Decision-Making

Decision-making is defined as the process by which different possible solutions or alternatives are
identified and the most feasible solution or course of action is finalized. It is an integral part of
planning. Decision-making results in selecting the right action among different available options.

It is also one of the important management functions and effective decision-making leads to fulfilling
expected goals by sorting out different problems related to such decisions. Decision-making is also a
time-bound process and eliminates confusions to reach a conclusion. It has a minimum of two or
more alternatives or solutions to a problem so that the best can be decided. If only one alternative is
available, then there is no requirement of decision-making.

Relation Between Planning And Decision-Making

Both planning and decision-making are connected to each other. These are the most important
aspects of management functions. Planning requires a series of decisions to be incorporated in
advance. The foundation of planning is decision-making. The role of a planner demands good
decision-making abilities also as the planner has to take a lot of decisions simultaneously. So,
decision-making is an important task in planning. Simultaneous and a number of decisions make a
plan. In the absence of decision-making, it’s not possible to answer what, how, when, and who is
planning. To execute planned activities, decision-making is compulsory.

So, planning has an important role to play in decision-making.

Characteristics of Decision-Making

Different characteristics of decision-making are mentioned below:

1. Process-oriented

Decision-making consists of a process to choose the best solution to a problem among available
alternatives. The process includes identifying and analyzing problems, collecting different facts and
figures, finding different solutions, and, finally, narrowing down and implementing the best one to
meet organizational goals.

2. Demands creativity and Intellectual mind

Decision-making process requires creativity and logical thinking. It demands a lot of mental exercise
and other components, i.e. education, experience level, intelligence, etc.

3. Demonstrates commitment

Decision-making process ensures better results based on the decisions made. So, it indicates the
commitment of desired results. It requires joint efforts of the team.

4. Ensures the best solution

Decision-making also provides the best solution to any problem as the best solution is decided after
evaluating different available alternatives.
5. Impacts of decision-making

Decision-making can be either positive or negative. A positive or right decision can bring positive
results and negative or wrong decisions can bring negative results.

6. Decision-making is a final process

After disbursing different activities and tasks, decision-making takes place to get the results of the
work done. It is the end result of discussions, comparisons, etc.

7. An ongoing and changing process

Organizations take decisions on a regular basis; so, decision-making is a continuous process. Every
decision consists of separate situations that make decision-making a changing process.

Decision-Making Process

There are different steps in effective decision-making process;

a. Situation analysis and information gathering

The first step of the decision-making process is analyzing any situation, defining a problem, collecting
relevant information, and identifying goals. This step includes collecting data and information to
identify a real issue or problem. Problem identification is necessary for furthering the decision-
making process. Once the problem is identified, an effective solution is determined. Problems are
solved as per priority. After the solution is improvised, an action plan is designed to achieve the
solution.

b. Plan and make alternatives

After collecting information, the next step is to develop different action plans or an alternative
course of action. It requires imagination skills of a decision maker. Sometimes, additional
information is also required to define better alternatives.

c. Evaluating and selecting the best alternative

This step in the decision-making process not only includes the analysis of different alternatives
available or solutions but also an examination of each one of them based on results they are going to
produce. The actual results of these solutions are not known as it’s based on performance in the
future. So, it comes with uncertainty. It also includes choosing the best solution to achieve
objectives. Different alternatives or solutions are judged based on different criteria, i.e. risk
involvement, the least effort, the least timing based on the urgency of the situation, limited
resources etc.

d. Implementing and evaluating decisions

After deciding the best solution to address a problem, the next step is to make and implement plans.
This requires getting and allocating resources, budgets, time frame, etc. Once made, decisions are
evaluated to know the progress by preparing progress reports.
Evaluating and monitoring decisions will clear different aspects, i.e. if everything is going as per the
plan, different internal and external factors influencing decisions, the performance of subordinates
as expected etc.

Example of the decision-making process is shown in the below visual presentation to solve the
problem of high employee turnover in an organization;

Factors Affecting Decision-Making

1. Timelines

The quality of decisions depends on how much time has been devoted to making decisions. Most of
the time decision-makers have to take decisions in a limited time frame as instructed by the
management. Due to the time limit, decision-makers are not able to collect all the necessary
information that influences decisions and are, also, not able to look for more alternatives.

2. Value and beliefs of decision-makers

In addition, the quality of decisions also depends upon the value and belief system of the decision-
makers. Anyone’s reaction to a particular situation is more likely to depend on the individual’s
values, likes and dislikes, thoughts, and beliefs. It is also a behavioural aspect of the decision-makers
and reflects in their decisions related to goals, strategy-making activities. So, value-based decisions
help in prioritizing tasks and making goals, identifying different solutions to problems, and finalizing
the best solution or alternative.

3. Policies of organization

Decisions are affected by the policies of an organization. Decisions taken have to be in the boundary
or within the limits of these policies. Decisions which violate policies are not considered for
implementation. Though there is a scope to make changes in policies as per decision, most of the
time decisions should be at par with the policy guidelines. However, a change in policy is a time-
consuming task and requires lots of things to be considered before any change. Comparatively, a
change in proposed decisions is much easier.

4. Other factors like budget, manpower, values of management also influence decision-making.

Types Of Decisions

Decisions can be of different types depending upon their nature and influence:

1. Programmed and non-programmed decisions

Programmed decisions are meant for daily routine issues and for those problems that repeat
frequently. A Set of tasks are defined to handle such problems or issues and are mostly initiated by
the entry-level decision-makers.

For example, HR department issues like handling grievances related to leaves or attendance of
employees require programmed decisions. Non-programmed decisions are made for tough
situations where defining different alternatives is a challenging task. These types of decisions
strategically affect organizations.

For example, decisions related to expanding the operation of an organization to other countries,
launching a new product, introducing performance management system for the first time to the
employees are non-programmed decisions where decision-making is a challenging task and these
decisions are mostly taken by management or at the top-level.

2. Routine and strategy-oriented decisions

Routine decisions are a regular activity in an organization once identified. These are quick decisions
and don’t require deep thinking or analysis. These decisions are generally taken by the bottom-
management staff. Different alternatives are not required in these as everyone is aware of what
action to take on a daily basis.

Examples of such decisions include what reports to generate from the biometric system of
attendance by the HR staff.

Decisions, in which involvement of organizational goals, resources, and policies is required, are
termed as strategic decisions. Strategy-based decisions are future-related and executed by the top
management. These are for the long term and are centrally focused. A large amount of investment is
required to execute strategic decisions. Different alternatives or course of actions are considered
and evaluated to finalize such decisions.

For example, developing a performance management system (PMS) strategy for employees
demands strategic decisions. Steps involved in strategic decision-making for formulating PMS
strategy starts with identifying goal which might be retaining and motivating the quality staff.
Further steps involved are: developing a process for monitoring performance and formulating a
comprehensive PMS plan.

3. Policy-related and operational decisions

Decisions related to policy issues are policy-related or tactical decisions. These decisions come under
the preview of the top management and leave a long-term impact. For example, changing leave
structure or office timings are policy-related decisions.

Operating decisions are for operational functioning and on a daily basis. Middle- and bottom-level
management is responsible for such decisions. Different departments or functions of an organization
like sales, IT, production, purchase, accounts, or HR take operations decisions.

For example, Diwali bonus payment to employees is a policy matter and calculation of such bonus to
handover to employees is considered an operational decision.

4. Organization-based and personal decisions

Decisions, taken by an individual as office staff, are organizational decisions. For example,
conducting a campus interview decision by hiring executives is an organizational decision. Wherein,
personal decisions are related to an individual’s decision to meet personal commitments. These are
also known as life decisions. Buying a house is a personal decision.
5. Major and minor decisions

Major decisions are those which require much time, effort, and thinking to finalize and have a long-
term impact. For example, a decision regarding higher studies whether to continue in own country
or to go abroad is a major decision.
Minor decisions are routine decisions and don’t require much time and deep thinking. Like
purchasing stationery for different departments is a minor decision.

6. Individual and group decisions

Individual decisions are taken by one person i.e. routine decisions; as the decision of making an excel
sheet for attendance management to keep the attendance record is an individual decision.

Decisions which are taken by a group of people aiming to achieve a common goal are group
decisions. For example, employee engagement activities demand HR staff to work as a group and
take decisions for better employee engagement programs.

Importance of Decision-Making

1. Optimum utilization of resources

With the help of decision-making, all resources of organizations i.e. money, men, material, machine,
market and method are used carefully and as per requirement.

2. Problem-solving approach

By decision-making, organizations can determine and face different problems in working. It not only
helps in identifying problems but also solving them by making correct and fast decisions.

3. Contributes to organizational growth

As decision-making ensures optimum utilization of resources, making the right decisions to solve
problems or issues helps in achieving organizational goals and overall growth.

4. Encourage initiatives and innovations

Decision-making task is performed at all levels of organization i.e. top, middle and bottom. This
motivates the staff members to contribute to decisions through brainstorming or alternatives to
solve the problem. Thus, it encourages innovative thoughts and ideas which, in turn, help the
organization to be at a competitive place in the market.

5. Employee motivation

Good decisions help in increasing the productivity of organizations that result in more profits.
Surplus profits help in increasing compensation benefits to employees which ultimately boosts their
morale and keeps them motivated.

Summary

To conclude, planning is a systematic process that supports organizations to carry out all its present
and future activities to achieve desired objectives. Planning, being a continuous function, works well
in adverse situations too. Plans can be modified and restructured as per requirement and available
information.

Decision making is also an important activity that supports the organization by reducing risks in
projects with quick and better decisions.