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Management Concepts and Practices - Decision Making

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Rahi Patel
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Management Concepts and Practices - Decision Making

Uploaded by

Rahi Patel
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Planning : Decision Making

Introduction: Decision making is at the core of planning because it is


planning where major decisions are made. It has to be done in
connection with formulating plans, establishing objec tives, laying down
policies, and so on. They produce actions and events for the operation
of organization collectively the decisions of managers give form and
direction to the behaviour of the organization itself.

Meaning: Simply, decision is an act of ch oice by which an individual as


organization selects one position or action from several alternatives.
Sometimes, the chosen policies is not reflected in specific actions and
actions are often not directly observable. A decision is not to act is also
possible. But, most frequently, the decision results in some tangible
actions, such as rules policies, orders, changes, as other concrete
events.

Decision making is a c onscious and human process. From this point


of view, shall et al have defined decision making as follows:

“Decision making is a conscious and human process, involving both


individual and social phenomenon based upon factual and value premises
which concludes with a choice of a behavioural activity from among one
or more alternatives with the inte ntion of moving towards some desired
state of affairs”

Decision making process: When a manager makes a decision, it is in


effect the organization response to a problem. Every decision is the
outcome of a dynamic process which is influenced by multiple forc es.
This process is discussed below. But we must keep in mind that is a
process and just a service of steps. This process enables a decision
makes to examine each element in the progression that leads to the
decision. Problems that occurs infrequently are unstructured, and are
characterized by a great deal of uncertainty regarding their outcome,
require the manage to utilize the entire process. For frequently
occurring, struclived problems, it is not necessary to consider the entire
process.

The decision m aking process is as follows:

Specific Identification Search of Evaluation of


Objectives of problems alternatives alternatives

Feedback
Results action Choice of
alternative
1. Specific Objective: The need for decision making arises in order
to achieve certain specific objective. Every action of human beings
is goal directed. This is true for decision making al so which is an
action. Therefore, the starting point in any analysis of decision
making involves the determination of whether a decision needs to
be made.

2. Problem Identification: Since a particular decision is made in t he


context of certain given objectives, identification of problems is
the real beginning of decision – making process. A problem is a
felt need, a question therein forward for solution. It is the gap
between present and desired state of affairs on the subject -matter
of decision. The objective s, if set precisely and specifically on the
subject matter of decision, will provide due in identifying the
problem and its possible solution. Further in management, a
problem exist whenever one faces a question whose answer doubt
and uncertainty.

A problem can be identified much clearly, if managers go


through diagnosis and analysis of the problem.

i) Diagnosis: Diagnosis is the process of identifying a problem from


its sign and symptoms. Symptoms signal the existence of problem
and guide the search for the underlying problem. For example, if
an organization has high turnover of its employees, it indicates
that something is wrong with an organization. The symptom of high
turnover may provide the due to the real problem and managers
can overcome the pro blem by taking appropriate action. The
symptom is not the problem. Hence, this exercise of diagnosis
should be done very carefully. Diagnosing the real problem implies
knowing the gap between what is and what ought to be, identifying
the reasons for the ga p, and understanding the problem in relation
to higher objectives of the organization.

ii) Analysis: While diagnosis identifies the problem, analysis goes one
step ahead. The analysis of the problem requires to find out who
would make the decision. What infor mation would be needed, and
from where, the information is available. Thus, analysis may
provide managers with revealing circumstances that help them gain
an insight into the problem. Analysis of the problem should be done
based on critical factor like the availability of information for
making decision, critically of decision, and the time available for
making decision.
In this way, diagnosis and analysis of problem requiring decision
will clarify what is needed and where the alternatives for doing the
thing can be sought.

3) Search for altern atives: When managers through diagnosis, define


both the specific problem and the situation in which the problem
exists, they seek possible solutions. A problem can be solved in
several ways because if there is only o ne solution to a problem,
the need for a decision does not arise! Anyway, all the ways cannot
be equally satisfying. Hence, the decision maker must try to find
out the various alternatives available in order to get the most
satisfactory result of a decisio n. Having different alternatives in
hand also give the managers some room to operate even if a
particulars decision goes wrong. It is not possible to identify all
the alternatives. Therefore, while generating alternative, their
limiting factors should be identified. A limiting factor is one which
stands in the way of achieving the desired objective. If these
factors are identified, managers will confine their search for
alternatives to those which will overcome the limiting factors.

And how does the dec ision makes identify various


alternatives? By using his/her own past experience by looking at
practices followed by others, and by using creative techniques.

4) Evaluation of Alternatives: With various alternatives in hand,


managers have to valuate them an d select one that will meet the
criteria for financial choice. Due to the limited energy of managers,
not all the alternatives can be evaluated in detail. Then how do
they narrow down the alternatives? They apply a constraint on
alternatives or they group alternatives of similar nature.

Having narrowed down the alternatives which require serious


consideration, the decision maker will go for evaluating how each
alternative may contribute towards the objectives, supposed to be
achieved by implementing the decision. For this purpose, the
various alternatives are dissected into various tangible and
intangible factors.

5) Choice of Alternative: Now that the manager know how each one
of the alternative contributes to the objectives under question, a
comparison is made among the likely outcomes of various
alternatives and the best one is chosen. The alternative that is
chosen has to fit with the organizations overall objectives. In
choosing an alternative the decision maker can go through three
approaches experie nce, experimentation, and research and
analysis.

Though various approaches are available for choosing


an alternative the decision maker’s personal values and aspirations
affect what alternative will be chosen. Further, managers should
take into account the uncertainty of outcome of a decision .
Therefore, they should be ready with contingency plans.

6) Action: Because decision making is a continuous and on -going


process, it must ensure that the objectives have been achieved by
the chosen alternative. Unl ess this is done, managers will never
known in what way their choice has contributed. Therefore, the
implementation of decision may be seen as an integral aspect of
decision making.

After one alternative is chosen over other, it is now the


managerial pri ority to convert this decision into something
operationally effective. This is the action aspect of decision
making. Section relates to putting a decision into practice. This
practice will provide further feedback for evaluation the soundness
of the decisi on, and if, need be, a change in the decision.

Implementation of a decision requires the communication to


sub-ordinates, getting acceptance of subordinates over the matters
involved in the decision, and getting their support for putting the
decision into action. The decision should be effected at appropriate
time and in proper way to make the action more effective. The
effectiveness of action is important because it is only effective
action through which organizational objectives can be achieved,
and right decisions help in effective action.

7) Results: When the decision is put into action, it brings certain


result. These results must correspond with objectives. Thus,
results provide indication whether decision making and its
implementation is proper. This is called feedback from the results.
If there is any deviation between objectives and results, this should
be analyzed and factors responsible for this deviation should be
located. The feedback may also help in reviewing the decision when
conditions change which may require changes in decision.
Decision Tree as a Decision-Making Tool

What is a Decision Tree?

A decision tree is a decision support tool that uses a tree-like model of decisions and their possible
consequences, including chance event outcomes, resource costs, and utility.

When is it used?

The Decision Tree is used to aid in decision making, when a series of decisions have to be taken in an
uncertain environment and hence the outcomes cannot be guaranteed.

In a Decision Tree square or box represents a decision point while a circle represents a chance event.

Example:

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