It is the cognitive process of reaching a decision.
Decision Making is the intellective process resulting in the selection of a course of action among several alternative scenarios.
Decision Making is the process choosing the best alternative for reaching objectives.
Decision Programming Continuum:
Programmed Decisions: Programmed decisions are those that a manager has encountered and made in the past.
Programmed decisions are made in routine, repetitive, well-structured situations with predetermined decision rules. These may be based on habit, or established policies, rules and procedures and stem from prior experience or technical knowledge about what works or does not work in a given situation.
Example: From a business perspective, a company may create a standard routine for handling technical issues, customer service problems or disciplinary matters. An employee’s duties may become routine with repetition, like the process a mechanic uses to troubleshoot problems with a customer’s car.
Non-programmed decisions: Non-programmed decisions are unique decisions that require a ‘custom made’ solution.
It is involve scenarios that are new or novel and for which there are no proven answers to use as a guide. In such a case, a manager must make a decision that is unique to the situation and results in a tailored solution.
In this case a manager cannot easily anticipate the outcome of his decision.
Example: An individual may make a Non-programmed decision when he/she visits a new restaurant, is unfamiliar with the menu and the menu is in a language she does not understand.
The Scope of the Decision:
The scope of the decision is the portion of the total management system that a particular decision will affect. The broader the scope of a decision, the higher the level of the manager responsible for making that decision.
Steps of the scope of the decision:
- Individual decision: Individuals have a tendency to think and question before performing. This is fruitful in analysis and forecasting of individual’s behaviour.
- Group/ collaborative decision: Group decision making is a situation faced when individuals collectively make a choice from the alternatives before them.
- Organizational decision: Organizational decision making is a pivotal strategic asset, and decision making in organizations should be managed as a strategic process.
- Meta-organizational decision: A meta-organizational system is one made up of several independent organizations working toward a common set of objectives.
Elements of the Decision Situation:
State of Nature:
- Internal Environment: A manager needs to consider the financial strengths, technical skills and other resources using for taking managerial decision.
- External Environment: A manager needs to consider the present economic trends, Govt. pressure, customer choice, competitor position and labor choice when manager takes decision.
The Decision Makers:
Following are the individuals or groups who actually make the choice between alternatives-
- Receptive Orientation: Decision makers who have a receptive orientation believe that the source of all good is outside them, and therefore they rely heavily on suggestions from other organization members. Basically, they want others to make their decisions for them.
- Exploitation Orientation: Decision makers with an exploitative orientation also believe that the source of all good is outside them, and they are willing to steal ideas as necessary to make good decisions. They build their organizations on others ideas and typically hog all the credit, extending little or none to the originators of the ideas.
- Hoarding Orientation: The hoarding orientation is characterized by the desire to preserve the status quo as much as possible. Decision makers with this orientation accept little outside help, isolate themselves from others, and are extremely self-reliant. They are obsessed with maintaining their present position and status.
- Marketing Orientation: Marketing oriented decision makers look on themselves as commodities that are only as valuable as the decisions they make. Thus they try to make decisions that will enhance their value, and they are highly conscious of what others think of their decisions.
Goals to be served:
This involves the goals that decision makers seek to attain. In the case of managers, these goals are usually organizational objectives.
The decision situation is usually composed of at least two relevant alternatives. A relevant alternative is one that is considered feasible for solving an existing problem and for implementation. Alternatives that will not solve an existing problem or cannot be implemented are irrelevant and should be excluded from the decision-making situation.
The decision situation requires a process of or mechanism for ranking alternatives from most desirable to least desirable. This process can be subjective, objective, or some combination of the two. Past experience of the decision maker is an example of a subjective process and the rate of output per machine is an example of an objective process.
Choice of alternatives:
The last element of the decision situation is the actual choice between available alternatives. This choice establishes the decision. Typically, managers choose the alternative that maximizes long term return for the organization.