MBAPages

Decision making in management is a very important factor and demands high level of commitment from the managers and the top management. Decision Making can be said as the process of comparing various alternatives to select the best one that ensures highly efficient future actions. Decision making is directly proportional with the performance of the decision makers or the management as the future actions depends on the decision so taken and establishes chances of future decisions and amendments in the existing one, if needed.

Decision making is the responsibility of every managers regardless their departments and roles and some decisions may have huge impact on the organizational performance and some may have less. The alternatives that are analyzed in the Decision Making Process should be selected keeping in mind various factors like cost involved, time required to implement those alternatives, available resources, etc. Decision making can be a part of any sales team, disaster managers, top management and not necessary if its related to any particular activity or department it affects the whole organization.

Factors affecting decision making (Decision making variables):
Some decisions may be the demand of any specific course of action and some decisions are to be taken in some variables that are beyond the management control. There are some decision making variables Generally there are three types of variables: Certainty, Risk and Uncertainty.

Certainty: Decisions under predetermined conditions are some easy things but yes rare. The future can't be certain and so the chances of certain conditions for managers are quite less. For example if a HR manager plans to hire 20 candidates in the second quarter can be a predetermined factor as the second quarter is the hiring season for many industries.

Risk: Risk factors arises when the managers take any decision assuming favourable conditions in the near future. For example when a sales manager takes a decision of increasing discount rates for the next couple of months assuming that the demand of that the price of particular product/service will increase. Making such assumptions may be due to the experience of the managers in their respective fields and in such assumptions involves high level of risks. Managers though should be prepared always with some alternative actions as to use them when required.

Uncertainty: The main component in the Decision Making Process is the historical data or say the past experience of the organization. The experience of the managers can be different with that of the organization. Every decision in any organization is taken keeping in mind the past experience of the organization or the impacts of any particular decision or variable. Uncertain variable arises when the mangers undertake decision making without knowing or having such historical data. In such case the manager can choose one of the below mentioned options:
a) Increase possibility of results,
b) Increase the number of results to choose from,
c) Increase the chances of getting results that have least possibilities,
d) Postpone decision making for a while.

Types of Decisions:
Though very important part component and surrounded by various factors there are three different type of decisions:
1) Regular/Periodic/Programmed Decisions: Decisions are taken to overcome any problems or situations. Some problems are periodic and decisions are needed to be taken very frequently. Examples can be with the sales targets, employee incentive programs, etc. These situations occur very frequently and timely decisions are needed to be taken. Not only decision making is enough in this situation but timely review meetings and planning schedules are also necessary. Such decisions are called 'Periodic decisions'.
2) Irregular/Non-programmed Decisions: Some situations are not regular and don't have any regular patterns. These can include annual targets. However targets are to be reviewed regularly but they are planned and designed in advance at the start of every financial year. These decisions don't come under the organizational planning and so there is not specific procedure.

Decision making is a management process and it is to be taken care that the decision so taken should be error free and that it has been taken after analyzing all the possible alternatives. Also apart from the different alternatives, all the available resources should be reviewed properly before coming to any decision.

Though the Decision Making is not a tough job but it should be done in a process in order to avoid future amendment and save time and so there are a few steps in decision making process. Lets have them below.

5 Steps of Decision Making Process

1) Identify the problem: The purpose of decision making should be identified as it is the logical reason to gather around to plan or decide. The problem the the organisation or a department is facing should be clearly  presented along with the possible reasons for it. The reasons for any problem can be either any past failures or due to loopholes in present actions. Only after studying these problems and their possible reasons managers can move ahead with the decision making. Some important factors of the problem should be studied and identified:
a) Duration of the problem,
b) Areas affected by the problem,
c) Possible reasons of the problem,
d) Time available to solve the problem.

2) Standards: Standards in decision making includes organisational values, goals and the resources engaged in it. Every decision that is taken revolves around these three standards. If these factors are taken into consideration then the chances for future amendments will be lesser.

3) Analyse the alternatives: Once the problem is identified and understood, the possible alternatives or solution(s) should be identified. 'What can be done:'  is this step. Though not necessary the possible solutions will be error free, changes need to be made in future, and so they should be shortlisted on the basis of various things like cost involved, if any, time required to implement that solution, future effects on the organisation/department, duration till it can be implemented.

4) Select the best solution: Once all the available solutions are reviewed, managers can select one of them that suits them well and have lesser risk involved. There can be levels in judging that particular solution and once everything done well, select that option.

5) Implement the decision:Now its the final step in Decision Making when the solution is derived and implemented. Once done, it should be reviewed regularly so that if there is any loop hole remaining then it should be examined in advance.

When in the mid of decision making one should take into consideration both the positive and negative impacts of the solution on the organisation's activities. This reduces future risks and helps organisation running     smoothly. However not matter how much efficient any decision is it will be changed in the near future as neither the conditions are always the same nor the actions.

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