DECISION-MAKING

What is Decision-Making?
Decision-Making is the process of identifying and choosing alternative courses of
action in a manner appropriate to the demands of the situation. An engineer manager
must adapt a certain procedure designed to determine the best option available to solve
certain problems.
Management makes a decision at a various level (i.e., top, middle, lower levels)
and at various management levels (i.e., planning, organizing, leading and controlling). It
is the heart of all management functions.

The Decision-Making Process

David H. Holt said that rational decision-making process involves the following steps:
 Diagnose a problem - Knowing or identifying the problem is the first step if a
manager wants to make an intelligent decision. An expert once said
“identification of problem is tantamount to having the problem half-solved.” A
problem exists when there is a difference between an actual situation and a
desired situation.

 Analyze environment - The objective of an environmental analysis is the

identification of constraints, which may be spelled out as either internal of
external limitations.
Example of Internal Limitations
• Limited funds available for the purchase of equipment
• Limited training for the employees
• Ill designed facilities
Example of External Limitations
• Patents are controlled by other organizations
• Very limited market for the company’s products and services exists.
• Strict enforcement of local zoning regulations.

Components of Environment
1. Internal Environment – refers to the organizational activities within in firm.
• Organizational Aspects like org. structure, policies, procedures, rules,
ability of management, etc.
• Marketing Aspects like product strategy, promotion strategy, etc.
• Personnel Aspects like recruitment practices, incentive systems, etc.
• Production Aspects like plant facility layout, inventory control, etc.
• Financial Aspects like liquidity, profitability, etc.
2. External Environment – refers to the variables that are outside the
organization and not typically within the short-run control of the management.

 Articulate problem or opportunity

 Develop viable alternatives - Problems can be solved by any solutions that is

given. The best among the alternative solutions must be considered by the
management. Here are the steps in determining alternatives: ✓ Prepare a list
✓ Determine the viability of each solution
 ✓ Revise the list

 Evaluate alternatives - Proper evaluation makes choosing the right solution less
difficult. Alternatives will be evaluated according on the nature of the problem, the
objectives of the firm, and the nature of alternatives presented. Each alternative
must be analyzed and evaluated in terms of its value, cost, and risk
characteristics according to Souder.

 Make a choice - Choice-making refers to the process of selecting among

alternatives representing potential solutions to a problem. Webber suggests that
“...particular effort should be made to identify all significant consequences of
each choice”.

 Implement decision - Implementation refers to carrying out the decision so that

the objectives sought will be achieved. To make the implementation effective, a
plan must be devised and the resources must be available.

 Evaluate and adapt decision results. In implementing a decision, the result

expected may or may not happen. It is important for the manager to use control
and feedback mechanisms to ensure results and to provide information for future
decision. Feedbacks refers to the process which requires checking at each stage
of the process to assure that the alternatives generated, the criteria used in
evaluation, and the solution selected for implementation are in keeping with the
goals and objectives originally specified.