Decision Making

Meaning
• Decision making is the process to select a course of action from a
number of alternatives.
• Like planning, decision making is all-pervasive. Also, much like
forecasting, decision making is an important part of planning.
• It has been explained earlier how policy documents help in taking
managerial decisions. However, these are decisions of routine nature
and are also called operational decisions.
• Strategic or important decisions are taken considering different
alternatives. In order to be a successful manager, one has to
necessarily develop decision-making skills.
 Characteristics of Decision Making
• Following characteristics of decision making may be visualized by the study and analysis of
aforesaid definitions:
• 1. Mental and Intellectual Process: Decision making is a mental and intellectual process
because whatever decisions are taken, they are based on logical deliberations to make them
more rational. For which intelligence, knowledge, experience, educational level, and mental
facilities are essential. Similarly, in decision making, the voice of inner consciousness is also
important, along with intellectual logic.
• 2. It is a Process: Decision making is a process to find out the solution to any problem or for
the achievement of a specific result, problems are well analyzed, during the course of
decision making. Facts are obtained and analyzed and alternative solutions are developed
and the best possible alternative is selected and in the end, the decision is taken and
implemented.
• 3. It is an Indicator of Commitment: This is an indicator of commitment because decision
making ties up with the result of its decision. The decision-maker has to bear the result of
the decisions of one or the other form. Not only that, but decision making is also the
indicator of commitment because, for its implementations, individual and collective efforts
are required.
• 4. It is a Best Selected Alternative: Decision making is the best-selected Alternative. The best
alternative is selected, out of two or more possible alternatives, for solving any problem.
• 5. Decision-Making Might be Positive or Negative: Decision making is positive or negative. The
decision of implementing any plan to do some work is positive, whereas the decision not to do
any work or not to implement and plan is negative. Hence, negative decisions are also as good
decisions, as are positive.
• 6. It is the Last Process: Decision making is the last stage of the planning process because the
result of the work is derived from it. This result is derived after detailed logical deliberations
about various possible alternatives. That is why, decision making which is the last process, is the
conclusion of the intellectual analysis, discussions, deliberations, comparative and analytic study
of the alternatives.
• 7. Decision Making is a Pervasive Function: Decision making is a pervasive function because it is
used in all business and non-business organizations, for all managerial activities, all the levels of
Management, and in all countries, etc. Decision making, being a pervasive function, many
scholars regard decision making and management as synonymous.
• 8. Continuous and Dynamic Process: This is a continuous process because decisions are to be
taken continuously in the business organizations, for routine and Special Tasks. Besides, it is a
dynamic also, because the situations and circumstances of each decision are different than the
situations and circumferences of the preceding decisions.
• 9. It is a Measurement of Performance: Decision making is a measurement on the basis of
which the success or failure and execution or non-execution of the decisions taken by the
managers depends. Hence, the evolution of the efficiency of managers, etc. is possible by
the measurement of decision making.
• 10. It is a Human and Social Process: Decision making is a human and social process also
because all human factors are to be kept into consideration, before the final selection of
any particular alternative, in the decision-making process. Similarly, it also includes the use
of intuition and Justice.
• 11. It is an Art and Science, Both: Decision making is an art because decisions are taken
for achieving certain pre-decided objectives, which is possible only by using knowledge,
talents, imagination, and foresightedness. Besides, decision making is science also, since in
decision making certain sequences are used in a particular sequence. Principles, causes,
and outcomes of decision making have a relationship.
• 12. Other Characteristics: A new decision emerges from the decision making process.
Decision making is synonymous with Management. Decision making is part of planning.
The forecast is part of decision making. Decision making is different from the decision.
Thus, now you know the characteristics of decision making in an organization.
 Decision-Making Environments: 

• Whenever you’re assigned a managerial role in an organization, or you’re

someone who has a team working under his command, it’ll be quite usual for
you to be making multiple decisions every day. 
• While making such decisions, various factors need analysis before you arrive
at a reasonable decision. Amongst all the factors, one such variable is the
environment in which you make the decision. 
• A decision environment is defined by the information available, knowledge
of the situation, nature of the problem, and whether there’s a certainty,
uncertainty, or risk to which the decision is made under. 
• It’s an essential part of the whole process since it helps you decide what steps
to follow and what precautions to take. Moreover, it lets us analyze the
difficulty of the situation.
Why Are Decision-Making Environments
Important?
• Decision-making environments are important because they help us
generalize the scenarios we face. Even though we face new situations
every time we need to decide something, if we take a look at it
broadly, there are only a few types of environments and every
situation will eventually be falling into either of those types.
• So, if we analyze every environment keenly and devise strategies for
tackling their situations beforehand, it’ll help us a lot in making more 
effective decisions within a short period.
Types of Decision-Making Environments
• 1. Decision-Making Under Certainty
• Coming on top, we have certainty. This is often regarded as the safest decision-making
environment and, consequently, the least risky. There aren’t many possibilities or paths to
pursue when you’re faced with decisions in such an environment. All the data you need is readily
available, or even if you need to gather it, it won’t be much expensive to get. The variables are
all clear, and there are no hidden factors that could endanger your decision.
• For example, consider you’re a manager and need to make a decision based on certain factors; In
the case of certainty, you will have all the alternatives completely sorted out, and there won’t be
much to worry about. The analysis of all the possible decisions would be done, and there would
be no hidden variables. As a result, the right decision would be quite easy to distinguish from the
rest.
• Certainty lets you put more focus on what’s right and avoid wasting time on other alternatives.
You don’t waste time thinking about different scenarios. Such scenarios are heaven for
managers, and they don’t take long to get done with decisions in such environments.
• 2. Decision-Making Under Uncertainty
• As you might have guessed, this is quite the opposite of the previous type of environment we looked at.
Uncertainty is when a manager fails to get enough information needed to make a sound decision, or even if he
does, it’s corrupted, biased, or has unreliable sources.
• This decision-making environment is a nightmare for managers. Not only does it get very confusing about what
path to follow, but when you start thinking in a certain direction, other possibilities start clouding over its
authenticity and seeming more appropriate.
• The variables and the data available are not credible; they keep changing and hence making the decision-maker
panic. Such situations need the managers to be able to handle pressure and make the best out of any situation.
A combination of a proactive approach with effective stress-management is required.
• Let’s consider an example; 
• Consider you’re a football team coach. There are two players of your team playing on the field. By the end of the
match, you need to kick one of them out. However, the problem is, both are playing at the best of their abilities,
and it’s hard to separate them.
• One of playing better in an instant, and the next minute, the other one exceeds him. Since their performance
isn’t following a certain trend or pattern, it gets tough for you to choose which one to kick and which one to
keep. 
• This type of decision-making environment is referred to as uncertain since a lot is going on, which leads to
nothing but confusion.
• 3. Decision-Making Under Risk
• The last type of decision-making environment is risky environments. Risk environments are
when the probability of multiple events is tied to a decision. You’re never sure about the
outcomes of your decision other than calculated guesses. Such decisions are associated
with events that could either be very successful or quite disastrous for the organization.
• When you’re faced with such problems, you will have some data available related to the
situation, but it’s all a game of probabilities. The past experiences of managers play a huge
role, and they often have to take a good look at their past when confronted with such
decisions.
• The best course of action to take in risky environments is first analyzing the risk of all the
alternative actions based on the information available to you. 
• Once you have done the risk calculation for all the possible alternatives, choose the one
with the smallest amount of risk involved.
• Nowadays, almost every decision made in huge organizations is based on risk factors. This
is the reason why there are whole departments dedicated to risk management. Moreover,
hundreds of tools are available that help you with risk calculation if you have enough
information, which makes it relatively more manageable than it would’ve been otherwise.
 Which Decision-Making Environment is the Riskiest?
• So, coming to the real deal, which decision-making environment is the riskiest? What type of environment poses the greatest
threat to your decision-making capabilities? Well, let’s see.
• First off, it’s pretty evident that certainty is out of the equation when it comes to the riskiest decision-making environments.
• As we’ve seen, certainty doesn’t need a lot of pondering over the possible decisions, and mostly the decision-maker ends up
being right. There are pretty rare chances someone could make a wrong decision in this environment.
• So, we’re left with two environments: risk and uncertainty. Both include quite a bit of confusion, and most of the real-life
scenarios are based upon them. The data and information available are mostly irregular or incomplete, and managers need
to have adequate experience while dealing with such situations.
• When we talk about decision making under risk, there are probabilities associated with each alternative, and one could use
the calculations to be confident about the decision being made. However, there’s no such concept in uncertain
environments. No matter what you do and which approach you follow, things always look blurry, and it doesn’t take much to
fall into the wrong pit.
• So, it’s much easier to make decisions under risk or in risky environments than in uncertain environments.
Hence, uncertainty comes out on top as the riskiest environment to make decisions, and there should be appropriate steps
and precautions taken when faced with such situations.
• Let me give you some real life example of these two types of decision-making environments:
• Imagine that you are about to open a shop or a new branch of your business in a new location and there’s no information
about that location online, or in nearby registries. You are the decision-maker, and so far you’ve only heard rumors that it’s a
high potential location.
• a) Do you decide for opening that branch without prospecting it or not? Will it bring good revenue? (If you do it right away,
there’s a lot of uncertainty here and your decision is likely to backfire)
• b) You send someone to prospect the area and gather as much information as possible. After that, it comes to light that there
are logistic challenges, due to road access, in the rainy season, goods deliveries cost higher. (If you decide to go ahead, at
least now you know what Risk you need to mitigate and you’re better equipped to deal with it and succeed)
 Types of Decisions:
• Different decisions differ in nature and significance. Some decisions are taken in routine while some may have to
be carefully evaluated.
• 1. Programmed and Non-Programmed Decisions:
• Programmed decisions are of a routine nature and are taken within the specified procedures. These decisions are
made with regard to routine and recurring problems which require structured solutions. A manager is not
required to go through the problem solving procedures again and again for taking programmed decisions.
• The decision rules for programmed decisions should be prepared carefully and intelligently so that lower level
executives are able to take the decisions without making references to higher managerial levels. No judgment or
discretion is needed to find out solutions to such problems. These decisions remain consistent for a relatively
longer period of time and over many solutions.
• Non-programmed decisions are related to problems which are unique and non-repetitive. The information and
knowledge about such decisions is not available. Such decisions are made under new and unfamiliar
circumstances. The standard and pre-determined procedures and rules are rendered ineffective in programmed
decisions because every decision will have to be taken separately. Non-programmed decisions are usually grade
for solving unstructured problems which keep on changing from time to time.
• Every problem has to be restructured and analyzed by the manager by using his skill, judgment and creativity. For
example, a decision regarding adding a new product, purchase of new machinery, opening a new branch,
appointment of a new chief executive are all non- programmed decisions and require separate attention for each
decision.
• 2. Strategic and Tactical Decisions:
• Strategic decisions relate to policy matters and need the development and analysis of alternatives.
These decisions influence organizational structure, objectives, working conditions, finances etc.
Strategic decisions exercise great influence on the functioning and direction of the organization and
have long-term implications. They also define and establish the relationship of the organization
with external environment. Such decisions require more resources, judgment and skill. Because of
their importance, strategic decisions are taken at top managerial levels.
• The decisions such as adding a new product or service, introduction of new technology, taking over
of another organization, selection of a location are all strategic decisions. These decisions once
taken cannot be easily reversed. The impact of these decisions is fairly long because expansion,
growth, development and profitability of the organization is linked to them. Strategic decisions
somewhat resemble to non- programmed decisions because they possess the characteristics of the
latter.
• In order to implement strategic decisions, management has to make some tactical, operational or
routine decision. One strategic decision may require many operational decisions. These decisions
are concerned with routine and repetitive matters arising out of the working of the organization.
Such decisions do not require managerial judgment and are taken at lower levels of the
management. Tactical decisions are more specific, functional and have short-term implications.
Such decisions are taken by referring to established rules, procedures and standards.
•  3. Individual and Group Decisions:
• A decision taken by one person is known as individual decision. In a small concern
normally the owner takes most of the decisions, in a bigger concern the routine or simple
decisions may be left to a particular manager. Such decisions are generally taken as per
predetermined rules and procedures and require less application of judgment and skill.
When a manager is required to take a decision, he is supplied with information and other
inputs needed for this purpose. All managers, whether at top level or at lower level, take
decisions for carrying out their activities.
• When decisions are taken by two or more persons, these are known as group decisions.
Generally, strategic or other important decisions are taken by groups instead of individuals
because of risk involved. The decisions of Board of Directors or Committees come under
this category.
• Group decisions are normally important and have long-term implications for the concern.
A decision regarding introducing a new product, shifting to latest technology, trying labour
saving devices etc. may be better taken by a group of specialists than by an individual.
Group decisions are generally time consuming but otherwise these are well discussed
decisions.
• 4. Policy Decisions and Operating Decisions
• Tactical decisions pertaining to the policy and planning of the firm are
known as policy decisions. Such decisions are usually reserved for the
firm’s top management officials. They have a long term impact on the
firm and require a great deal of analysis.
• Operating decisions are the decisions necessary to put the policy
decisions into action. These decisions help implement the plans and
policies taken by the high-level managers.
• Such decisions are usually taken by middle and lower management. Say
the company announces a bonus issue. This is a policy decision.
However, the calculation and implementation of such bonus issue is an
operating decision.
• 5. Organizational Decisions and Personal Decisions
• When an executive takes a decision in an official capacity, on behalf of
the organization, this is an organizational decision. Such decisions can be
delegated to subordinates.
• However, if the executive takes a decision in a personal capacity, that
does not relate to the organization in any way this is a personal decision.
Obviously, these decisions cannot be delegated.
What are decision-making strategies?
• A decision-making strategy is an approach an individual uses to make an important
decision. Since every situation is different, each decision-making strategy provides a
unique framework to address specific needs and requirements. Learning about
different decision-making strategies and practicing them can help you make more
efficient decisions in your personal and professional life.
• Who uses decision-making strategies?
• Business professionals in every industry make decisions. While having a strong
understanding of different decision-making strategies can benefit anyone who is
looking to enhance their decision-making capabilities, managers and team leaders
may find this knowledge especially useful. Managers and team leaders often make
key decisions that impact the overall well-being of an organization. Being able to
make effective decisions can help leaders make mindful choices that affect their
team and organization positively.
• 12 Decision-making strategies
• Here are 12 decision-making strategies you can explore:
• 1. Analytical decision-making
• The analytical decision-making strategy uses logic, data and facts to make a rational decision. This strategy is an excellent
choice if you have access to all the information you need to assess a situation accurately. Analytical decision-making usually
follows a well-ordered sequence of steps that can help individuals break large or complex decisions into smaller, more
manageable tasks. If you are dealing with a situation that uses concrete numbers or variables, then using an analytical
decision-making strategy may be the right option for you.
• Example: Thomas is a social media marketing expert who specializes in running advertising campaigns for large
corporations. One of Thomas' clients wants to increase their marketing budget, and they ask him which social media
platform they should spend the additional money on. Thomas uses the analytics from previous advertising campaigns and
the data he has collected about his client's target audience to determine which social media platform has the highest return
on investment (ROI).

• 2. Command decision-making
• Leaders who choose to use the command decision-making strategy make a choice without listening to input from other
people. This approach can be useful in urgent or time-sensitive situations since it is the fastest and most direct form of
decision-making. It can also provide team members with a clear sense of direction in fast-paced work environments. If you
choose to use the command decision-making strategy, ensure you have enough knowledge about the subject to make an
accurate and appropriate decision.
• Example: Heather manages a coffee shop and creates a monthly work schedule for team members to assign their shifts. She
has a strong understanding of who is able to work on different days and what each team members' skill sets are. Heather
updates the work schedule at the end of every month and pins it to a bulletin board at the coffee shop to let her team know
what the new schedule is.
• 3. Collaborative decision-making
• A collaborative decision-making approach involves getting input from multiple people. Often, groups or
teams work together to discuss a situation and develop a potential solution. Using this type of decision-
making strategy can help you ensure your team members feel like you value their opinions. Many leaders
also choose to incorporate feedback from clients, vendors and industry experts in their collaborative
decision-making process. This approach can provide y with a more diverse perspective which can help you
make a more objective, well-balanced decision.
• Example: Lawrence's marketing agency needs to develop a new billboard campaign for one of their clients.
Lawrence asks each team member to develop an idea to pitch at their next meeting. Then he has his team
anonymously vote on which pitch they like the best. After they narrow their selection down to the top three
pitches, Lawrence asks his team to develop a presentation for each of these ideas. Then they present the top
three pitches to their client to determine which one the client likes best.
• 4. Expertise decision-making
• Experts in a certain industry, career or subject matter may choose to use the expertise decision-making
strategy. If you have enough knowledge or experience to make an intuitive decision about a particular topic,
then this approach might be for you. The expertise decision-making method can help you make quick and
informed decisions without having to debate or discuss a specific topic with other team members.
• Example: Nathan has been a dentist for 35 years. When one of his patients tells him they are experiencing
discomfort, Nathan quickly determines that they have a cavity. Nathan knows this is causing his patient's
discomfort because he has treated many patients with cavities over the years. He schedules a follow-up
appointment with his patient to fix the cavity.
• 5. Consensus-based decision-making
• If you want to ensure everyone on your team is aligned about a decision, using the consensus-based
decision-making strategy might be a good choice. In this approach, a leader presents all the relevant
information to team members and requires them to agree on a single option. While consensus-based
decision-making may take longer than many other strategies, it can promote a sense of unity and teamwork.
To speed up your discussion, you may choose to present specific solutions to your team and ask them to
choose one.
• Example: Margaret is the president of a local nonprofit organization that was founded 50 years ago. She's
decided it's time to update the nonprofit's branding to make it look more polished and professional. At the
next board meeting, Margaret presents two new logos that a local marketing agency developed for the
nonprofit. In order to update the nonprofit's logo, all the board members must agree on which logo they like
best.
• 6. Random choice decision-making
• Random choice decision-making is one of the simplest strategies available. When used appropriately, this
approach can save you time and help you make effective decisions. You may flip a coin or select a random
number to make your decision. Leaders often use this strategy for decisions that have minimal
consequences and need to be made quickly. They may also use this method if the options they are choosing
between have very similar or ambiguous outcomes.
• Example: Natalie wants to treat her team to lunch, but some people want pizza and some people want
tacos. To make a quick decision, Natalie decides to flip a coin. If it lands on heads, her team can have pizza. If
it lands on tails, her team can have tacos. The coin lands on tails and Natalie orders tacos for her team.
• 7. Vote decision-making
• Using the vote decision-making strategy allows you to make your decision based on what the majority
of people want. This can be a great method for gathering direct input from a large group of people
without spending an extensive amount of time in discussion. Leaders often provide their teams with a
set of options to choose from to make it easier to count votes. Make sure you also give your team
enough details and background information to understand the situation they are voting on.
• Example: Mark is the owner of a film studio and he wants to submit one video from his team to a local
film festival. There are three videos his team has produced over the last year that are all strong
candidates to win an award. He decides to gather his team together to watch each of the videos and
vote on which one they like the best. Mark submits the video that receives the most votes to the film
festival.
• 8. Single feature decision-making
• The single feature decision-making strategy can be an effective method to make quick decisions about
simple topics. To use this approach, identify the most important feature your decision needs to include.
Then choose an option that has that feature.
• Example: Thomas is a plumber who needs to replace a 40-gallon water heater for one of his clients.
When he asks his client what type of water heater they're interested in, they tell him they trust his
judgement as long as the water heater costs less than $900. Thomas reviews what 40-gallon water
heaters the company he works for has in stock and selects one that is less than $900 to install.
• 9. Delegation decision-making
• Using the delegation decision-making strategy is a great option if you need input from someone who is
well-informed on the topic. You can use this method to give the decision-making responsibilities to
someone else, such as a consultant, expert or someone on your team that is more knowledgeable
about the subject. The delegation decision-making strategy can save you time and make your team
members feel like you value their opinions.
• Example: Matthew is the manager at a growing technology startup. As he hires more people, he realizes
the accounting and payroll system they have in place doesn't meet all their needs. The company's HR
representative has over 30 years of experience working with different accounting and payroll systems, so
Matthew asks her to create a list of her top three software recommendations for him to review.
• 10. Additive feature decision-making
• The additive feature decision-making strategy accounts for all the most important features before
systematically evaluating each option. This approach can help you make challenging decisions. To start,
make a list of all the important features you want to consider. Then evaluate each of your options by
determining which of the important features they include. This can help you rank your options and
identify which one has the most important features.
• Example: Lydia is a freelance photographer who wants to purchase a new camera. To help her decide
which camera is the best, she makes a list of the most important features she wants her new camera to
have. Then she ranks each of her top three camera options based on which of the features they include.
She chooses to purchase the camera that has the most features.
• 11. Elimination by aspects decision-making
• The elimination by aspects decision-making strategy works well when you have multiple options
to choose from. To use this approach, identify what the most important features are. Starting
with the most important feature, evaluate each option one by one. Then systematically eliminate
each option that doesn't meet the criteria you've set in place until you have just one choice left.
• Example: Lance works for a digital marketing company and is looking for new software to help
his team measure their campaign analytics. He makes a list of what the most important features
are. Starting with the most important feature, Lance compares each of the software options. If an
option doesn't include one feature, he eliminates it. This helps Lance determine which software
has all the most important features.
• 12. Availability heuristic decision-making
• Availability heuristic decision-making strategies can help leaders make effective decisions in
ambiguous situations. This method can help you determine how likely something is by
comparing your current situation to a similar event from the past. By reflecting on what you've
learned from previous experiences, you may be able to determine what the best decision is.
• Example: Kathleen is planning her company's annual holiday party for the fifth year in a row. In
the past, more people attended when the holiday party was on a Friday. Kathleen decides to
schedule this year's holiday party on a Friday to increase her team's attendance.
Decision Making Styles
• According to the Decision Dynamics research, decision styles differ in
two fundamental ways: how information is used and how options are
created. In terms of information, some managers want to pore over
reams of information before making a decision. The opposite
approach is to come to a decision as soon as enough information is
available. (This approach is referred to as satisficing, as described
earlier.) In terms of creating options, single focus decision makers are
committed to taking one course of action.
• In contrast, their multifocused counterparts generate lists of possible
options and may pursue multiple courses. Combining the dimensions
of using information and creating options result in four decision-
making styles, as follows
• 1.Decisive (one option, less information). Decisive decision makers value
action, speed, efficiency, and consistency. Once a plan is in place they stick
with it and move on to the next decision. Time is precious to this type of
decision maker, and he or she fits well into a role such as brand for Procter
& Gamble. For example, “Let’s run a special promotion on Tide next
month. Get the word out this afternoon.” task oriented
• 2.Flexible (many options, less information). The flexible style also focuses
on speed, yet adaptability is emphasized. Flexible decision makers gather
just enough data to choose a line of attack and quickly change course if
needed. A marketing manager for Jeep with a flexible style might say,
“Let’s try a dealer incentive for the Dodge Nitro (sold by Jeep dealers). I’ve
seen that work with the Cherokee. If that doesn’t work, let’s quickly switch
to zero percent financing. Social and responsive
• 3.Hierarchic (one option, more information). People using the hierarchic style analyze a
great deal of information and seek input from others. They expect a decision to be final and
relatively permanent. An information technology manager might say, “We have studied the
problem for several months and have received inputs from hundreds of intelligent users. Our
single source of new desktops and laptops will be Dell Computer.” intellectual
• 4.Integrative (many options, more information). Instead of looking for a single best solution,
managers using the integrative style frame problems broadly. The integrative style uses input
from many sources and makes decisions involving multiple courses of action. The decision
may be modified in the future as circumstances change. An executive at Target might say,“For
now, we will increase the proportion of full-time workers based on the opinions of several
hundred store managers. However, we will keep our eyes on the bottom line and employee
morale to see how well this shift in the proportion of full-time staff works.” highly
participative
• Be aware that these decision-making styles exist. Reflect on your personal style and solicit
feedback from others. You might recognize, for example, that you tend to collect too much
data before making a decision. You might be like the potential homebuyer who collects so
much information before making a purchase offer that the property is sold to someone else.
 Steps in Decision Making
• Learning how to solve problems and make decisions properly is vitally
important.
• The basic purpose of making a decision is to solve a problem, but you
must analyze the problem prior to making the decision.
• 1. Identify and Diagnose the Problem
• Problem solving and decision making begin with the awareness that a problem exists.
In other words, the first step in problem solving and decision making is to identify a
gap between desired and actual conditions. Being attentive to the environment helps
the manager identify problems, such as noticing that the department is receiving
frequent criticism from outsiders and insiders. Sometimes a problem is imposed on a
manager, such as when customer complaints increase. At other times, he or she must
search actively for a worthwhile problem or opportunity. For example, a sales
manager might actively pursue a problem by conducting an audit to find out why
former customers stopped buying from the company.
• A thorough diagnosis of the problem is important because the real problem may be
different from the one that is suggested by a first look. The ability to think critically
helps a person get at the real problem. To diagnose a problem properly, you must
clarify its true nature. A frequently cited example is that a manager might attempt to
reduce turnover by increasing wages. The manager assumes that workers would stay
with the company longer if their wages were higher. Yet the real problem is inflexible
working hours that are triggering turnover.
• 2. Develop Alternative Solutions
• The second step in decision making is to generate alternative solutions. In this
intellectually freewheeling aspect of decision making, all kinds of possibilities are
explored, even some that seem unrealistic. Often the difference between good and
mediocre decision makers is that the former do not accept the first alternative they
think of. Instead, they keep digging until they find the best solution. When Jeff
Bezos, the founder of Amazon.com, was searching for a way to commercialize the
Internet, he made a list of the top 20 mail order products. He then looked for where
he could create the most value for customers and finally decided to sell books.
• Often the problem solver will find a creative alternative solution. At other times, a
standard solution will work adequately. For example, one small-business owner
needing money to expand the business might choose the standard alternative of
borrowing from a bank or finance company. Another small-business owner might
attempt the creative alternative of raising money by selling shares of the company
to friends and family members. (This option creates a risk. If the company fails, the
business owner will have created conflict with these people.)
• 3. Evaluate Alternative Solutions
• The next step involves comparing the relative value of the alternatives.
The problem solver examines the pros and cons and considers the
feasibility of each. Some alternatives may appear attractive, but
implementing them would be impossible or counterproductive.
• Comparing relative value often means performing a cost and savings
analysis of each alternative. Alternatives that cost much more than they
save are infeasible. The possible outcome of an alternative should be part
of the analysis. If an unsatisfactory outcome is almost a certainty, the
alternative should be rejected. For example, if a firm is faced with low
profits, one alternative would be to cut pay by 20 percent. The outcome of
this alternative would be to lower morale drastically and create high
turnover, so a firm should not implement that alternative. High employee
turnover is so expensive that it would override the cost savings.
• 4. Choose One Alternative Solution
• The process of weighing the alternatives must stop at some point. You cannot
solve a problem unless you choose one of the alternatives—that is, make a
decision. Several factors influence the choice. A major factor is the goal the
decision should achieve. The goals sought for in making the decision are also
referred to as the decision criteria. The alternative chosen should be the one that
appears to come closest to achieving it. If two alternatives appear almost equally
good after considerable deliberation, it might be helpful to seek the opinion of
one more person to decide which alternative is slightly better.
• Despite a careful evaluation of alternatives, ambiguity remains in most decisions.
The decisions faced by managers are often complex, and the factors involved in
them are often unclear. Even when quantitative evidence strongly supports a
particular alternative, the decision maker may be uncertain. Human resource
decisions are often the most ambiguous because making precise predictions
about human behavior is so difficult. Deciding which person to hire from a list of
several strong candidates is always a challenge.
• 5. Implement the Decision
• Converting a decision into action is the next major step. Until a decision is
implemented, it is not really a decision at all. A fruitful way of evaluating the merit of
a decision is to observe its implementation. A decision is seldom good if people resist
its implementation or if it is too cumbersome to implement. Suppose a firm tries to
boost productivity by decreasing the time allotted for lunch or coffee breaks. If
employees resist the decision by eating while working and then taking the allotted
lunch break, productivity will decrease. Implementation problems indicate that the
decision to boost productivity by decreasing break time would be a poor one.
• Another perspective on implementation is that it represents execution, or putting
plans into action. Implementation therefore involves focusing on the operations of a
company or business unit. When Mark Hurd was appointed as the new CEO of
Hewlett-Packard several years ago, he was praised for his decision to focus on
execution rather than formulating new visions for the company. As part of execution,
he focused on cost cutting and efficiency. His predecessor, Carly Fiorina, was often
accused of focusing too much on visions and not enough on execution or business
operations.
• 6. Evaluate and Control
• The final step in the decision-making framework is to investigate how
effectively the chosen alternative solved the problem. Controlling means
ensuring that the results the decision obtained are the ones set forth during
the problem-identification step. Evaluating and controlling your decisions
will help you improve your decision-making skills. You can learn important
lessons by comparing what actually happened with what you thought would
happen. You can learn what you could have improved or done differently
and use this information the next time you face a similar decision.
Factors Influencing Decision Making
• 1. Intuition
• Effective decision makers do not rely on analytical and methodological
techniques alone. They also use their hunches and intuition. Intuition is an
experience-based way of knowing or reasoning in which weighing and
balancing evidence are done unconsciously and automatically. Intuition is also a
way of arriving at a conclusion without using the step-by-step logical process.
Intuition can be based mostly on experience or mostly on feeling. The fact that
experience contributes to intuition means that decision makers can become
more intuitive by solving many difficult problems because accumulated facts
are an asset to intuition. It also means that decision makers develop intuition
when they perform the same work for a relatively long period of time.
• Intuition helps point the executive in the right direction, such as when sizing up
the overall merits of the company to be acquired. Major decisions usually begin
with intuition. As Henry Ford said,“If I asked consumers what they wanted, they
would have told me to build a faster horse and buggy.”
• 2. Personality and Cognitive Intelligence
• The personality and cognitive intelligence of the decision maker influence his or her ability to find effective solutions. A
particularly relevant personality dimension is a person’s propensity for taking risks. A cautious, conservative person
typically opts for a low-risk solution. An extremely cautious person may avoid making major decisions for fear of being
wrong. Organizational pressures can influence a person’s propensity for risk taking. In addition to being related to risk
taking, cautiousness and conservatism influence decisiveness, the extent to which a person makes up his or her mind
promptly and prudently. Good decision makers, by definition, are decisive. Take the quiz presented in Exhibit 5-3 to
examine your degree of decisiveness.
• Perfectionism exerts a notable impact on decision making. People who seek the perfect solution to a problem are usually
indecisive because they hesitate to accept the fact that a particular alternative is good enough. Optimism versus
pessimism is another relevant personality dimension. Optimists are more likely to find solutions than are pessimists.
Pessimists are more likely to give up searching, because they perceive situations as being hopeless.
• Cognitive (or traditional) intelligence carries a profound influence on decision-making effectiveness. Today psychologists
recognize other types of intelligence such as imagination, adaptability, and practical intelligence. In general, intelligent
and well-educated people are more likely to identify problems and make sound decisions than are those who have less
intelligence and education. A notable exception applies, however. Some intelligent, well-educated people have such a
fondness for collecting facts and analyzing them that they suffer from “analysis paralysis.” One plant manager put it this
way: “I’ll never hire a genius again. They dazzle you with facts, figures, and computer graphics. But when they get through
with their analysis, they still haven’t solved the problem.”
• It is helpful to size up the environment in terms of how much analysis is required before making a decision. It is good to
avoid being both impulsive (jumping too quickly to a decision) and indecisive because of over-analysis.
• A person can typically make best use of cognitive intelligence when he or she is well rested, or at least not highly fatigued.
That is one reason why airlines have strict regulations about the amount of sleep pilots need before flying. An analysis of
studies and theory concluded that sleep-deprived executive teams working late at night are likely to solve problems
poorly and make inaccurate decisions. Unfortunately, many decisions are made with limited sleep during crisis conditions
• 3. Emotional Intelligence
• How effective you are in managing your feelings and reading other people can affect the
quality of your decision making. For example, if you cannot control your anger, you are
likely to make decisions motivated by retaliation, hostility, and revenge. An example would
be shouting and swearing at your team leader because of a work assignment you received.
Emotional intelligence refers to qualities such as understanding one’s own feelings,
empathy for others, and the regulation of emotions to enhance living. This type of
intelligence generally affects the ability to connect with people and understand their
emotions. If you cannot read the emotions of others, you are liable to make bad decisions
such as pushing your boss too hard to grant a request. Emotional intelligence contains four
key factors, all of which can influence the quality of our decisions:
• Self-awareness. The ability to understand your own emotions is the most essential of the
four emotional intelligence competencies. Having high self-awareness allows people to
know their strengths and limitations and have high self-esteem. (Effective managers seek
feedback to see how well their actions are received by others. A manager with good self-
awareness would recognize whether he or she was liked and exerting the right amount of
pressure on people.)
• Self-management. The factor is the ability to control one’s emotions and act with honesty
and integrity in a consistent and adaptable manner. The right degree of self-management
helps prevent a person from throwing temper tantrums when activities do not go as
planned. Effective workers do not let their occasional bad moods ruin their day. (A
manager with high self-management skills would not suddenly decide to fire a group
member because of one difference of opinion.)
• Social awareness. This competency includes having empathy for others and having
intuition about organizational problems. Socially aware workers go beyond sensing the
emotions of others by showing that they care. (A team leader with social awareness, or
empathy, would be able to assess whether a team member had enough enthusiasm for a
project before assigning it.)
• Relationship management. This competency includes the interpersonal skills of clear and
convincing communication, the ability to disarm conflicts, and the ability to build strong
personal bonds. Effective individuals use relationship management skills to spread their
enthusiasm and solve disagreements, often with kindness and humor. (A manager with
good relationship management skills would not burn bridges and would continue to
enlarge his or her network of people to win support when support is needed.)
• 4. Quality and Accessibility of Information
• Reaching an effective decision usually requires high-quality, valid information. The ability to
supply managers with high-quality information forms the major justification for information
systems. Part of having quality information is being able to base decisions upon solid data.
Accessibility may be even more important than quality in determining which information is
used or not used. Sometimes it takes so much time and effort to search for quality
information that the manager relies on lower-quality information that is close at hand. A
frequent accessibility problem is to rely on information from the Internet because it is easy
to access, without stopping to investigate the date or the source of the information. Quite
often the information comes from the blog of an uninformed person.
• Closely related to quality and accessibility of information is the tendency to be influenced by
the first information we receive when attempting to solve a problem or make a decision.
Anchoring occurs during decision making when the mind gives too much weight to the first
information it receives. Initial impressions and estimates hold back, or anchor, later
thoughts and judgments. The manager who uses old or inaccurate information found on the
Internet might be overly influenced by that information. Having been received first, the
anchored information becomes the standard against which to judge other information.
Anchoring can lead to wasting useful information received after the first information.
• 5. Political Considerations
• Under ideal circumstances, managers make organizational decisions on the basis of the objective
merits of competing alternatives. In reality, many decisions are based on political considerations
such as favoritism, alliances, or the desire of the decision maker to stay in favor with people who
wield power.
• Political factors sometimes influence which data are given serious consideration in evaluating
alternatives. The decision maker may select data that support the position of an influential person
whom he or she is trying to please. For instance, one financial analyst, asked to investigate the cost-
effectiveness of the firm owning a corporate jet, gave considerable weight to the“facts”supplied by
a manufacturer of corporate jets. This information allowed her to justify the expense of purchasing
the plane—the decision the CEO favored.
• The status quo trap ties decisions to political factors. Failure to challenge the status quo often stems
from worry that being critical will invite criticism from key people. Breaking away from the status
quo requires action, and when we take action, we take responsibility, thus opening ourselves up to
criticism. A barrier many sales representatives face in selling against a dominant product in the
industry results from managers’ fear of being criticized if the new product were to fail. As one
system administrator said,“You can never get fired for buying Cisco.”(The implication is that if the
manager bought Internet equipment from a smaller competitor, he would risk being reprimanded.
• 6. Degree of Certainty (Decision Making Environment)
• The more certain a decision maker is of the outcome of a decision, the more
calmly and confidently the person will make the decision. Degree of certainty is
divided into three categories: certainty, risk, and uncertainty. A condition of
certainty exists when the facts are well known and the outcome can be
predicted accurately. A retail store manager might predict with certainty that
more hours of operation will lead to more sales.
• A condition of risk exists when a decision must be made based on incomplete,
but accurate, factual information. Effective managers often accept a condition
of risk. A calculated risk is one in which the potential return is well worth the
cost that will be incurred if the effort fails. When Steve Jobs at Apple Inc.
spearheaded the development of the iPod for downloading and playing music,
many insiders thought the company was taking a risk with dwindling funds.
However, the iPod sold well beyond even Jobs’s expectations, vindicating the
risky decision. Part of the factual information here was that MP3 players were
an established part of the culture, along with industry sales figures for the MP3.
• 7. Crisis and Conflict
• In a crisis, many decision makers panic. They become less rational and more
emotional than they would be in a calm environment. Decision makers who are
adversely affected by crisis perceive it to be a stressful event. They concentrate
poorly, use poor judgment, and think impulsively. Under crisis, some managers do
not bother dealing with differences of opinion because they are under so much
pressure. A smaller number of managers perceive a crisis as an exciting challenge
that energizes them toward their best level of problem solving and decision making.
• A recommendation for becoming more adept at making decisions under crisis
conditions is to anticipate crises. Visualize ahead of time how you will react to the
situation. Visualization serves somewhat as a rehearsal for the real event. A hospital
administrator might think to himself or herself,“Here is what I would do if a patient
were to die during routine surgery, and the media grabed hold of the story.”
• Conflict relates to crisis because both can be an emotional experience. When
conflict is not overwhelming and is directed at real issues, not personalities, it can
be an asset to decision making. When opposing sides express different points of
view, problems can be solved more thoroughly, which leads to better decisions.
• 8. Values of the Decision Maker
• Ultimately, all decisions are based on values. A manager who places a high value on the personal
welfare of employees tries to avoid alternatives that create hardship for workers and implements
decisions in ways that lessen turmoil. Another value that significantly influences decision making is the
pursuit of excellence. A manager who embraces the pursuit of excellence will search for the high-quality
alternative solution. Attempting to preserve the status quo mentioned earlier as a political factor is also
a value. If you value the status quo too highly, you may fail to make a decision that could bring about
major improvements. For example, a supermarket executive might not want to bother shifting part of
the company’s marketing efforts to social networking media. As a result, other supermarkets who have
a strong presence on Facebook and comparable Web sites gain a few percentage points in market share.
• 9. Procrastination
• Many people are poor decision makers because they procrastinate, or delay taking action without a
valid reason. Procrastination results in indecisiveness and inaction and is a major cause of self-defeating
behavior. Procrastination is a deeply ingrained behavior pattern; it may be based on concerns about
being judged negatively. For example, if the oil company manager delays making a decision about
drilling, he or she cannot be accused of having wasted resources on an oil source of limited value.
Although too much procrastination interferes with effective decision making, rapid decision making is
not always the most effective. When too much emphasis is placed on speed, financial data become less
reliable, customer service might be compromised, and productivity suffers. Critical information may be
withheld, alternative solutions are dismissed too readily, and risks are ignored. Good decision makers
recognize the balance between procrastination and impulsiveness.
• 10. Decision-Making Styles
• The various factors that influence the quality of decision making also
contribute to a manager’s typical pattern of making decisions, or
decision making style. For example, a manager who relies heavily on
intuition will tend to make decisions quickly without agonizing over
data. A manager with procrastination tendencies will ponder over as
much information as possible and consult many people before
reaching a decision.
 Challenges to Effective Decision Making
• The decision-making process can pose interesting challenges to leaders. Within the world of
organizations, challenges are commonly referred to as barriers in decision-making, or just
barriers. There are six, distinct barriers to overcome.
• 1. Bounded rationality: When decisions are made within organizations, are all decisions rational
in nature? Not necessarily, as within leadership there are issues where the problem or right
solution cannot be grasped. Bounded rationality is the notion that challenging complex issues
that leaders cannot fully grasp, makes them unable to be rational about the situation, and are,
therefore, incapable of understanding an alternative. Within learning organizations, educators
would like to believe they can learn everything. However, at times there is no comprehension of
a certain component of learning, thus they become a victim of bounded rationality. This can lead
to incorrect decisions being made without all the information, or abandonment of an issue all
together. Both produce an incomplete outcome. Overcoming bounded rationality is difficult
given the old adage “you learn something new every day.” With that ideal, no one is ever fully
knowledgeable. Therefore, as a leader, it would be best not to work against bounded rationality,
but with bounded rationality, understanding its place along continual learning.
• It means that the decision will be good enough rather than the best possible decision. (example
egg)
2. Escalation of commitment: In decision-making, it can be difficult to make a tough
decision, and even more difficult to live with that decision when it does not pan out.
Escalation of commitment is the idea that leaders and managers remain committed to a
poor decision, or find it hard to remove themselves from a poor decision rationally. It is
hard, as a leader, to take “being wrong,” but it is a learning process. In modern learning
organizations, mistakes, critiquing, and revising are all parts of a divergent, learning
process. Therefore, it is fine that a poor decision is made, but there are tools in place to
help a learner develop new skills to overcome past mistakes, eventually removing the
challenge of escalation.
3. Time constraints: When discussing time constraints, it is not necessarily discussing time
management. Managers could have managed their time well, but outside circumstances
could have caused an immediacy for a decision to be made. Time constraints are when
there is little time available to collect information with rationality and make an effective
decision[5]. When using the example of a university wanting to unveil a new web tool for
students that other organizations have completed, time is of the essence, so the tool is
launched without grasping all of the information necessary. The web tool eventually
releases with numerous bugs and has to be fixed immediately. Although some instances
are out of leaders’ control, effective planning, forecasting, and time management can be
used to alleviate time constraints.
• 4. Uncertainty: In everyday life, no one is 100% sure of every decision that is made. If the answer
is “no,” not to worry, effective leaders and managers are not always 100% sure of every decision
they make either. Uncertainty is the act of not knowing an outcome until said outcome has
transpired and is tied in the belief that an outcome is envisioned, but not seen.  Within a learning
organization, it is uncertain how to manifest learning in prospective students.  Leaders can only
follow a methodology that works best for the learner to absorb content. A desired outcome can be
conceived of, but the uncertainty allows only sight of the outcome after the decision has
transpired.
• 5. biases: One of the most common errors that leaders and managers make is trusting a poor
decision based on preconceived notions. Biases, with regards to decisions, follow the notion that
the decision made is closely tied to inherent beliefs and world views. In addition, it enhances
beliefs that are similar to our own beliefs. Decisions are usually made and stuck to that are our
own. The idea that our initial beliefs are given more attention, we pay less attention to beliefs
outside of our world view. This is called confirmation bias. Leader’s own confirmation can have an
impact on how they work within organizations, and have an adverse effect on the people who do
not follow their precise worldviews. One way to avoid bias is to be knowledgeable and empathetic
about a contrary idea. Leaders may make a decision based on personal worldviews, but if they are
acknowledging that it is coming from a form of bias, and can work with incorporating contrary
views for a more collaborative decision-making process, then such influences can be circumvented.
• 6. Conflicts: Within an organization, leaders and managers should not be shy of turbulent
issues. Perhaps not physically, or overtly verbally, but situations can be tense depending
on the context. Conflict can be broken down into two areas within an organization:
• Process Conflict – conflict about the best way to find a solution, while others look for
other options for a superior solution.
• Relationship Conflict – conflict between individuals that is more personal, involving
attacks on character rather than ideas.
• Regardless of the conflict, it is best to alleviate conflict at the onset. For example, if there
is a conflict between two leaders within an organization, a civil sit down and discussion
about worldviews, ideology, and best practices within a workplace can lead to a
consensus in some areas and maybe lead to a highly effective decision to be made that
makes a positive effect on an organization.
• Within learning organizations, leaders and managers are constantly faced with barriers in
their decision-making from personal indifference or organizational indifference. When
faced with barriers, the use of expert power (Chapter Three) can be an effective tool to
help avoid barriers.  Being knowledgeable about a variety of situations can be beneficial
for members to hear.  In addition, acknowledging that they are not the beacon of
knowledge, and that their decisions may have biases or be uncertain, would lead to a
holistic discussion and a collaborative decision, so that everyone is on-board and
accountable.