Decision-Making

Principles of Management

Chapter 8- Decision-Making

The Need to Decide

          A manager is responsible for resources and methods at his disposal. He is to use these resources to reach his objectives. An in using them he must constantly make decisions - the right decisions at the right time.

          But many managers find it hard to make decisions. They are often afraid to make the wrong one and the result of not making one is often disastrous. The decision “not to decide” often compounds the problem.

Decision-Making Defined

          Decision-making is the conscious act of choosing from among a number of options or courses of action.

          A decision has several components:

- a desire for a better state of affairs

- a manager who wishes to change the present affairs, and

- a manager who has the needed abilities and resources to effect the change.

          The current view in decision-making is not to seek to maximize the reward for endeavor, but to arrive at a decision that “satisfies”. This is so because the conditions for making an optimal decision rarely exist and so managers almost must be “satisfied” with decisions that are good enough rather than optimal.

Types of Decision

1. Policy Decisions. 

          These decisions will affect the prospects of the organization for a long time. These are made by top management, who are charged with the responsibility of the survival and prosperity of the organization. Such decisions include: major capital investments, product and market choice of key executives, volume of production output and similar long-term problems.

2. Administrative decisions. 

          These decisions are less far reaching, involving such problems as minor capital investment, market planning and those decisions that are needed to keep the organization on course with top-level objectives. These are made at a lower level in the organization.

3. Executive Decisions. 

          These are decisions that have immediate results and as such are made by supervisors at the lower levels of management. Examples are, replenishment of stocks, route for deliveries, and so on.

Steps to Effective Decision-Making

1. Define the problem correctly. Know definitely what one must accomplish.

2. Analyze the problem in the light of the objectives of the organization.

3. Review the resources, and relevant information available to solve the problem.

4. Identify a number of possible courses of action and evaluate each in terms of its ability to solve the problem.

5. Choose the solution that promises to be the most effective.

6. Put the solution into effect and issue the necessary orders and instructions to see that it is carried out.

7. Monitor its implementation and get feedback as to its effectiveness so that modification to the orders and instructions can be issued where necessary to ensure the ultimate success of the decision.

          The manager may have to use sophisticated techniques and tools. But he must remember that these are mere tools to aid him. The responsibility to exercise his own judgment using his knowledge and experience is still his, whatever tools he uses.