DECISION MAKING

Decision Making is the selection of best possible alternative from among the
various alternatives available for the solution of a given problem. It is an act
wherein a manager arrives at a conclusion about what must be done in a
particular situation. It involves the choice of a course of action to achieve
pre-determined objectives.

CHARACTERISTICS OF DECISION MAKING

A careful study of the above noted definitions of Decision Making reveals

the following characteristics:

1. Selection of Best Alternative. Decision Making is a process of

selecting the best possible alternative form among the various alternatives
available for the solution of a given problem. Thus, the need of decision
arises only when more than one alternative are available for a particular
action.

2. Rational Selection. Decision Making is the process to select the best

alternative in a rational manner. It involves the evaluation of available
alternatives and then to select the best possible alternative.

3. A Job of Top Management. Decision Making is the responsibility of

Top Management of a business enterprise. Although various decisions are
taken at different levels of Management in the course of business activities
but the most important decisions are taken by the Top Management.
4. Decisions are Means. A very important characteristic of Decisions is
that the decisions are not an end in themselves; they are only the means of
an end. The object of decision making is to achieve the pre-determined
objectives of the business and industrial enterprise.

5. A Human and Social Process. Decision Making is a human and

social process. It involves all the human activities which are necessary for
taking a decision on an aspect. It involves making discretion and judgment.

6. Uncertainty and Risk. Decision Making involves uncertainty and risk

also because the decisions are taken in regard to the activities which will
take place in future. It is very difficult to forecast the future activities with
complete accuracy. Therefore, the decisions cannot be cent percent correct
and accurate.

7. Decisions may be Positive or Negative. A decision is not necessary

to be positive. It may be negative also. A decision may be taken to do or not
to do a particular activity.

NATURE OF DECISION MAKING

The Process of Decision Making involves the selection of best possible

alternative from among the available alternatives for doing a particular work.
Ultimate object of Decision Making is to achieve the pre-determined targets
of the business and industrial enterprise. A decision is generally expressed as
a policy or as a rule or as an order or as a directive of the enterprise. A
decision may also be expressed as to consider a problem or not to consider it
or to consider it after sometime.
Nature of Decision Making can be expressed as follows:

1. Process of Continuity. Every incident of past, present and future

affects the decision in one way or the other. If some problems have
arisen in the past, the alternative solutions of that problem may be
considered at present and the best alternative is selected, the
alternative so selected is used in the future. Not only this, a decision
creates many other decisions. In addition to this, sometimes a decision
is the result of some other decisions. Thus, decisions are inler-related
and inter-dependent. Thus, it is said that Decision Making is a process
of continuity. –

2. Commitment. A decision reflects the commitment of the person who

takes the decision. The person taking the decision is committed to
implement it and to prepare the plans according to the decision taken. Al!
the business activities are performed in accordance with the decision taken
by the Top Management of the business enterprise. Thus, the process of
decision making reflects the commitment of the enterprise to carry on its
activities according to the decisions taken.

3. Evaluation. It is not sufficient enough to take the decisions. Decision

must be followed and actual results must be evaluated so that the
implementation of decision may be ensured. If the decisions are not
followed and evaluated, the objects of enterprise may not .be achieved,
howsoever, the best decisions might have been taken.
4. Birth to New Decisions. Some are the decision which create the need
of many other decisions. Some decisions are taken to overcome the defects
of the decision taken earlier. Sometimes, the decisions are taken to remove
the variations of actual results from decisions.

5. Rationality. Decision making process is a mental process which

involves the rationality of best possible alternative from among the available
alternatives. It involves the choice of best possible course of action and it is
performed only by human beings.

BASIC ELEMENTS OF DECISION MAKING

The process of Decision Making is very important in a business enterprise.

All the decisions must be taken with utmost care and intelligence. Some
basic elements of the process of the Decision Making must be followed
while taking the decisions. These elements may be summarized as follows:

1. Continuity. Decision Making must taken up as a continuous process

and not as a function. It is a process ^f taking a decision, implementing it,
following of variations and actions to take the decisions to remove these
variations. Thus, it is a process which never ends.

2. Selection of Best Alternative. The process of Decision Making is the

selection of best alternative from among the various alternatives available
for the solution of a given problem. The need of taking a decision arises only
when there are more than one alternative available. In this process, all the
available alternatives are analyzed and compared carefully and then the best
possible alternative is selected. If there is only one way of doing a particular
Act, there is no need of taking a decision.

3. Environment of Decision Making. There must be a proper environ-

ment for Decision Making in the organisation. For taking decision, it is
necessary that there must be proper arrangement of communication in the
organisation and organisational structure should be formal. If the decisions
are not implemented or followed, it will be wastage of time and energy to
take the decisions. Therefore, there must be proper atmosphere for Decision
Making Process.

4. Time of Decision Making. Decisions must be taken at their proper

time. Timing of decisions is very important. If a decision is taken at its
proper time, it will help in achieving the objects of enterprise more
successfully. If it is not taken- at the right time, it can create various
problems for the Management. Therefore, the decisions must be taken ui
proper time.

5. Psychological Factors. Decisions should h taken after a careful

consideration of the psychological factors, situation and information. The
process of Decision Making must be performed by the persons who are able,
intelligent and experienced. Because the decisions are affected by the
personality of the persons taking such decisions. Habits, temperament, social
environment, domestic life, political learning, personal linkings and
dislinkings of the persons taking decisions have impact on the decision taken
by them.
6. Participation of Employees. A decision is taken by Top
Management, while it is implemented by the subordinates. Therefore, it will
be better if it is taken with the consultation of all those who have to
implement it- Top management must invite active participation of their
subordinates in the Process of Decision Making. If the decisions are taken in
this manner, employees of the organisation are integrated in the Process of
Decision Making and they contribute their whole-hearted efforts in the
implementation of those decisions.

7. Communication of Decisions. Proper Communication of Decisions

is important as to take the decisions. Decisions and its communication must
go together. If the decisions are not timely and properly communicated to
those who have to implement them and who are concerned with them in any
way, it will be of no use to take the decisions. Implementation of decisions
can be ensured oniy when these are timely, clearly and properly
communicated Uncommunicated decisions are of no use however important
or good they may be.

TYPES OF DECISIONS

George has described four major branches of decisions—Production, Sales,

Finance, and Personnel, Then he has further sub-divided these branches into
as many as 40 decisions.

Main Types of Decisions may be described as follows :

1. Important Decisions. Important Decisions are the decisions taken

with regard to the important aspects of a business and industrial enterprise. It
includes the decisions related to the field ot Production, Finance Marketing
and Personnel. These decisions are generally taken by the Top Management.
Such decision involves long term planning and heavy investment of funds.
The success of an enterprise depends upon. the success of these decisions.
Therefore, these decisions must be taken after very careful analysis and
evaluation of various alternatives.

2. Routine Decisions. Routine Decisions are the decisions which are

taken in the day-to-day management of the organisation. These decisions are
of a repetitive nature do not require much intelligence and ability. These
decisions are generally taken at the middle Level of Management within the
policy frame-work decided by the Top Management.

3. Inter-departmental Decisions. Decisions which are related to more

than one department, are called inter- departmental decisions. Such decisions
are taken with the unanimous consent of the concerned heads or all the
concerned departments. All the activities of these departments are taken in
accordance with these decisions.

4. Departmental Decisions. The decisions which are taken at the level

of one particular department are called departmental decisions. These
decisions are concerned with the activities of that particular department only.
Such decisions are taken by head of the concerned department. Generally
these decisions relate to increase the efficiency of the department.

5. Personal Decisions'. When a decision is not taken by an executive in

his official capacity but in this personal capacity it is called personal
decision. Personal decision is taken by an executive to decide the course of
action for himself. Such decision is implemented by the person taking the
decision and is not delegated to anyone.

6. Programmed Decisions. Programmed Decisions are of a routine

nature and do not require any special arrangement or procedure. A system
established in the organisation and all the problems of a particular nature are
treated in the similar manner. For Example, if an employee applies for
leave, the supervisor takes the decision on such application on his own. He
need not to refer this matter to the higher authorities. Thus, the decisions of a
routine nature are called programmed decisions.

7. Non-programmed Decisions. When a decision is required to be

taken to solve a special problem, it is called non- programmed decision. In
this case, every decision is to be treated as a separate problem and a different
treainient is required for every decision. There is no standard procedure for
taking such decisions.

8. Individual Decisions. A decision taken by an individual is known as

individual decision. Such decisions generally relate to the problems of
routine nature.

9. Group Decision. When decision is taken by a group of persons, it is

called group decision. A number of people participate in taking such
decisions. For Example, the decisions taken by the Board of Directors.
Executive Committee etc. are known as group decisions. These decisions are
required to deal With the problems of key importance to the organisation.