What is Decision Making?

Meaning:
Decision making is the mental process of selecting a course of
action from a set of alternatives.

Definition:
Decision-making is the selection based on some criteria from two or
more possible alternatives - George R.Terry
 DECISION MAKING
PROCESS
1. IDENTIFYING
THE PROBLEM

6. REVIEW
2. GATHERING
YOUR
INFORMATION
DECISION

5. CHOOSE
THE BEST 3. IDENTIFYING
ALTERNATIVE ALTERNATIVES

4. ANALYSE
THE
ALTERNATIVES
1. IDENTIFYING THE PROBLEM
Thorough analysis of the problem. Couple of questions one should ask when it
comes to identifying the purpose of the decision.
1 . W h a t exactly is the problem?
2. Why the problem should besolved?
3. Who are the affected parties of theproblem?
4 . D o e s the problem have a deadline or a specific time-line?

2. GATHERING INFORMATION

A problem may be related to many stakeholders and can have dozens of factors
involved and affected.
3. IDENTIFYING ALTERNATIVES

Baseline criteria for judging the alternatives should be set up. Organizational
goals as well as the corporate culture should be taken into consideration.

E x : Profit is one of the main concerns in every decision making process.

Companies usually do not make decisions that reduce profits.

4. ANALYSE THE ALTERNATIVES

You need to compare each alternative for their positives and negative then
select the option that has the highest chances of success.
5. CHOOSE THE BEST ALTERNATIVE

Securing desired results with the least efforts.

Less risk, more gain.

6. REVIEW YOUR DECISION

Important step in the decision making process is evaluating your decision for
effectiveness. Ask yourself what you did well and what can be improved next
time.
 TYPES OF DECISION MAKING

1. Programmed and non-programmed decisions:

 Programmed decisions are problems of repetitive nature.

 Taken generally by lower level managers.
 Example: Purchase of raw material, granting leave to an employee and supply of
goods.

 Non-programmed decisions relate to difficult situations for which there is no

easy solution.
 These matters are very important for the organization.
 Taken at the higher level.
 Example: opening of a new branch of the organization or introducing new product
in the market.
2. Routine and strategic decisions:

 Routine decisions are related to the general functioning of the organization.

 Do not require much evaluation and analysis and can be taken quickly.
 Taken by lower level of management.

 Strategic decisions are non-repetitive in nature and are taken after careful analysis
and evaluation of alternatives.
 Taken by top level of management.

3. Individual and group decisions:

 Decisions are taken by a single individual.

 Individual decisions are less costly.
 They are based on limited information gathered by managers.
 Individual decisions are taken in situations of crisis or emergency.
Group decision

 Decisions are taken by a group of persons.

 Group decisions are costly in terms of time and money.
 Group decisions are taken when there is sufficient time to make decisions.
 The main aim of group decisions is the involvement of maximum number of
individuals.

APPROACHES TO DECISION MAKING

1. Intuition Approach

oIn this approach managers takes decision on the basis of their intuition.
oIntuition means when manager feels that the decision they take is wrong or right.
oIn this approach no predefined principles & conscious reasoning.
oIntuition increases from communicating more, consulting others from they get
feedback.

2. Structural Approach

oIn this approach different alternatives identified, analyzed and choose the best one
& decision made on basis on them.
oThe sequential steps of SDM are problem framing, elicitation of objectives,
development of alternatives, evaluation of alternatives, choosing the best one & last
making decision
3. Incremental Approach

oThe incremental model breaks down the decision-making process into small steps.
oThis approach is combination of experience, intuition, guessing etc.
oIncremental Approach will work only for situations where continuous decision-
making and implementation are acceptable.
oA small number of alternatives are considered at each stage of the decision-making
process which results the costs of making a decision are minimized.

4. Opportunistic Approach

oIn this approach, there is constant search for opportunity & then opportunity is
exploited for the betterment of society.
oThis approach mainly focus on SWOT analysis that defines the strength which helps
in overcome the weakness of the organization.
oSome opportunity created by prior actions & some are arise by chance.
oThere is avoiding of threats which present in external environment.