CHAPTER THREE

3. Decision Making
3.1. What Is Decision Making?
Decision making is defined as a rational choice among alternatives. There
have to be options to choose from; if there are not, there is no choice
possible and no decision. Decision making is a process, not a lightning –
bolt occurrence. In making the decision, a manger is making a judgment –
reaching a conclusion – from a list of known alternatives.

3.2. Decision Making Is Universal

Decision making is a part of all mangers’ jobs. A manger makes decisions
constantly while performing the functions of planning, organizing, staffing,
directing, and controlling. Decision making is not a separate, isolated
function of management but a common core to the other functions.

Mangers at all levels of the organization are engaged in decision making.

The decisions made by top management, dealing with the mission of the
organization and strategies for achieving it, have an impact on the total
organization. Middle – level managers, in turn, focus their decision making
on implementing the strategies, as well as on budget and resource
allocations. Finally, first – level management deals with repetitive day –
today operations. Decision making is indeed universal.

Managers make big decisions and small ones daily. Whether they realize
it or not, they go through a process to make those decisions. Whether
planning a budget, organizing a work schedule, interviewing a prospective
employee, watching a worker on the assembly line, or making
adjustments to a project, the manager is performing a decision – making
process.

3.3. Types Of Decisions

Although mangers in large business organizations, government offices,
hospitals, and schools may be separated by background, lifestyle, ad
distance, they all sooner or later must share the common experience of
making decisions. They all will face situations involving several alternatives
and an evaluation of the outcome. In this section, we will discuss various
types of decisions.
Programmed Decisions
Programmed decisions are the decisions mangers make in response to
repetitive and routine problems. If a particular situation occurs often,
managers will develop a routine procedure for handling it.
Non Programmed Decisions
When a problem has not arisen in exactly the same manner before, or is
complex or extremely important, it may require a nonprogrammer decision.
Decisions are termed nonprogrammer when they are made for novel and
unstructured problems. Making such decisions is clearly a creative process.

The two classifications – programmed and non programmed are broad, yet it
is important to clearly differentiate between them. The managements of
most organizations face great numbers of programmed decisions in their
daily operations. Such decisions should be made without expending
unnecessary time and effort. Reaching nonprogrammer decisions, however,
is more complicated and requires the expenditure of lots of money worth of
resources every year. Government organizations make nonprogrammer
decisions that influence the lives of every citizen. Business organizations
make nonprogrammer decisions to manufacture new products. Hospitals and
schools make nonprogrammer decisions that influence patients and students
years later. Unfortunately, very little s know about this type of decision
making.

In most organizations, programmed decisions are handled through policies.

In some organizations and industries, management scientists have
developed mathematical models that help ease these types of decisions. Non
programmed decisions, however, are usually handled by general problem –
solving processes, judgment, intuition, and creativity.
3.4. Types of Decisions and Level of Management

Problems that arise infrequently and have a great deal of uncertainty

surrounding them are often of a strategic nature and should be the concern
of top management. Problems that arise frequently and have fairly certain
outcomes should be the concern of lower levels of management.

Middle managers in most organizations concentrate mostly on programmed

decisions. The nature of the problem, how frequently it arises, and the
degree of certainty surrounding it should dictate at what level of
management the decision should be made.
3.5. The Decision – Making Process
Because decision making is such an important part of a manager’s job, we
need to discover anything ht can improve the quality of decision making.
One of the most effective measures is to follow a conscious, rational,
decision – making process. A manger who makes decisions on an impulse will
not have the day – to – day decision – making success of the manger who
consciously works through the decision – making process.

The decision – making process has seven steps. They are logical and simple
in themselves, but they are all essential to the process;
1. Define the problem
2. Identify the limiting or critical factors
3. Develop potential alternatives
4. Analyze the alternatives
5. Select the best alternative or combination of best alternatives
6. Implement the solution
7. Establish a control and evaluation system

Let’s Look At Each Step Individually.

Define the Problem

What is the particular problem you have to resolve? Defining the problem is
the critical step. The accurate definition f a problem affects all the steps that
follow; if a problem is inaccurately defined, every other step in the decision –
making process will be based on that incorrect point. A motorist tells a
mechanic that her car is running rough. This is a symptom of problem of
problems. The mechanic start by diagnosing the possible causes of a “rough
running” engine, checking each possible cause based on the mechanic’s
experience. The mechanic may find one problem – a faulty spark plug. If this
is the problem, changing the plug will result in a smooth running engine. If
not, then a problem still exists. Only a road test will tell for sure. Other
causes may still exist.

Is there a good method for a manger to use to define the problem? Yes. A
manger needs to focus on the problem, not the symptoms. This is
accomplished by asking the right questions and developing a sound
questioning process. According to Peter Drucker, “the most common source
of mistakes in management decisions is the emphasis on finding the right
answer rather than the right question.
Finding a solution to the problem will be greatly aided by its proper
identification. The consequences of not properly defining the problem are
wasted time and energy. There is also the possibility of hearing, “what, that
again! We just solved that problem last month. Or at least we thought we
did.”

Identify the Limiting or Critical Factors

Once the problem is defined, the manger needs to develop the limiting or
critical factors of the problem. Limiting factors are those constrains that rule
out certain alternative solutions. One common limitation is time. If a new
product has to be on the dealer’s shelves in one month, any alternative that
takes more than one month will be eliminated. Resources personnel, money,
facilities, and equipment – are the most common limiting or critical factors
that narrow down the range of possible alternatives.

Develop Potential Alternatives

At this point, it is necessary to look for, develop, and list as many possible
alternatives solutions to the problem-as you can. These alternatives should
eliminate, correct, or neutralize the problem. Alternative solutions for a
manger faced with the problem of trying to maintain scheduled production
may be to start an extra work shift, to regularly schedule overtime, to
increase the size of the present work force by hiring employees, or to do
nothing. Doing nothing about a problem sometimes is the proper alternative,
at least until the situation has been thoroughly analyzed. Occasionally, just
the passing of time provides a cure.

While building this list of alternatives, it is wise to avoid being critical or

judgmental about any alternative that occurs to you or those assisting you.
Censorship at this stage can needlessly limit the number of alternatives
developed. Initially, the alternatives should be separate solutions to the
problem because a set of alternatives that are variations of one another
provides less choice in the final analysis. After the initial brainstorming
process, variations of the listed ideas will begin to crystallize, and
combinations will emerge. In developing alternatives, the goal is to be as
creative and wide-ranging as possible. Sources for alternatives include
experience, other persons whose opinions and judgments are expected, the
practice of successful managers, group opinions through the use of task
forces and committees, and the use of outside sources, including mangers in
other organizations.
Analyses the Alternatives
The purpose of this step is to decide the relative merits of each of the
alternatives. What are the positives and negatives (the advantages and
disadvantages) of each alternative? Do any alternatives conflict with the
critical (limiting) factors that you identified earlier? If so, they must be
automatically discarded. Depending on the type of problem and the potential
solutions developed, the manger might need to make a more thorough
analysis by applying specific decision – making aids.

Select the Best Alternative

By this point, the alternatives have been listed along with their
corresponding advantages and disadvantage. Which should be selected?
Sometimes the optimal solution is a combination of several of the
alternatives. In trying to select an alternative or combination of alternatives,
you must, reasonably enough, find a solution that appears to offer the fewest
serious disadvantage and the most advantages. Take care to solve one
problem and create another with you.

Implement the Solution

Mangers are paid to make decisions, but they are also paid to get results
from these decisions. A decision that just sits there hoping someone will put
it into effect may as well never have been made. Everyone involved with it
must know what he or she must do, how to do it, why, and when.
Additionally, a good alternative half-heartedly applied by uncommitted
persons will often create problems, not solve them. Like plans, solutions
need effective implementation to yield the desired results. People must be
sold on their roles and must know exactly what they must do and why.
Finally, programs, procedure, rules, or policies must be though fully put into
effect.

Establish a Control and Evaluation System

The final step in the decision – making process is to create a control and
evolution system. Ongoing actions need to be monitored. This system should
provide feedback on how well the decision was implemented, what the
results are – positive or negative and what adjustments are necessary to get
the results that were wanted when the solution was chosen.
For a manger that uses this decision – making process, the probability for
success in decisions should be improved. Why? Because it provides a step -
by - step roadmap for the manger to move logically through decision making.

Is the decision – making process all a manager needs to must to be

successful indecision making? No; the manger must be aware of the
environment in which he or she makes decisions