Decision making : concept and process
Introduction:
decision are made by all of us, in our daily lives Decision may be minor or routine decision or they may be of pertinent importance for us and we take them consciously .for Example: decision to buy a candy may be a routine decision without you being aware of that but decision to purchase a house is a major decision and thus, should be taken in a planned manner. A decision means . to come a conclusion and is a result of intuition, reasoning and of course, planning in the context of business organisation, decision making is of vital importance ,all managers take decision, upon nature and scope of work these decisions decides the success or failure of a organization
Meaning :
A decision is a course of action which is consciously chosen from among various alternatives. to achieve the desire result Decision making refers to the process of selecting the best alternatives course of action, from among various alternatives available to management after through evaluation of each, alternatives, According to peter, F. Drucker” whatever a manager does, he does, through decision making” by taking a decision , a manager attempt to reduce the gap between the present and the desired situation, while decision making is a process / technique a decision is the result or outcome of this process.
Characteristics of Decision making:
- Goal oriented : every decision made, helps to achieve certain goals for an organization, either major or minor, it bridges the gap between where we are and where intend to go. A decision is considered to be good if it helps in achieving organizational goals,
- Involves choice: Decision making essentially involves choice, you have to choose among the set of alternatives , the best solution to your problem , unless , there are or more alternatives, there is no need for decision making
- Continuous process: Decision making start from the very beginning of the organization and continues throughout the life of the organization .manager are regularly engaged I making decision and the very nature of their jobs demand rigorous decision making
- Intellectual exercise: decision making is no doubt a thinking exercise, it involves creativity and imagination , experience and intuition also play a major role when it comes to decision making.
- Dynamic: Technique used for making decision may very with the nature of problem and time frame available to solve that problem
- situation: decision making depends on the situation facing the management , when a problem pops, up: A manager may take one decision in particular situation and opposite decision in another situation, sometimes they may decided that it is wise not to act at all
- commitment of organizational resources: decision making involves , time effort physical resources etc, Resource commitment is involved both at the planning phase and implementation phase of a decision, Thus it is very essential that right decisions be taken at the right time, otherwise precious organizational resources may go wasted
- pervasiveness: decision making is pervasive, manager at all levels i;e ..top middle low and in all arears of management i:e production , marketing , finance etc, are involved in making decision, also decision making is involved in all functions of management i;e planning , organizing , staffing , directing and controlling .
Types of Decisions
- routine and strategic Decision: tactical or routine decision are concerned with routine or repetitive, problems they neither require collection of new data nor conferring with people. Thus they do not require much of managerial judgement or deliberation . such decision are mainly taken by the managers at middle or lower levels of management. Top management lays down the rules and regulations for such decisions, for instance, departmental heads can easily decide salary of a new worker on the basis of established scales for different categories of the employee. strategic or basis decisions on the other hand, are more important and thus they are taken by top level of management. such decisions involve long term commitments and exercise an enduring influence on the future of the oranization . these decisions relate to the policy matters and so require a through fact finding and analysis of possible alternatives, for instance location of new plant. launching of new product are some of the important decisions that a firm needs to take.
- programmed and Non-programmed decisions:– The programmed decisions are of a routine and repetitive nature which are to be dealt with according to specific procedure, A sequence of steps can be laid in advance so that the decisions become highly, structed . they are called programmed because information on them is available and have a short term impact, thus they are entrusted to lower levels of management. for instance , if an employee absents himself from work for a long period of time without intimation, the supervisor can deal with such situation according to standard procedure without consulting the chief executive, on the other hand non-programmed decisions arise because of unstructured problems these, are concerned with novel or non-repetitive issues, there is no standard procedure for dealing with such problems since, readymade decisions are not available and high degree of precision is required, so they are generally made by top level of management .for instance , if large number of employees absent themselves from work for a long period of time without intimation, the supervisor cannot deal with such situation without consulting the chief executive . the scenario depicts and unstructured problem which can be solved in the light of scientific analysis of situation factors, and requires the involvement of top officials
- Individual and group decisions:– Individual decisions are taken by individuals, they are taken either in small organization or in those organization where autocratic style of management prevails, in such decision analysis of various variables is relatively simple, group decisions on the other hand are taken by a group of organization member. decisions taken by a committee or board of direction are examples of group decisions, these decisions these decisions are generally important for an organization . they promote participative. decisions making but takes more time and create difficulty in fixation of responsibility
Role of Decision making:
Decisions making lies deeply incorporated in the process of management and is spread over all managerial function and covers all areas of the enterprise. effectiveness of decisions making and quality of decision depend upon manager’s skill, judgement competence and ability , it involves thinking and deciding before doing and so is inherent in all managerial function , each manager has to take a number of decisions while performing the function of planning , organizing , staffing , directing and controlling . that is why decisions making is often called the essence of management.
Decisions are made not only regarding the various elements of management and matters, involved therein such as determination of organizational goals, designing the structure of organization designing controlling techniques etc, but managers have, also to decide upon various issues related various issue related to functional areas like productions, marketing , distribution , purchase etc, thus it runs through the entire process of management and all sub systems of the organizations, In an organization, resources can be mobilized and utilized in the direction of achieving desired goals only by making decision and getting them implemented Right from the day when the size of business used to be very small to the present day, the importance of decision making has been there. the only different is that in today’s business environment , decision making is getting more and more complex.
process of Rational Decision making.
The world rational basically means judicious, logical sensible and scientific, A rational decision , therefore implies, a decision backed by a scientific process involving analysis of the problem, collection of relevant data, review of key factors, evaluation of alternatives and choice of best alternative , such a decision could a decision be justified on a logical basis and does not suffer from the personal. bias, of the decision maker, Irrational decision of the other hand, is based purely on hunch and intuition without using relevant facts and figures,
- Identify the problem;– The process of decision making starts with the discovery of the problem, that requires a decision this requires analysis of internal and external situation, clear definition of the problem is very important as the right answer can be found only to right questions, imagination, judgement and experience are required for detection of problem that requires managerial decision,
- Diagnose the problem;- once the problem has been identified , the next step is to analysis the problem to determine its nature, The problem have to be defined in term of its origin, scope , causes its nature, intensity, mangnitude, etc, In order to Diagnose the problem a manager must obtain all important fact and analysis them carefully,
- Discover alternatives:– after diagnosing the problem, a manager has to develop alternative solution .the process of decision making becomes relevant and meaningful and challlenging exercise for managers, only if the have many more alternatives to be examined , for making a final decision, managers should not take hasty decisions by jumping on the first feasible alternative which is available it, is their obligation to search for the various alternatives, as many alternatives may not be obvious and apparent, some alternatives may be develop by managers other, may be generated through research and analysis , creative thinking and innvoativeness. However , the principle of limiting factor should be followed i;e only strategic , factor which are most important in determining solution to a problem should be considered.
- Evaluate alternatives, ;- after discovering alternatives, each alternative is evaluated to satisfy the objective of management, The probable consequence of alternatives, can be estimated through for casting and other devices, An alternative should be thoroughly evaluated in terms of risk time consumed , efficiency and resource position .cost -benefits analysis should be performed, while choosing an alternative. both qualitative and quantitative factor should be taken into account,
- select the best alternative;- after evaluation the best alternative is selected i’e , that alternative that will maximize the result under the given condition , for the final choice the manager has to relay on his experience skill judgement, experimentation research and analysis , various organization plans , policies, rules, basis philosophy of management and other human factors are given due weightage,
- Implementation and follow up:- A decision remains on papers, unless it is implemented .implementation requires following steps,
- communication of decision to those responsible for its implementation
- securing maximum cooperation
- commitment and acceptance from concerned employees,
- making structure and administrative arrangements such as delegation of authority, allocation of resources, etc,
after putting the decision into practice, management must constantly monitor the consequences, this is feed back or follow up aspect of decision making process, periodic progress reports should be obtained , in case feed back indicates flaw in the decision, necessary modification should be made, this feed back may also prove helpful in future decision making,
Decision -making: Techniques and support system
The process of managerial decision making has become very cumbersome in the highly turbulent business environment of the present times, in order to evaluate the alternatives for choosing the best alternative course, of action , certain qualitative and qualitative techniques have been developed which help in making objective decision, Accordingly, the techniques fall under two categories:-
- qualitative techniques
- quantitative techniques
Qualitative techniques: these techniques are basically traditional in nature and the quality of decision arrived at depends upon the qualities of decision maker himself (i:e , his competence, knowledge etc, ). The prominent techniques of decision making often used by groups of committees include the following:
(a) Experience:– experience is basically learning from past judgements, an experienced manager uses feedback of his past performance in deciding about, the current course of action, however, this techniques should be used carefully, in the light of changing environment conditions, in many cases, this techniques may prove unscientific and misleading.
(b) Intuition:- intuition or hunch is the ability to comprehend something by using feelings rather than, facts decision making of this type is influenced by the beliefs, attitudes, perception, psychology of the decision maker, some managers take decision very quickly because of the presence of intuitive power rather than those who undertake elaborative formalities and procedure for making decision , though this technique seems cheap and less time consuming , but the probability of taking wrong decisions is extremely high,
(c) mutual consultation:– mutual consultation calls for conducting meeting and formation of committees, here, decision ,maker decides an issue through diverse and creative ideas of a number of people present in the meeting or present on the board of committee formed for the purpose , this result in getting specialized knowledge and expert comment on the issue under consideration.
(d) facts;– facts refer to the background information for developing and evaluating an alternative, however, facts and figures do not speak for themselves, they require systematic processing and interpretation by the decision markers, fact, in itself in not an independent technique of decision making, they simply, serve as a basis of decision making by a manager who prefers to take decisions on a sound basis
(e) standard plans:- standard are the pre-established guidelines to perform a particular task, this technique is normally adopted in situation where routine decision making is involved. managers at lower levels in an organization generally follow this techniques they have to take large number of routine decisions during the normal course of performing their organization duties and these standards help them in quick decision making.
(f) Delphi technique:– This technique calls for making a decision, when there is convergence of opinion under the technique, a panel of experts related to a particular problem area is prepared, experts are deliberately kept apart and their identity id kept secret from one-another, A pre-drafted questions is prepared and given to each experts , for obtaining his, response to the questions contained therein, answer of each experts is evaluated and on those answer on which experts have varied opinion , need to be scrutinized through feedback provided to such experts , are requested to communicate the reasons for their divergence and again feed back is sent to them. the process of providing feedback is repeated till convergence of opinion emerge.
(g) Brain storming;– through this technique often , unique solution to complicated problems are obtained in brain storming session , a problem is posed before a number of managers and ideas are invited from them for a solution to a problem each, one in this session often his/ her own idea for solving the problem . after the session gets over, each idea is critically examined, and ideas are processed to arrive at solution to the problem.
(h) Consensus mapping technique:– consensus mapping technique is used for consolidating results from several taskforces or project groups and is suitable for solving problems that are multidimensional and have interconnected elements, this technique begins after the first task group has developed and evaluated a list of ideas, The technique is used to pool the ideas generated by several task subgroups to arrive at a decision, the facilitators encourage participants to search for clusters and categories of ideas this search for structure includes the listing and discussion of alternative clusters and categories by the subgroups, and then generated of a single classification scheme by group members working as a group or in pairs or trios, after this, the facilitators consolidate the different schemes developed by subgroups into a representative scheme that act a strawman map” tor the entire .group members then work to revise the strawman map into a mutually acceptable solution this exercise is repeated until the group as a whole arrives at a single consolidated map and a final decision based on that .
Quantitative / mathematical techniques,
- Liner programming:– The techniques is used for determining the optional combination of limited resources for achieving a given objective, it is based as the assumption that there exists a relationship between the variables, with the help of a linear equation, optimum combination of cost, time and utilization of machine can be prepared, the objective function of this technique is either to maximize benefits or to minimize cost
- Queuing theory:- it involves a mathematical study of queue or waiting lines, it is to be applied for maintaining a balance between cost of waiting line and cost of preventing the waiting line in respect of utilization of personnel, equipment and services, it is based on the premise that although delays are costly (in that customers may decide to do business on other institutions, )” the costs of eliminating them may be even more costly, The technique may be used in service organizations like transportation, hospitals , banks etc,
- Probability theory:– This statistical device is based on the assumption that certain things are likely to happen in the future in a pattern which can be predicted to some extent by assigning various probabilities though probability is not a certain phenomenon, but deviations from probabilities are within fairly predictable margins, it plays a major role in techniques like pay off matrices and decision trees,
- Marginal cost Analysis:– it is also known as marginal costing as under this analysis , the additional revenues from additional costs compared, The profits are maximum at the lever where marginal revenues and marginal costs are equal , it can also be used for comparing factors other than costs and revenues, for Example: , in order to find maximum output of a machine, one can vary inputs against output unit additional inputs equal additional outputs, this would be point of maximum efficiency of the machine, break even analysis is the modification of this technique which tells the management the point of production, where there is no profit no loss
- Network Analysis:– network analysis is used for planning and controlling the project activities, under this, a project is broken down to small operations which are engaged in a logical cycle, The next step is to decide the sequence of operation to be performed, A network diagram may be draw to present the relationship between all the operation involved, the diagram will reveal gaps in flow plans ,it will also show the interdependence of various activities of project and point out the activities which should be completed before others are invitiated, PERT (program Evaluation and Reviews techniques ) and CPM, ( Critical path method) have become very popular as network analysis technique,
Information Technology (IT) and Decision making.
In present day industrial and commercial scenario, decision making has become very, complex To improve the quality of decision , managers require vary fast processing and transmission of huge quantity of data, IT performs this function efficiently . IT is a combination of various techniques for capture, storage , processing and transmission of data, information retrieval and its display, it consists of hardware, software. data base management, telecommunication and other information processing techniques used in computer–based information system, IT is a enables installation and operation of MIS (management information system:)’ under which computer performs the function of data organization and formatting, it makes available the information at the proper time to proper decision maker,s
Main components of IT are
- computer hardware: i;e , physical equipment used for input, processing and output of data
- computer software/ programs: consist of detailed programmed instruction to coordinate computer hardware components
- Data base management: is the organized set of data that is stored in a computer and can be looked at and used in various ways, It implies technical and operational aspects of managing data, including data base design and operations,
- Telecommunication:– are the methods for dispersing information among different computers located at different places, for this linkage are created through network it has become an essential tool for management, through IT. managers can perform many function in lesser time and that too cheaply, it helps in providing competitive edge to the managers, data processing and transmission has become very fast in modern era due to IT revolution making improvement in the quality of decision being made. IT helps in collection , processing and communication of information very quickly and at low cost so that prompt actions for the problems can be obtained , in fact, IT helps managers to improve efficiency and effectiveness of their organization
Decision support system (DSS)
Decision -making can be structured (i.e, programmed), unstructured (Non-programmed) or semi-structured (in-between phase)
Structured Decision:-are those whose objectives are clear, procedures are standardized and for which standard solution exists, for novel problems, it involves considerable judgement and a creative solution, for this decision no standard solution exists, semi-structured decision involve a combination of both standard solution and individual judgement,
A DSS can improve the quality of information on which decision is based by providing a range of alternative solution in case of unstructured and semi-structured decision, As per scott morton, ” DSS means interactive computer-based system which help decision makers utilize data models to solve unstructured problems, DSS use computers to facilitate the decision -making process of semi-structured tasks, these systems are designed not to replace managerial judgment but to support in and make the decision-making process more effective .
DSS helps managers to react quickly to changing needs, The availability of minicomputers and microcomputers, as well as communication networks, has made it possible to access and utilize a huge amount of information at low cost, thus, DSS providers managers with an important tool for decision making under their control. DSS are designed in such a manner so that users can work with them directly . these system exclusively include user friendly software . DSS are interactive in nature, so user can change assumptions, ask new questions and include new data.
Features of DSS
- DSS improves decision effectiveness, not the efficiency with which decision are being made.
- DSS provide tools required for analysis of data in a flexible manner,
- they are focused on specific set of decision such as routing, queuing etc, which are not meant for general use,
- they support managerial judgment particularly at top and middle level, rather than replacing, it
- In DSS , reliable communication network, computer terminals are more important than large scale data processing systems,
- Extensive participation of end users is desirable,
Objectives of DSS
- To support managerial judgment rather than replace it,
- To assists managers in making decisions to solve semi-structured problems
- To improve the effectiveness of decision-making rather than improving efficiency, manager’s valuable time should not be saved at the cost of quality of decisions, proper algorithms and models should be developed to provide decision options, Earlier, DSS focused mainly on individual decisions making, but later on, group decision support system was developed to support group decision making, examples, of DSS are -data analysis system , suggestions models, optimization models, accounting models ,pricing decision, investment evaluation etc,
DSS incorporate both data and models, DSS software system managers the creation, storage and retrieval of models from model base and integrates them with data in the data base, it also providers a graphic and easy to use flexible user interface lotus 1-2-3 or MS-Excel are example, of DSS Software,
Thus, a DSS is a specialized management information system (IMS) designed to support a manager’s skills at all stages of decision-making whether it is identification of problem or choice of data or evaluation of alternative courses of action. it can therefore be concluded that DSS is MIS is not always DSS because of their different purposes.
Objectives of MIS
- To make the information available to the right person, at the right time and in the right form
- To supply the information at reasonable cost
- To process data by using most efficient methods
- To keep the information up to date,
- To maintain secrecy and security of confidential information