Importance of decision-making

Decision making is an indispensable part of managerial function. All the managerial functions such as planning,
organizing, directing, and controlling are determined by the decision. The success and failure of an organization
depends on the quality of decisions made in the organization. The importance of decision-making can be discussed
as follows:

1. Indispensable Function: - Decision-making is an indispensable function of management. It is said that,

whatever the manager does, he/she does through decision-making. No management and business functions
can be carried out in the absence of decision. All the managerial functions such as planning, organizing,
directing and controlling involve decision making. Therefore, we can say that decision is central and
important part of management.
2. Pervasive function: - Decision-making is a universal function. Even a common man makes choices
from the available alternatives. Decision-making is essential for the functioning of all types of
organizations whether small or large, private or public. It is required at all levels of management within
an organization. Although the nature and scope of decisions may vary at different levels, all levels of
management have to be involved in decision-making. So, it is pervasive.
3. Evaluation of managerial performance: - Decision-making serves as a valuable tool for assessing
managerial performance. In organizations, managerial performance is evaluated based on the quality of
decisions he/she makes. If a manager consistently makes correct and effective decisions that lead to
positive or favorable outcomes for the organization, it indicates his/her ability to analyze situations, gather
relevant information, and choose the best course of action. In such cases, the manager is often perceived
as effective in his/her role. On the other hand, if a manager consistently makes incorrect decisions, putting
the organization at the risk of failure, it is understood that the manager is inefficient and incompetent in
his/her role. Thus, decision-making evaluates managerial performance.
4. Selection of best Alternative: - Decision-making is the process of selecting the best alternative. When
making decisions within an organization, managers evaluate various available alternatives based on cost-
benefit and risk-return analyses, and then they choose the best alternative. Therefore, Decision-making
enables managers to select the best alternative that is profitable, cost-effective, and ensures the efficiency
and effectiveness of the business firm.
5. Helpful in formulation of plans and policies: - Any policy or plan is established through decision
making. Without decision making, no plans and policies can be formulated. In the process of making
plans, appropriate course of action or strategies have to be selected from the available possible alternatives
that involves decision making. Therefore, decision making helps in the formulation of sound plans and
policies, which supports for the achievement of organizational goals and objectives.
6. Successful operation of business: - In this competitive world, organization can successfully operate and
grow, when the correct and appropriate decisions are made in right time. In the course of regular operation
of business, many problems might arise in different situations and time. Managers solve these problems
through decision making. Decision-making process enables the managers to take right decision at right
time to solve the problems, which facilitates smooth and successful functioning of the organization.

Decision-making Styles
Styles indicate the way managers approach decision-making. Decision making styles proposes that people differ
in two dimensions when they approach decision making. The first is individual’s way of thinking and second is
an individual’s tolerance for ambiguity.

• Individual’s Way of Thinking: Rational Vs Intuitive: - Managers differ in their way of thinking. Some
managers are rational and logical in decision making. They make decisions in an objective and logical
way. They make sure that the information is logical and consistent before making decisions. On the other
hand, some managers are creative and intuitive. They do not process information in certain order.
• Individual’s Tolerance for Ambiguity: Low Vs High: - Managers differ in their degree of tolerance for
ambiguity. Some managers may have low tolerance for ambiguity. These managers prefer consistency
and order. They like situations where things are clear, structured, and predictable. They are not
comfortable with uncertainty. On the other hand, some managers may have a high tolerance for ambiguity.
These managers are comfortable in uncertain situations. They are more flexible and open-minded. They
prefer to keep their options open, generally creative and are able to process/handle many information at a
time.

Draw figure:

(Given in the book)

On the basis of way of thinking and tolerance for ambiguity, decision making styles may be classified into
four types:

1. Directive Style of Decision Making: - This style is characterized by low tolerance for ambiguity and
rational way of thinking.
➢ The managers who adopt directive style have a low tolerance for unclear and ambiguous ideas or
information.
➢ They are rational and logical in their decision making i.e., they think rationally.
➢ They are motivated by the results their decision will bring them.
➢ They take quick and clear-cut decisions.
➢ They give emphasis on short time duration.
➢ They do not need bulks of information to make decision. They assess few alternatives and make a
choice.
➢ Usually, they prefer to make decisions alone. They use their own knowledge, logic and judgment
to come to a conclusion with selective input from other individuals.
➢ Directive decision-maker have strong verbal communication skill. Once a decision is made, they
give clear direction to their subordinates.

2. Analytical Style of Decision Making: - This style is characterized by high tolerance for ambiguity
and a rational way of thinking.
➢ The managers who adopt this style have high tolerance for ambiguity and they think rationally.
➢ They prefer detailed analysis and seek a lot of information for taking decision. They invest time to
collect all the relevant data, carefully analyze the data to form a conclusion.
➢ They are motivated or driven to find the best solution.
➢ They have ability to adapt to situations.

3. Conceptual Style: - This style is characterized by high tolerance for ambiguity and intuitive way of
thinking.
➢ The managers who have conceptual style have high tolerance for ambiguity and have intuitive
way of thinking.
➢ They are achievement-oriented and are motivated to impact on the world.
 ➢ Generally, they are open-minded with a broad outlook. Conceptual decision-makers are big-
picture thinkers. They see how most things connect and affect each other. They tend to think
outside the box.
➢ They prefer to keep their option open. They develop many alternatives and analyze them before
making a choice.
➢ They focus on long run.
➢ They enjoy coming up with new ideas and finding creative solutions to problems.

4. Behavioral Style: - This style is characterized by low tolerance for ambiguity and intuitive way of
thinking.
➢ The managers who adopt behavioral style have low tolerance for ambiguity and have intuitive way
of thinking.
➢ They are motivated to maintain relationship and harmony, and like to avoid conflict.
➢ They rely on the feelings and behavior of others in decision-making. They are concerned about
their subordinates.
➢ They are eager to hear inputs (suggestions, advice and information) from others, and they value
collaboration and group decision-making.
➢ They are persuasive in nature. Their decisions are often based on how the choice will impact
relationships.