Decision Making

Decision-Making: Definition, Importance and Principles
Decision-making is the process of making choices by identifying a decision, gathering

information, and assessing alternative resolutions.
A decision is an act of selection or choice of one action from several alternatives.
Decision-making can be defined as the process of selecting a right and effective course of action
from two or more alternatives for achieving a desired result. Decision-making is the essence of
management.
Using a systematic decision-making process can help you make more deliberate, thoughtful
decisions by organizing relevant information and defining alternatives. This approach increases
the chances that you will choose the most satisfying alternative possible.
Step 1: Identify the decision

You realize that you need to make a decision. Try to clearly define the nature of the decision
you must make. This first step is very important.
Step 2: Gather relevant information

Collect some pertinent information before you make your decision: what information is
needed, the best sources of information, and how to get it. This step involves both internal and
external “work.” Some information is internal: you will seek it through a process of self-
assessment. Other information is external: you will find it online, in books, from other people,
and from other sources.
Step 3: Identify the alternatives

As you collect information, you will probably identify several possible paths of action, or
alternatives. You can also use your imagination and additional information to construct new
alternatives. In this step, you will list all possible and desirable alternatives.
Step 4: Weigh the evidence

Draw on your information and emotions to imagine what it would be like if you carried out each
of the alternatives to the end. Evaluate whether the need identified in Step 1 would be met or
resolved through the use of each alternative. As you go through this difficult internal process,
you will begin to favor certain alternatives: those that seem to have a higher potential for
reaching your goal. Finally, place the alternatives in a priority order, based upon your own value
system.
Step 5: Choose among alternatives

Once you have weighed all the evidence, you are ready to select the alternative that seems to
be best one for you. You may even choose a combination of alternatives. Your choice in Step 5
may very likely be the same or similar to the alternative you placed at the top of your list at the
end of Step 4.
Step 6: Take action

You are now ready to take some positive action by beginning to implement the alternative you
chose in Step 5.
Step 7: Review your decision & its consequences

In this final step, consider the results of your decision and evaluate whether or not it has
resolved the need you identified in Step 1. If the decision has not met the identified need, you
may want to repeat certain steps of the process to make a new decision. For example, you
might want to gather more detailed or somewhat different information or explore additional
alternatives.
The definition of decision-making has three different but inter-related

implications.
These are as follows:

1. When the managers make decisions, they exercise choice. They decide what to do based on
some conscious and deliberate logic or judgement.
2. When making a decision the managers are faced with alternatives. An organization does not
take a wise manager to reach a decision when there are no other possible choices. It does
require wisdom and experience to evaluate several alternatives and select the best one.
3. When taking a decision, the managers have a purpose. They propose and analyze the
alternative courses of action and finally make a choice that is likely to move the organization in
the direction of its goals.
Importance of Decision-Making:
Management is essentially a bundle of decision-making process. The managers of an enterprise
are responsible for making decisions and ascertaining that the decisions made are carried out in
accordance with defined objectives or goals.
Decision-making plays a vital role in management. Decision-making is perhaps the most

important component of a manager’s activities. It plays the most important role in the planning
process. When the managers plan, they decide on many matters as what goals their
organization will pursue, what resources they will use, and who will perform each required task.
When plans go wrong or out of track, the managers have to decide what to do to correct the
deviation.
In fact, the whole planning process involves the managers constantly in a series of decision-
making situations. The quality of managerial decisions largely affects the effectiveness of the
plans made by them.
In organizing process, the manager is to decide upon the structure, division of work, nature of
responsibility and relationships, the procedure of establishing such responsibility and
relationship and so on.
Principles of Decision Making:

Effective decision involves two important aspects—the purpose for which it is intended, and
the environmental situation in which it is taken. Even the best and correct decision may
become ineffective if these aspects are ignored; because in decision-making there are so many
inside and outside chains of unavoidable reactions.
These principles are stated as follows:
1. Subject-matter of Decision-making:
Decisional matters or problems may be divided into groups consisting of programmed and non-
programmed problems. Programmed problems, being of routine nature, repetitive and well
founded, are easily definable and, as such, require simple and easy solution. Decision arrived in
such programmed problems has, thus, a continuing effect. However, in non-programmed
problems, there is no continuing effect because they are non-repetitive, non-routine, and
novel.
2. Organizational Structure:
The organizational structure, having an important bearing on decision-making, should be
readily understood. If the organizational structure is rigid and highly centralized, decision-
making authority will remain confined to the top management level. This may result in delayed
and confused decision and create suspicion among the employees.
On the contrary, if the organizational structure provides scope for adequate delegation and
decentralization of authority, decision-making will be flexible and the decision-making authority
will be close to the operating centers. In such a situation, decision-making will be prompt and
expected to be more effective and acceptable.
3. Analysis of the Objectives and Policies:

Proper analysis of the objectives and policies is needed for decision-making. The clear definition
of objectives and policies is the basis that guides the direction of decision-making. Without this
basis, decision-making will be aimless and unproductive.
4. Analytical Study of the Alternatives:

For decision-making, analytical study of all possible alternatives of a problem with their merits
and demerits is essential. This is necessary to make out a correct selection of decision from
among the alternatives.
5. Proper Communication System:

Effective decision-making demands a machinery for proper communication of information to all
responsibility centers in the organization. Unless this structure is built up, ignorance of decision
or ill-informed decision will result in misunderstanding and loose co-ordination.
6. Sufficient Time:
Effective decision-making requires sufficient time. It is a matter of common experience that it is
usually helpful to think over various ideas and possibilities of a problem for the purpose of
identifying and evaluating it properly. However, in no case a decision can be delayed for an
indefinite period, rather it should be completed well in advance of the scheduled dates.
7. Study of the Impact of a Decision:

Decision is intended to be carried out for the realization of the objectives of the organization. A
decision in any particular area may react adversely in other areas of the organization. As all
business activities are inter-related and require co-ordination, it is necessary that a study and
analysis of the impact of any decision should precede its application.
8. Participation of the Decision-maker:

The decision-maker should not only be an observer while others will perform as per his
decision. He should also participate in completing the work for which he took decision. This
experience will help him in decision-making in future. The principle of participation in work of
the decision-maker will enable him to understand whether the decision taken is practical and
guide him in forthcoming decisional matters.
9. Flexibility of Mind:
This is essential in decision-making, because decisions cannot satisfy everybody. Rigid mental
set-up of the decision-maker may upset the decisions. The flexible mental disposition of the
decision-maker enables him to change the decision and win over the co-operation of all the
diverse groups.
10. Consideration of the Chain of Actions:

There is a chain relationship in all the activities of any organization. Different activities are tied
up in a chain sequence. Any decision to change a particular work brings change in other related
works also. Similarly, decision-making also proceeds following the chain of action in different
activities. Therefore, before taking a decision one should consider the chain relationship among
different activities.
What Can Prevent Effective Decision-Making?

There are a number of problems that can prevent effective decision-making. These include:
1. Not Enough Information

If you do not have enough information, it can feel like you are making a decision without any
basis.
Take some time to gather the necessary data to inform your decision, even if the timescale is
very tight. If necessary, prioritize your information gathering by identifying which information
will be most important to you.
2. Too Much Information

The opposite problem, but one that is seen surprisingly often: having so much conflicting
information that it is impossible to see ‘the wood for the trees’. This is sometimes
called analysis paralysis, and is used as a tactic to delay organizational decision-making, with
those involved demanding ever more information before they can decide.
This problem can often be resolved by getting everyone together to decide what information is
important and why, and by setting a clear timescale for decision-making, including an
information-gathering stage.
3. Too Many People

Making decisions by committee is difficult. Everyone has his or her own views, and their own
values. Moreover, while it is important to know what these views are, and why and how they
are important, it may be essential for one person to take responsibility for making a decision.
Sometimes, any decision is better than none.
4. Vested Interests
Decision-making processes often founder under the weight of vested interests. These vested
interests are often not overtly expressed, but may be a crucial blockage. Because they are not
overtly expressed, it is hard to identify them clearly, and therefore address them, but it can
sometimes be possible to do so by exploring them with someone outside the process, but in a
similar position.
It can also help to explore the rational/intuitive aspects with all stakeholders, usually with an
external facilitator to support the process.
5. Emotional Attachments
People are often very attached to the status quo. Decisions tend to involve the prospect of
change, which many people find difficult.
6. No Emotional Attachment
Sometimes it is difficult to make a decision because you just do not care one way or the other.
In this case, a structured decision-making process can often help by identifying some very real
pros and cons of particular actions, that perhaps you had not thought about before.
Many of these issues can be overcome by using a structured decision-making process. This will
help to:
 Reduce more complicated decisions down to simpler steps;
 See how any decisions are arrived at; and
 Plan decision making to meet deadlines.
Many different techniques of decision-making have been developed, ranging from simple rules
of thumb, to extremely complex procedures. The method used depends on the nature of the
decision to be made and how complex it is.

Decision Making

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Decision-Making: Definition, Importance and Principles

Decision-making is the process of making choices by identifying a decision, gathering

A decision is an act of selection or choice of one action from several alternatives.

Step 1: Identify the decision

Step 2: Gather relevant information

Step 3: Identify the alternatives

Step 4: Weigh the evidence

Step 5: Choose among alternatives

Step 6: Take action

Step 7: Review your decision & its consequences

The definition of decision-making has three different but inter-related

These are as follows:

Decision-making plays a vital role in management. Decision-making is perhaps the most

Principles of Decision Making:

These principles are stated as follows:

3. Analysis of the Objectives and Policies:

4. Analytical Study of the Alternatives:

5. Proper Communication System:

7. Study of the Impact of a Decision:

8. Participation of the Decision-maker:

10. Consideration of the Chain of Actions:

What Can Prevent Effective Decision-Making?

1. Not Enough Information

2. Too Much Information

3. Too Many People

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