Decision Making

Decision Making

• It is a process through which managers identify and solve

organisation problems.

• Importance of decision varies as per the level at which

decision is taken

• It precedes every managerial action.

• It is a continuous process involving all functional areas

Process of Decision Making
1. Identify the problem

2. Diagnose the problem

3. Establishing the objectives.

4. Collecting information

5. Generating alternatives

6. Evaluating alternatives

7. Selecting the alternative

8. Implementation & monitoring

 Types of Decisions
Programmed Decision:

• These are related to structured situation.

• The problem here is more or less routine

• Usually taken by middle level and lower level management.

• They usually do not involve any innovative way of solving

the problem.

• It involves certain amount of certainty and in most of the

case decision is known.
Non Programmed Decisions

• These are taken in Unstructured situation and are related with

new, poorly defined and complex problems.

• The problem are non recurring and exceptional in nature.

• As such situation has not occurred before they require extensive

brainstorming.

• Problem are solved through analysis and reasoning.

• As we move up in hierarchy the need of non programmed

decision increases
 Basis of PROGRAMMED NON PROGRAMMED
Differentiation DECISIONS DECISIONS

Structured, Routine, Well Unstructured, New, poorly

Nature of Problem
defined. defined
Recurrence of
Repetitive Non repetitive
Problem

Method of solving Policies, standard, rules Managerial Initiative

Judgement Objective Subjective

Probability of Some degree of certainty

Uncertain
outcome involved

Level of
Middle & Lower level Top level
management
 Approaches to Decision
Making

• Centralised and Decentralised Approach

• Participative and Non Participative Approach

• Group and Individual Approach

INDIVIDUAL DECISION MAKING
Decision taken by single member
Less costly
Usually based on limited information
Taken in situation of crisis and
emergency
Members may not be committed to
decision
Usually there is no interaction among
members
Usually taken in situation where
people are not open to suggestion
GROUP DECISION MAKING
Decision taken by group of persons
Involves cost in terms of time and
money
They are based on information
gathered by group members
Spends sufficient time in making a
decision
Members are committed to decision.
Promotes interaction and healthy
relation among members.
Taken in supportive business situation
where are open to suggestions
members
 Decision Making and
Planning
• Planning involves decision making regarding objectives and ways to
achieve them.

• Both involves judgement, creativity, thinking, innovation.

• Efficiency of plan is determined by efficiency of decisions.

• Plans and decision are related to predetermined goals.

• Both are continuous and performed at all levels.

• Both are based on forecast and assumptions.

• Planning and decision making are affected by the environment

 Management by Objective
(MBO)
• Management by objectives (MBO) is a comprehensive
management system based on measurable and participative set
objectives.
• The concept of ‘Management by Objectives’ (MBO) was first given
by Peter Drucker in 1954 (The Practice of Management’)
• Authors have differently described MBO for some it as an appraisal
tool, others see it as a motivational technique, still, others consider
MBO a planning and control device.
• Management by objectives (MBO) has been defined by Weihrich
and Koontz;—-The comprehensive managerial system that
integrates many key managerial activities in a systematic manner
and that is consciously directed toward the effective and efficient
achievement of organizational and individual objectives.
 Features of MBO
• MBO is not a technique to measure selective areas of
performance but it is a philosophy of management that
affects it's thinking.

• MBO involves managers at all levels. The whole process

involves participative objective setting.

• It involves integration of objectives across organisational and

functional areas.

• Link objectives to performance.

• There is a periodic assessment and review.

 Process of MBO
1.Define organisational goals
2.Define employees objectives
3.Continuous monitoring performance and
progress
4.Performance evaluation
5.Providing feedback
6.Performance appraisal