Main Importance Of Decision Making

Published Date: 02 Nov 2017

According to the Oxford Advanced Learner’s Dictionary the term decision making means - the process of deciding about something important, especially in a group of people or in an organization [Oald8.oxfordlearnersdictionaries.com. 2012].

Trewatha & Newport defines decision making process as follows:, "Decision-making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem" [Akrani, G. 2010]

A Decision is nothing but a choice between a set of alternatives. ‘Decision’ word has originated from Latin word ‘De ciso’ which means ‘cutting away or cutting off’ or in simple English words ‘coming to a conclusion’. Decisions are made to achieve the goals and objective of an organization from suitable follow-up actions. Decisions are taken through a decision making process. Decision making is one the primary function of management [Lingham, L. 2013].

Decisions are taken in every organization at every stage as management process starts from planning and planning starts from taking decisions, so in a way management process starts from decision making. Every big and small decision is taken for best interest of the organization. Decision leads to success of the organization but sometimes it can be responsible for downfall also. Every organization have their own way to take any sort of decision , while small and simple organizations have manager’s at every level for decision making, big hierarchy and complex organization have separate professional trained decision making team [Managementstudyguide.com. 2008]. Every decision which is made in an organization is to support the growth of organization. Thus decision making is a cumulative and consultative process [Tripathi, P. and Reddy, P. 2008].

Decisions can be of two type i.e. Programmed decisions and Non-programmed decisions. Programmed decisions are made for the structured problems. If a problem has arisen before and have a cut and dry method for handling that problem, such problem are known as structured problems. In Programmed decision, decision is made according to a standard procedure, policy, or rule so those decision makers do not have to come up with new alternative every time the problem occur. Such decisions are usually repetitive, routine and easiest way to make the decision [Tripathi, P. and Reddy, P. 2008]. For e.g. If a waiter spills any drink on a customer’s coat, because drinks are usually spilled, the manager may offer to get the coat cleaned at restaurant’s expense or the whole bill will be complimentary, that totally depend on different hotels policy. Decision taken by the manager will be called Programmed Decision.

Non-programmed decisions are novel and non-repetitive. When manager faces a problem which has not risen before or there is no pre available solution for it and if that problem or issue needs a new or unique solution, such problems are called unstructured problem. Such problem requires a non-programmed decision. The creation of a marketing strategy for a new service is an example of non-programmed decisions. IBM Australia's introduction of a personal computer in the 1980s was different from all other decisions of the company had done before [Answers.com. 2010]. Gresham’s law states that programmed decisions have tendency to overshadow the non-programmed decisions as most of the manager’s spent most of their time in planning, unimportant, programmed decisions, and very less time for sudden, important, non-programmed decisions [Marc. 2005].

There are three main conditions which managers may feel while making a decision and those are certainty, risk, and uncertainty.

Certainty is one of the ideal conditions for decision making. When manager makes a decision before knowing all the possible outcomes and results of the decision he/she will take, such conditions are known as certain condition. In other words if someone knows the consequences of the decision, it will be a certainty condition. Certainty condition doesn’t need unique or non-programmed decision. In such conditions, decision taker has to studies the entire alternative and decides the best alternative for the problem [Cliffsnotes.com. 2010]. For example. Deciding a new equipment for the office, opening a new account in a bank etc.

Risk is one of the most common conditions of Decision making. In risk condition decision maker may have full knowledge of problem and information but has no guarantee on how each alternative will work [Robbins, S. P. 2005]. Risk condition takes place when unstructured problems occurs [Hasan, S. 2000].

Uncertainty is one of the most difficult and dangerous condition for decision makers. Uncertainty condition occurs when decision maker can’t even predict the possible outcome of the decision taken. New product launch, changes in market strategy is some examples of uncertainty condition [Unclemaxsays.com. 2012]. It requires a unique and often very innovative alternative to existing processes [Drucker, P. F., & Maciariello, J. A. 2008].

Every decision maker has different decision making style when it comes to decision making. There are two dimensions on which all decision making styles are based. First dimension talks about way of thinking of every individual. Some decision makers are more rational and logical in the way they made decision in order to get more rational and logical decision. Whereas, some are more intuitive and creative in the way of making decisom. Other dimension talks about tolerance of ambiguity where some people have low tolerance of ambiguity, some also have high tolerance of ambiguity. These two dimensions give four decision making styles : directive, analytic, conceptual, and behavioral [Toolkit.gov.au. 2006].

Directive style decision making are mostly used by decision makers with low tolerance for ambiguity and are rational in their thinking. This type of decision makers are more efficient and logical and make fast decision and focus on the short run which results with minimal information and assessing few alternatives [Boundless.com. 2011].

Decision makers with higher tolerance for ambiguity use analytical style. They spend more time on collecting information and alternative before making a final decision. These types of decision makers are have the ability to adapt or cope with new and creative solution [Robbins, S. P., & Coulter, M. K. 2005].

Individuals using conceptual style tend to very broad in their thinking and try to find as many alternatives possible. They focus on long run with effective and unique solution [Robbins, S. P., & Coulter, M. K. 2005].

Behavioral style is used by decision makers who work well with others. These decision makers are more concern about achievements of people they are working with and take suggestions from others. Acceptance by others is the main important for this type of decision maker [Robbins, S. P., & Coulter, M. K. 2005].

All the decisions are we make, we make it individually or in group. In order make an appropriate and effective decision, it is necessary to pursue in a particular or combination of different decision making approaches made by different theorist. Decisions are made for growth or development of anything, therefore it is appropriate to concentrate on how the particular decision is made. Decision makers with knowledge of different theoretical approach have opportunity to select the appropriate approach to take the more effective decision [Robbins, S. P., & Coulter, M. K. 2005].

Many theorist/decision makers have come up with number of theories and approaches to take effective decision and each approach has its own characteristics and advantage of using the same, so it is necessary for decision makers to have be aware of all different approaches and use suitable approach to resolve the problem in hand [Decision-making-solutions.com. 2009].

Rational decision making-making model on one of most consistent and accepted compared to any of the other approaches. However many decision theorists has questioned the rationality model. Management decision making can be called as relational as most of the times decisions are made under certainty. Decision maker in certain condition aware of the entire alternative what would be outcome, decision criteria, deciding the best alternative and how to implement it [Tripathi, P. and Reddy, P. 2008]. Rational model basically relies on six steps which start from recognizing the actual problem or issue after recognition, generation of alternatives take place in that decision makers try to find alternatives for the occurred problem. After finding the alternative, each and every alternative is carefully evaluated to take the effective decision. Once all the alternative are evaluated, best alternative to be selected and them implemented. Once decision is implemented it is then evaluated time to time to assure its immediate and continued effectiveness [Lunenburg, F. 2010].

Bounded rationality is the idea that people who are faced with decisions must work within certain limits in order to make these decisions. When it comes to consumer decisions about the purchase of goods and services, which means that it is necessary, the choice for the consumer to make, based on factors such as time and available information available make a decision. The general idea of bounded rationality recognizes that data may or may not be completely accurate or reliable, but that despite the quality of the data at hand, requires a decision with the resources currently available to decision makers. With bounded rationality, it is widely recognized that the decision to make three specific limitations. The first is the decision of the decision maker, the information is often incomplete and may be unreliable. This reality means that a decision can be taken without the knowledge of one or more alternative courses of action. Along with the limitations of the available data, the limits of the human mind to reason and process the data at hand also play a role in decision making. A third factor that influences the outcome of the decision process is the time available for the decision to seek an approach [wiseGEEK. 2012].

The least rational decision making theory is Intuitive approach which is a non-conscious process created from distilled experiences. Intuitive decision making relies on "gut feeling" or "hunch" due to that careful planning is not possible in this condition. Intuition is not rational, that doesn’t mean that theory is not right, experts believes that intuitive decision making sometimes can improve the decision. Intuition doesn’t operate opposite of rational theory but can defiantly complement rational theory [Krulak, C. 1999]. Intuitive decisions are unquantifiable, which is the main reason decision makers can’t rely on it. Such approaches are used when decision maker has to make the decision on impulse and don’t have much time to think about alternatives. [Decision-making-solutions.com. 2009].

Main importance of decision making is that it facilitates to utilize the available resources for achieving the objectives of an organization. The available resources of an organization are Men, Money, Materials, Machines, Methods and Markets. Without decision making all these resources are of no use. The manager has to make correct decision fort use of every resource in order for success of an organization. Decision making helps the organization to face and tackle the everyday problems and challenges. Sometimes quick and correct decisions help in resolve and accept the new problem and achieving the organizations objectives. Every major as well as minor decision helps in growth of an organization [Akrani, G. 2011]. However, sometimes wrong, slow or no decision can result in downfall of an organization. Management process begins with planning as it helps in deciding what is to be done and when to be done. Therefore; decision making is integral part of planning. Decision usually involves the application of considerable human judgment and experience before obtaining a solution thus decision making is a key part of a manager’s activity [Tripathi, P. and Reddy, P. 2008].

Rational decisions are made after analyzing and evaluating all the alternatives of a problem. Thus rational decision helps in quickly achieving all the objectives of an organization. Rational decision helps to improve the efficiency of an organization. Efficiency is the ratio between costs and benefits. If yields are high and costs low, the efficiency is better. Rational decision helps to higher the performance at lower cost. Rational decisions facilitates to innovation by developing new ideas, new products, new processes, etc. Innovation creates a competitive advantage for the organization. Decision making also help in building a good moral amongst the employees. This is because employees are motivated to make rational decisions. If implemented rational decisions the organization makes large profits. Therefore, there are financial and other benefits to employees [Akrani, G. 2011].