooked in implementation is that when explaining the decision to
those involved in carrying it out or those who will be affected by it, don't just list the projected
benefits: frankly explain the risks and the drawbacks involved and tell why you believe the
proposed benefits outweigh the negatives. Implementers are much more willing to support
decisions when they (1) understand the risks and (2) believe that they are being treated with
honesty and like adults.

Remember also that very few decisions are irrevocable. Don't cancel a decision prematurely
because many new plans require time to work--it may take years for your new branch office in
Paris to get profitable--but don't hesitate to change directions if a particular decision clearly is

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not working out or is being somehow harmful. You can always make another decision to do
something else.

7. Implement the decision as per the planning done.

8. Monitor and evaluate the performance.

Kinds of Decisions
There are several basic kinds of decisions.

1. Decisions whether. This is the yes/no, either/or decision that must be made before we proceed
with the selection of an alternative. Should I buy a new TV? Should I travel this summer?
Decisions whether are made by weighing reasons pro and con. A simple worksheet with two
columns (one for Pro--reasons for, and one with Con--reasons against) can be useful for this kind
of decision.

It is important to be aware of having made a decision whether, since too often we assume that
decision making begins with the identification of alternatives, assuming that the decision to
choose one has already been made.

2. Decisions which. These decisions involve a choice of one or more alternatives from among a
set of possibilities, the choice being based on how well each alternative measures up to a set of
predefined criteria.

3. Contingent decisions. These are decisions that have been made but put on hold until some
condition is met.

For example, I have decided to buy that car if I can get it for the right price; I have decided to
write that article if I can work the necessary time for it into my schedule. OR even, We'll take the
route through the valley if we can control the ridge and if we detect no enemy activity to the
north.

Most people carry around a set of already made, contingent decisions, just waiting for the right
conditions or opportunity to arise. Time, energy, price, availability, opportunity, encouragement-
-all these factors can figure into the necessary conditions that need to be met before we can act
on our decision. Some contingent decisions are unstated or even exist below the awareness of the
decision maker. These are the type that occur when we seize opportunity. We don't walk around
thinking, "If I see a new laser printer for $38, I'll buy it," but if we happen upon a deal like that
and we have been contemplating getting a new printer, the decision is made quickly. Decisions
made in sports and warfare are like this. The best contingent and opportunistic decisions are
made by the prepared mind--one that has thought about criteria and alternatives in the past.

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4. Contingent alternatives. Similar to contingent decisions, contingent alternatives involve two
or more choices of action, one of which will be taken when the appropriate trigger occurs. Often
this trigger is an event or more information.

The Components of Decision Making

The Decision Environment
Every decision is made within a decision environment, which is defined as the collection of
information, alternatives, values, and preferences available at the time of the decision. An ideal
decision environment would include all possible information, all of it accurate, and every
possible alternative. However, both information and alternatives are constrained because the time
and effort to gain information or identify alternatives are limited. The time constraint simply
means that a decision must be made by a certain time. The effort constraint reflects the limits of
manpower, money, and priorities. (You wouldn't want to spend three hours and half a tank of gas
trying to find the very best parking place at the mall.) Since decisions must be made within this
constrained environment, we can say that the major challenge of decision making is
uncertainty, and a major goal of decision analysis is to reduce uncertainty. We can almost never
have all information needed to make a decision with certainty, so most decisions involve an
undeniable amount of risk.

The fact that decisions must be made within a limiting decision environment suggests two things.
First, it explains why hindsight is so much more accurate and better at making decisions that
foresight. As time passes, the decision environment continues to grow and expand. New
information and new alternatives appear--even after the decision must be made. Armed with new
information after the fact, the hindsighters can many times look back and make a much better
decision than the original maker, because the decision environment has continued to expand.

The second thing suggested by the decision-within-an-environment idea follows from the above
point. Since the decision environment continues to expand as time passes, it is often advisable to
put off making a decision until close to the deadline. Information and alternatives continue to
grow as time passes, so to have access to the most information and to the best alternatives, do not
make the decision too soon. Now, since we are dealing with real life, it is obvious that some
alternatives might no longer be available if too much time passes; that is a tension we have to
work with, a tension that helps to shape the cutoff date for the decision.

Delaying a decision as long as reasonably possible, then, provides three benefits:

1. The decision environment will be larger, providing more information. There is also time for
more thoughtful and extended analysis.
2. New alternatives might be recognized or created. Version 2.0 might be released.
3. The decision maker's preferences might change. With further thought, wisdom, and maturity,
you may decide not to buy car X and instead to buy car Y.

And delaying a decision involves several risks:

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1. As the decision environment continues to grow, the decision maker might become
overwhelmed with too much information and either make a poorer decision or else face decision
paralysis.

2. Some alternatives might become unavailable because of events occurring during the delay. In
a few cases, where the decision was between two alternatives (attack the pass or circle around
behind the large rock), both alternatives might become unavailable, leaving the decision maker
with nothing. And we have all had the experience of seeing some amazing bargain only to
hesitate and find that when we go back to buy the item, it is sold out.

3. In a competitive environment, a faster rival might make the decision and gain advantage.
Another manufacturer might bring a similar product to market before you (because that company
didn't delay the decision) or the opposing army might have seized the pass while the other army
was "letting the decision environment grow."

Concepts and Definitions

1. Information. This is knowledge about the decision, the effects of its alternatives, the
probability of each alternative, and so forth. A major point to make here is that while substantial
information is desirable, the statement that "the more information, the better" is not true. Too
much information can actually reduce the quality of a decision. See the discussion on The Effects
of Quantity on Decision Making in Part 1.

2. Alternatives. These are the possibilities one has to choose from. Alternatives can be identified
(that is, searched for and located) or even developed (created where they did not previously
exist). Merely searching for preexisting alternatives will result in less effective decision making.

3. Criteria. These are the characteristics or requirements that each alternative must possess to a
greater or lesser extent. Usually the alternatives are rated on how well they possess each
criterion. For example, alternative Toyota ranks an 8 on the criterion of economy, while
alternative Buick ranks a 6 on the same criterion.

4. Goals. What is it you want to accomplish? Strangely enough, many decision makers collect a
bunch of alternatives (say cars to buy or people to marry) and then ask, "Which should I
choose?" without thinking first of what their goals are, what overall objective they want to
achieve. Next time you find yourself asking, "What should I do? What should I choose?" ask
yourself first, "What are my goals?"

A component of goal identification should be included in every instance of decision analysis.

5. Value. Value refers to how desirable a particular outcome is, the value of the alternative,
whether in dollars, satisfaction, or other benefit.

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6. Preferences. These reflect the philosophy and moral hierarchy of the decision maker. We
could say that they are the decision maker's "values," but that might be confusing with the other
use of the word, above. If we could use that word here, we would say that personal values dictate
preferences. Some people prefer excitement to calmness, certainty to risk, efficiency to esthetics,
quality to quantity, and so on. Thus, when one person chooses to ride the wildest roller coaster in
the park and another chooses a mild ride, both may be making good decisions, if based on their
individual preferences.

7. Decision Quality. This is a rating of whether a decision is good or bad. A good decision is a
logical one based on the available information and reflecting the preferences of the decision
maker.

The important concept to grasp here is that the quality of a decision is not related to its outcome:
a good decision can have either a good or a bad outcome. Similarly, a bad decision (one not
based on adequate information or not reflecting the decision maker's preferences) can still have a
good outcome.

For example, if you do extensive analysis and carefully decide on a certain investment based on
what you know about its risks and your preferences, then your decision is a good one, even
though you may lose money on the investment. Similarly, if you throw a dart at a listing of stocks
and buy the one the dart hits, your decision is a bad one, even though the stock may go up in
value.

Good decisions that result in bad outcomes should thus not be cause for guilt or recrimination. If
you decide to take the scenic route based on what you know of the road (reasonably safe, not
heavily traveled) and your preferences (minimal risk, prefer scenery over early arrival), then
your decision is a good one, even though you might happen to get in an accident, or have a flat
tire in the middle of nowhere. It is not justified to say, "Well, this was a bad decision."

In judging the quality of a decision, in addition to the concerns of logic, use of information and
alternatives, three other considerations come into play:

A. The decision must meet the stated objectives most thoroughly and completely. How well does
the alternative chosen meet the goals identified?

B. The decision must meet the stated objectives most efficiently, with concern over cost, energy,
side effects. Are there negative consequences to the alternative that make that choice less
desirable? We sometimes overlook this consideration in our search for thrills.

C. The decision must take into account valuable byproducts or indirect advantages. A new
employee candidate may also have extra abilities not directly related to the job but valuable to
the company nonetheless. These should be taken into account.

8. Acceptance. Those who must implement the decision or who will be affected by it must
accept it both intellectually and emotionally.

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Acceptance is a critical factor because it occasionally conflicts with one of the quality criteria. In
such cases, the best thing to do may be to choose a lesser quality solution that has greater
acceptance.

For example, when cake mixes first were put on the market, manufacturers put everything into
the mix--the highest quality and most efficient solution. Only water had to be added. However,
the mixes didn't sell well--they weren't accepted. After investigation, the makers discovered that
women didn't like the mixes because using the mixes made them feel guilty: they weren't good
wives because they were taking a shortcut to making a cake. The solution was to take the egg
and sometimes the milk out of the mix so that the women would have something to do to "make"
the cake other than just adding water. Now they had to add egg and perhaps milk, making them
feel more useful. The need to feel useful and a contributor is one of the most basic of human
needs. Thus, while the new solution was less efficient in theoretical terms, it was much more
acceptable. Cake mixes with the new formula became quite popular.

Thus, the inferior method may produce greater results if the inferior one has greater support. One
of the most important considerations in decision making, then, is the people factor. Always
consider a decision in light of the people implementation.

A decision that may be technologically brilliant but that is sociologically stupid will not work.
Only decisions that are implemented, and implemented with thoroughness (and preferably
enthusiasm) will work the way they are intended to.

Approaches to Decision Making

There are two major approaches to decision making in an organization, the authoritarian method
in which an executive figure makes a decision for the group and the group method in which the
group decides what to do.

1. Authoritarian.

The manager makes the decision based on the knowledge he can gather. He then must explain
the decision to the group and gain their acceptance of it. In some studies, the time breakdown for
a typical operating decision is something like this:

make decision, 5 min.; explain decision, 30 min.; gain acceptance, 30 min.

2. Group. The group shares ideas and analyses, and agrees upon a decision to implement.
Studies show that the group often has values, feelings, and reactions quite different from those
the manager supposes they have. No one knows the group and its tastes and preferences as well
as the group itself. And, interestingly, the time breakdown is something like this:

group makes decision, 30 min.; explain decision, 0 min.; gain acceptance, 0 min.

Clearly, just from an efficiency standpoint, group decision making is better. More than this, it
has been shown many times that people prefer to implement the ideas they themselves think

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of. They will work harder and more energetically to implement their own idea than they would to
implement an idea imposed on them by others. We all have a love for our own ideas and
solutions, and we will always work harder on a solution supported by our own vision and our
own ego than we will on a solution we have little creative involvement with.

There are two types of group decision making sessions. First is free discussion in which the
problem is simply put on the table for the group to talk about. For example, Joe has been offered
a job change from shift supervisor to maintenance foreman. Should he take the job?

The other kind of group decision making is developmental discussion or structured discussion.
Here the problem is broken down into steps, smaller parts with specific goals. For example,
instead of asking generally whether Joe should take the job, the group works on sub questions:
What are Joe's skills? What skills does the new job require? How does Joe rate on each of the
skills required? Notice that these questions seek specific information rather than more general
impressionistic opinions.

Developmental discussion (1) insures systematic coverage of a topic and (2) insures that all
members of the group are talking about the same aspect of the problem at the same time.

Factors Affecting Decision Making

Whenever we are involved in making decisions, a number of factors can affect the process we
follow and ultimately the decision we make. Below are some of the factors that will affect the
effectiveness of the decision:

Perception Issues

 Perception Issues – perception can be described as the way in which individuals interpret
their environment. An individual’s perception can influence how they make decisions and
solve problems. For example, when information about a problem needs to be gathered the
individual’s perception will impact on where the information is sought and the type of
information regarded as relevant.

 Perception can be influenced by the perceiver, the object or the situation. The perceiver,
the individual perceiving the object, will be heavily influenced by their personal
characteristics such as: background and experience, personal values, personal
expectations and personal interests.

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  The object – which refers to any person, item or event, can have an impact on the way it
is perceived. For example, when a manager receives a number of reports to read he may
be more inclined to read the one with the most colourful cover as this one stands out.

 The situation – time, location and other situational factors can influence our perception of
an object. For example, a team leader may notice team members who work late on the
same evenings as the team leader.

Issues within the organization

 A number of organizational issues can impact on the decision making process. These
issues include: policies and procedures, organizational hierarchy and organizational
politics.

 Policies and Procedures - Many organizations have formalized policies and procedures
which have been developed to resolve common problems and to guide managers when
making decisions. For example, many organizations have documented disciplinary
procedures which guide managers through a process of resolving issues with staff
members.

 Organizational Hierarchy – this refers to the management structure of the organization.

Most organizations have different levels of management which carry with them different
degrees of authority. The degree of authority directly impacts on the nature of the
decisions an individual can make. For example, a customer contact centre team leader
cannot make decisions about overall goals of the organization. However, the team leader
can make decisions about how their team contributes to the achievement of the
organization’s goals.

 Organizational polities – refers to behavior displayed by individuals and groups which is

designed to influence others. Individuals and teams will often use politics to advance
their careers, advance their interests and ideas, as well as increase their rewards.

 Organizations are made up of individuals with different beliefs, values and interests.
These differences are often the driving forces behind organizational politics. For
example, two teams believe they require an extra team member. Unfortunately the

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 organization can only afford one new employee. The two teams may well use politics in
an attempt to influence their manager to allocate the new employee to their team.

Issues within the environment

Environmental issues are the external factors that affect the organization. The types of external
factors that can have an effect on decision making: the market in which the organization
operations, the economy, government legislation, customers’ reaction to the organization’s
products and services

Common Decision making mistakes

Many of the factors which affect decision making process can lead to mistakes being made. By
being aware of the types of mistakes that can be made and by understanding the reasons for the
mistakes, a team leader is in a better position to avoid making them.

Some common mistakes that decision makers should be aware of include:

 Only hearing and seeing what we want. Each individual has their own unique set of
preferences or biases which blinker them to certain information. The best way to deal
with this problem is to identify your preferences and biases while attempting to be open
to the information around you.

 Placing too great a reliance on the information you receive from others. Often we rely on
certain individuals to provide support and guidance. This may be a suitable course of
action in many cases. However, if the individual is not closely involved in the problem
situation they may not have the necessary information or knowledge to help make the
decision.

 Placing too little emphasis on the information you receive from others. This issue can
easily occur in a team situation. In many cases the team members are the people who are
most closely involved in a problem situation and they often have the most pertinent
information in relation to the problem. The best way to deal with this issue is to ensure
that team members are involved in the decision making process.

 Ignoring your intuition. On many occasions we are actually aware at a subconscious level
of the correct course of action. Unfortunately, we often tend to ignore our intuition or gut
feeling, the sixth sense or whatever we may choose to call it.

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Knowing the subject area and evidence base

There are a wide variety of online journals, books and reference materials you can utilize to
research the evidence base. The Knowledge Network is a useful starting point. As experience
develops you will identify and build your set of cases with identifiable patterns and typical
outcomes that can provide valuable background knowledge when dealing with a current
situation.

Knowing Yourself

Being aware of your behaviour, competencies, attitudes, emotions and values and not just your
own but also those of your patients/clients and colleagues. It's also important to know your
limitations - being aware of when to seek help, advice and support. Remember - you are part of
a team.

Knowing the Environment

Awareness and recognition of the approach to decision making and the wider team dynamics
within your organization.

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Intelligence of the decision-maker
Higher intelligence generally results in highly conservative attitudes and highly conservative
decision makers take low risks. There are others who are more willing to take calculated risks if
the potential rewards are larger and there is some chance of success.

Expectation of the decision-maker:

People with high expectations are generally highly optimistic in nature and are willing to make
decisions even with less information. The decision makers with low expectations of success will
require more and more information to decide upon a course of action.

Time constraints:
As the complexity of the personal habits of the decision maker and the complexity of the
decision variables increase, so does the time required to make a rational decision. Even though
there are certain individuals who work best under time pressures and may outperform others
under severe time constraints, most people require lime to gather all the available information for
evaluation purposes.

Personal Habits

Personal habits of the decision-maker, formed through social environmental influences and
personal perceptual processes must be studied in order to predict his decision-making style.
Some people stick to their decisions even when these decisions are not optimal. For example,
Hitler found himself bound by his own decisions. Once he decided to attack Russia, there was no
going back even when he realized that the decision was not the right one.
Some people cannot admit that they were wrong and they continue with their decisions even
ignoring evidence which indicates that a change is necessary. Some decision-makers shift the
blame for failure on outside factors rather than their own mistakes. These personal habits have
great impact on organizational operations and effectiveness.

Social and Cultural Influences

The social and group norms exert considerable influence on the style of the decision-maker.
Ebert and Mitchell define a social norm to be an evaluating scale designating on acceptable
latitude and an objectionable latitude for behavior activity, events, beliefs or any object of
concern to members of a social unit. In other words social norm is the standard and accepted way
of making judgments.’

Similarly, cultural upbringing and various cultural dimensions have a profound impact on the
decision-making style of an individual. For example, in the Japanese organizational system, a

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decision maker arrives at a decision in consensus with others. This style is culturally oriented and
makes implementation of the decision much easier since everybody participates in the decision-
making process. In America, on the contrary, the decision-making style is generally
individualistic with the help of decision models and quantitative techniques.

http://www.managementstudyhq.com/factors-affecting-decision-
making.html#sthash.MuffuIDe.dpuf

Decision Making Levels

Operational decisions are the day-to-day decisions needed to operate the organization.
Operational decisions are more routine and follow known rules. How many? To what
specification? These decisions involve more limited resources, have a shorter-term application
and can be taken by middle or first line managers.

These decisions affect the organization for short periods of time - perhaps for a few days or
weeks. In a clothing store, an operational decision is whether or not to order more white shirts.
This type of decision is typically made by a lower-level manager. Operational decisions are
distinct from tactical and strategic decisions in that they are made frequently. The decisions to
order white shirts may be repeated on a weekly basis. In addition, operational decisions tend to
be very structured, meaning the decision is well-structured and there are well-defined procedures
and mathematical formulas to assist the manager.

Tactical decisions, on the other hand, are those decisions that involve formulating and
implementing policies for the organization. Tactical decisions are about how to manage
performance to achieve the strategy. What resources are needed? What is the timescale? These
decisions are distinctive but within clearer boundaries. They may involve significant resources,
have medium-term implications and may be taken by senior or middle managers.

Policy decisions have more lasting effects in the organization, perhaps for months or years.
Tactical decisions are usually made by mid-level managers. For example, deciding whether or
not to sell white shirts the following year is a form of tactical decision. In addition, tactical
decisions are usually semi-structured. The procedure for making tactical decisions is not as well-
defined.

Strategic decisions are made by top managers and involve setting long-term organizational
goals and objectives. Strategic decisions are big choices of identity and direction. Who are we?
Where are we heading? These decisions are often complex and multi-dimensional. They may
involve large sums of money, have a long-term impact and are usually taken by senior
management. Strategic decisions affect the business direction of a company and help determine
what markets to play in and how. Because of the long-term effects, these types of decisions are
made less frequently, in some cases every five to ten years. The decision to get out of the
clothing business and sell outdoor sports equipment instead is a strategic decision with long-term
consequences. Strategic decisions are generally unstructured. There are few foolproof procedures
for determining corporate strategy and deciding what business to be in.

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http://businesscasestudies.co.uk/cima/decision-making-techniques/types-of-
decisions.html#ixzz2hrpGtEPP

Types of decisions

A business continually makes decisions at all levels. Think of a retailer such as Next. To keep
the brand’s high profile position, its managers have to make many decisions. Each major
strategic decision leads to tactical decisions, which break down into operational decisions.

1. ORGANISATIONAL AND PERSONAL DECISIONS:-

Organizational decisions are made to advance the interest of the organization. When an executive
acts formally in his expected role in an organization he makes organizational decisions making
become organizations official decisions making power is delegated to others also and calls for
decisions at subordinate levels supporting it. They thus touch off chain of behavior throughout
the organization. Personal decisions are made by an executive as an individual and not as a part
of an organization. An executive who charges jobs or organization is making a personal decision.
Decisions to many to buy a house, to purchase a car are examples of personal decisions. Such
decisions life of an executive but may affect the personal life of an executive but may affect the
organization sometimes directly or indirectly.

2. INDIVIDUAL AND GROUP DECISIONS:-

When a decision is taken by an individual in the organization, it is known as individual decision.
These are concerned mainly with routine problems for which broad policies are available. Such
decisions are generally taken in small organizations and in those organizations where autocratic
style of management prevails. Group decisions are those taken by a group of persons constituted
for the purpose. Decisions taken by the board of directors or a committee are examples of group
decisions. Group decision making generally results in more realistic and well balanced decisions
and encourages participative decision making.

3. ROUTINE AND STRATEGIC DECISIONS:-

Routine decisions are made repetitively following certain established rules, procedures and
policies. They do not require collection of new data and can be taken without much
deliberations. Such decisions are taken generally by the executives at the middle and lower
management levels. Strategic or basic. decisions, on the other hand, are more important and are
generally taken by the top management of organizations. They relate to policy matters and so
require a thorough fact finding and analysis of the possible alternatives. Launching a new
programme, location of a new plant, installation of a computer system are examples of strategic
decisions.

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4. PROGRAMMED AND NON-PROGRAMMED DECISIONS: -
Programmed decisions are concerned with relatively routine and repetitive problems.
Information on these problems is already available and can be processed in a pre-planned
manner. Such decisions have short-term impact and are relatively simply. They are, made at
lower levels of management. These decisions require little thought and judgment. The decision
maker identifies the problem and applies the predetermined solution. For example, if an
employee is habitually late comer he can easily be dealt with under the established procedure.
Non-programmed decisions deal with unique or unusual problems. Such novel or non-repetitive
problems cannot be tackled in a predetermined manner. There are no cut-and-dried of executive
judgment and deliberation is required to solve them. To order firing on a rioting mob, to impose
curfew in the city, opening of a new branch are examples of such decisions. The ability to make
good non-programmed decisions help to distinguish effective executives from non-effective
executives.

5. POLICY AND CREATIVE DECISIONS:-

Policy decisions are of vital importance and are taken by the top management. They effect the
entire organization. But operating decisions are taken by the lower management in order to put
into action the policy decisions. For instance, the bonus issue is a policy matter which is to be
decided by the top management and calculation of bonus is an operating decision which is taken
at the lower levels.

Styles of the Decision Making

A decision can be taken at the various stages whenever it is required and the Decision can be
made by the various functional executives of an organization. So it can be said that the
Decisions can be –
1. Taken by the individual manager responsible for that particular department and work.
2. Can be consultative in the nature: – can further be either formal or informal in the
nature.
3. The various group decisions can be taken with the help of the –
a. Co actions
b. Task groups
c. The interacting groups
d. Brainstorming
e. Delphi techniques
f. Nominal grouping technique
g. Consensus mapping

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