Chapter – 3

Decision Making
 PART II: PLANNING AND DECISION MAKING
Chapter 4: Decision Making
Content:
4.1 Introduction
4.2 Definition
4.3 Features of Decision-Making
4.4 Relationship between Planning and Decision-making
4.5 Types of decisions
4.6 Individual versus Group decision making
4.7 Decision Making Process
4.8 Rationality in decision making
4.9 Decision making models
4.10 Decision Tree
4.11 Guidelines for making effective decisions
4.1 Introduction: Every action of a manager is generally
an outcome of a decision.

Once a problem is clearly recognized and defined, it is

imperative to develop the criterion or aspiration level or
decision rules which will be applied to judge the suitability
of an alternative.

A manager can use several methods to generate a wide

array of alternatives and discuss consequences thereof of
problem solving.
The word ‘decides’ means to come to a conclusion or
resolution as to what one is expected to do at some
later time.

According to Manely H. Jones, “It is a solution

selected after examining several alternatives chosen
because the decider foresees that the course of action
he selects will do more than the others to further his
goals and will be accompanied by the fewest possible
objectionable consequences”
4.2 Definition:

Decision-making is the selection based on some criteria

from two or more possible alternatives. —George R.Terry

A decision can be defined as a course of action

consciously chosen from available alternatives for the
purpose of desired result —J.L. Massie

A decision is an act of choice, wherein an executive forms

a conclusion about what must be done in a given
situation. A decision represents a course of behaviour
chosen from a number of possible alternatives. -—D.E.
Mc. Farland
Following elements can be derived from the above
mentioned definitions:

1. Decision–making is a selection process and is

concerned with selecting the best type of alternative.
2. The decision taken is aimed at achieving the
organisational goals.
3. It is concerned with the detailed study of the available
alternatives for finding the best possible alternative.
4. Decision making is a mental process. It is the outline of
constant thoughtful consideration.
5. It leads to commitment. The commitment depends
upon the nature of the decision whether short term or
long term.
4.3 Features of Decision-Making:
1. Rational Thinking: Since the human brain with its
ability to learn, remember and relate many complex
factors, makes the rationality possible.

2. Process: It is the process followed by deliberations and

reasoning.

3. Selective: Decision involves selection of the best course

from among the available alternative courses that are
identified by the decision-maker.

4. Purposive: The solution to a problem provides an

effective means to the desired goal or end.
5. Positive: Every decision is usually positive; sometimes
certain decisions may be negative and may just be a
decision not to decide.

6. Commitment: Management is committed to every

decision it takes for two reasons- viz., it promotes the
stability of the concern and (ii) every decision taken
becomes a part of the expectations of the people involved
in the organisation.

7. Evaluation: Decision-making involves evaluation in two

ways, viz., (i) the executive must evaluate the alternatives,
and (ii) he should evaluate the results of the decisions
4.4 Relationship between Planning and Decision-making:

Decision-making has priority over planning function. It is

the starting point of the whole management process.

In fact, decision-making is a particular type of planning.

A decision is a type of plan involving commitment to

resources for achieving specific objective.

The managerial decisions should be correct to the

maximum extent possible.

For this, scientific decision-making is essential.

4.5 Types of decisions:

1. Personal and Organizational Decisions

2. Basic and Routine Decisions
3. Programmed and Non-programmed Decisions

1. Personal and Organizational Decisions: Personal

decisions are to achieve personal goals.

Organizational decisions are to achieve organizational

goals.
2. Basic and Routine Decisions: Basic decisions are
unique, one-time decisions involving long-term
commitment of resources viz., plant location,
organization structure, product line, and so on, which
are often taken by top management.

Routine decisions are highly repetitive, everyday

decisions, often taken at lower levels, such as a
supervisor assigning a worker from one job to another
on a particular day or a salesman deciding his
schedule for visits.
3. Programmed and Non-Programmed Decisions:
Programmed Decisions: Some decisions in every organization
are quite routine or repetitive in nature and every organization
has developed standard operating procedures to handle such
decision problems.
Eg: Someone has to go on leave, or stationary has to be
purchased, and so on. Simon calls them programmed
decisions.

Non-Programmed Decisions: There are some other decisions

which call for deeper thinking, consultation and commitment
of resources for a long period. These decisions are one-time,
unique or novel decisions taken once in a while and for which
no standard procedures exist.
Eg: A new product’s launch or acquiring a firm, or appointing
the CEO. Such decisions are called non-programmed decisions.
4.6 Individual versus group decision:

Individual Decision Making: Decision making without

a group's input or a decision made regardless of the
group's opinion is, naturally, an individual decision.

This is the more traditional decision making approach

and can work effectively for a manager when the
group's input is not required or in certain cases,
desired.
Group Decision Making: There are several models of
group decision making that you can put to use.
Two examples of group decision making are
consensus and consultation.
Consensus decision making involves posing several
options to the group and using the most popular
option to make a decision.
Consultation takes the opinions of the group into
consideration when making a decision.
Both methods require the group's participation and
call for a manager who respects the opinions and
input of the group in the decision making process.
Advantages: An individual can make a decision quicker than
group can, since only one person needs to be consulted.
Group decision making, though it can be an arduous process,
can help cement the group by allowing input from all
members of the group.

Disadvantages: Avoid individual decision making if the

decision directly affects the group.
For example, making a blanket decision that everyone must
work weekends will meet with opposition for reasons ranging
from religious to other personal obligations.
On the flip side, group decision making should be avoided if
there is little chance that a group might reach a consensus.
For example, a directive that all members of a department
must carry out works best when the manager decides on the
course of action.
4.7 Decision Making Process:

Step 1: Define the problem: A problem is defined as

the difference between expected and/or desired
outcomes and actual outcomes. This is a critical
consideration because how one defines a problem
determines how one defines causes and searches for
solutions.

Step 2: Identify alternative solutions: Consider as

many alternatives as you can. Realistically, the
decision maker should consider more than five in
most cases. They should not have only two opposing
choices; either this or that.
Step 3: Evaluate the identified alternatives: While
evaluating alternatives, decision makers should look at
the likely positive and negative sides of each alternative.
The decision maker should develop a "confidence score"
for each alternative. He needs to determine not just what
results each alternative could yield, but how probable it is
that those results will be realized.

Step 4: Make the decision: After evaluating the

alternatives against accepted criteria, managers screen
the non-feasible alternatives and select the most
appropriate alternative that will help in achieving the
desired objective.
Following are the approaches for alternatives:
a. Experience: Follow the past actions, their successes and
failures, analyse them in the context of future environment,
and select the most suitable alternative fit in the present
situation.

b. Experimentation: In experimentation, each alternative is

put to practice and the one which is most suitable is selected.
Testing each alternative, therefore, is not possible. Also, this
method may be suitable in the present circumstances only.

c. Research and Analysis: It helps to analyse the impact of

future variables on the present situations, apply various
mathematical models and select the most suitable
Step 5: Implement the alternative: The selected
alternative should be implemented with least
resistance from organizational members.
Implementation must be properly planned.

Those who will be affected by the implementation

should be allowed to participate in the
implementation process to make it more effective and
fruitful.
Implementation of the alternative should ensure the
following:
a. The selected alternative should be communicated to
everyone who are concern with the issue.
b. Changes in the existing structure because of
implementation should also be communicated.
c. Authority and responsibility for implementation should be
specifically assigned.
d. Resources should be allocated to respective departments
for carrying out the decisions.
e. Budgets, schedules, procedures and controls should be
established to ensure effective implementation.
f. A committed work force should be promoted. Unless
everyone is committed to the decision, the desired outcome
will not be achieved.
Step 6: Evaluate the decision: The implementation
process should be regularly monitored to know its
acceptance by the organisational members.
The alternatives should be regularly monitored,
through progress reports, to see whether the
objective for which it was selected has been achieved
or not.
If not, managers should make corrections whenever
necessary or make changes in the implementation
process.
If yes, such alternatives form the basis for future
decision-making.
4.8 Rationality in decision making: Managers rely on
fact-based analytical decision making. Rational
decision making can be beneficial in the business
world and differs from intuitive processes in several
ways.

A method for systematically selecting among possible

choices that is based on reason and facts.

In a rational decision making process, a business

manager employs a series of analytical steps to review
relevantfacts, observations and possible outcomes
before choosing a particular course of action.
4.9 Decision making models: Following are the
different decision making models.

1. Rational Model: Following are the six steps in the

rational model decision making:

1. Define the problem

2. Identify the decision criteria
3. Allocate weights to the criteria
4. Develop the alternatives
5. Evaluate the alternatives
6. Select the best alternative
1. Define the Problem: The problematic area should be
properly identified. Proper care should be give to find out
the route cause of the problem.
The next step facing is to determine what criteria she will
be used to make the decision.
2. Identify the Decision Criteria: This step deals with
choosing variables that will determine the decision
outcome. The criteria are usually dependent upon the
individual's values and beliefs.
Following questions are generally considered while
Identify the decision criteria.
How will employees be affected?
How will changes affect customers?
How will changes affect quality?
4. Develop the Alternatives: The next step is to develop
alternatives, which is where the potential solutions need
to be considered. There will not be any consideration in
this step, just a generated list of alternatives.

5. Evaluate the Alternatives: Violet spent all weekend

evaluating the alternatives to see which choice would
have the least impact on employees yet solve her financial
dilemma. After much consideration, Violet has decided to
submit her recommendation to management with the
hopes that it will increase store profits.

6. Select the best alternative: in this last step, after

evaluating the various alternative solutions, select the
best alternative solution and implement it.
Other Model:
1. Team leader decides and informs the team: Where
the team is likely to support and implement the decision
regardless of whether or not they've given input.
Example: The team leader decides to cancel a particular
team meeting because key participants cannot attend.

2. Team leader gathers input from team then decides:

The synergy of team discussion may lead to a richer
decision, but the team itself doesn't need to come to
agreement about the particular course of action.
Example: the team leader has a good discussion with the
team about how they view the team's needs, but the
team leader writes the final position description for an
opening on the team.
3. Consensus decisions: The word consensus mean
unanimous agreement but this is not necessarily the
case. Consensus decisions include input from and
acceptance by each member of the team.

Consensus decisions have a very high level of team

involvement and can lead to strong, well-supported
decisions. (More on consensus follows)
Example: Coming to consensus about the success
criteria that a team will use to evaluate its progress on
a particular project.
4. Consensus with a fallback: The preferred fallback
may be to the team leader, who considers the team's
input and then decides. The existence of a fallback plan
keeps the team moving forward without ignoring input
from team members.

Example: After a lengthy discussion about the team's

motto, the team leader observes that there is still
considerable disagreement among team members. He
gets agreement from the team to go to their fallback: that
he will take all of their input and make the decision
herself. The team agrees to this.
5. Team leader sets constraints and delegates decisions
to team members: Once team members know about any
critical constraints, a team leader can delegate a decision
to the team or a sub-group of the team.

This decision-making model helps teams share the

responsibility for decisions, can help the team and
individual members develop decision-making skills, and
allows the team leader to use his/her time in another
way. Example: a team leader gives a subgroup the
authority to design and print a brochure, given pricing and
style constraints.
4.10 Decision Tree: It is branching diagram which helps in
decision making when there is uncertainty and risk
associated with each alternative.
It represents problems in a series of decisions to be made
under conditions of uncertainty.
It is mainly used when any one of the stream of
alternative of decision is dependent upon the outcome of
proceeding or outcome of a trial.
It diagrammatically shows relationships among decisions
with value of pay-offs at each stage.
Branches represent the possible alternative decisions
which can be made and various possible outcomes that
may arise.
4.11 Guidelines for making effective decisions:
1. Identify the causes and effects of the problem
across social, economic and environmental
dimensions.

2. Use a multi-stakeholder approach to take a variety

of points of view into consideration and to
incorporate as much varied knowledge as possible in
the analysis.

3. Evaluate the impacts across sectors and find a

balanced strategy aimed at improving the entire
system’s performance rather than a strategy aimed at
4. Evaluate the impacts across actors and find an
inclusive strategy that will allocate the costs
consistently and distribute the benefits fairly across
the key actors in the system.

5. Think long term and prioritize means focusing on

increasing a system’s capacity to absorb change and
adapt to it with clear, long-term goals.

6. Monitor the performance of the system to improve

decision making by learning about the causes of
success and failure to implement these.
 …learning never ends
the journey of excellence
continues…

Thank You