Decision-making is not an easy job. It requires a lot of skill. A decision-making is affected by a number of factors. So, the manager can take good decisions by adopting a procedure. A manager may not be able to take good decisions if he fails to follow a sequential set of steps.
The decisions-making process depends upon the nature of problem and the nature of organisation. A decision cannot be taken in isolation. It is influenced by past experience, present conditions and future expectations.
Some of the steps involved in decision making are as follows:
1. Identification of a Problem 2. Diagnosing the Problem 3. Collect and Analyse the Relevant Information 4. Discovery of Alternative Course of Action 5. Analysing the Alternatives
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6. Screening of Alternatives 7. Selection of Best Alternative 8. Conversion of Decision into Action 9. Implementation 10. Verifying the Decision.
Steps Involved in Decision Making: Identification of a Problem, Diagnosing the Problem and Screening of Alternatives
Steps Involved in Decision Making – 7 Main Steps: Defining the Problem, Analysis of Problem and a Few Other Steps
A decision cannot be taken in isolation. It is influenced by past experience, present conditions and future expectations. Once a decision is taken then it becomes difficult to reverse it. It is pertinent to discuss the problem involved and then take a decision after considering various possibilities.
Decision-Making involves the following steps:
Step # 1. Defining the Problem:
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The first step in decision-making is to find out the correct problem. It is not easy to define the problem. It should be seen what is causing the trouble and what will be its possible solutions. No problem presents itself in a manner that an immediate decision is taken. If the problem is not correctly defined then the efforts and money spent on a wrong decision will go waste. Moreover, a wrong problem may create fresh difficulties instead of solving them.
Before defining the problem the manager has to identify critical or strategic factor of the problem. Chester Bernard has pointed out that the theory of the strategic factor is necessary for the appreciation of the process of decision-making. He emphasises that in decision-making the analysis required is actually a search for the strategic factors. These factors may be the root cause of obstacles in developing a proper solution to the problem under discussion.
If we wish to increase the yield of grain in a certain field, on analysis it may be found that there is a lack of potash. The potash will be a strategic or limiting factor in this case. Once the problem is properly defined then it will be easily solved. So the first important factor is the determination of problem.
Step # 2. Analysis of Problem:
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After defining the problem, the manager should analyse it. He should collect all possible information about the problem and then decide whether it will be sufficient to take a decision or not. Generally, managers complain that they seldom get sufficient information which they would have liked to have. Sometimes it may be costly to get additional information or further information may not be possible.
In the words of Peter Drucker, “To make a sound decision, it is not necessary to have all the facts; but it is not necessary to know what information is lacking in order to judge how much of a risk the decision involves, as well as the degree of precision and rigidity that the proposed course of action can afford.” Whatever information is available should be used to analyse the problem. If there are deficiencies in information then manager must judge the degree of risk involved in the decision.
Step # 3. Development of Alternatives:
Every problem has a number of solutions. If there is only one solution then there is no need for decision-making. A manager must try to find out various alternatives in order to get satisfactory results of a decision. Unless manager develops several alternative solutions, he is only too prone to fall into the either or kind of thinking. Having more alternatives is not a guarantee against wrong decisions. It should be kept in mind that alternative solutions are no guarantee of wisdom or of the right decision. But at least they prevent one making wrong decision.
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There are several alternatives even in discouraging situations. For example, the plant of the company needs replacement because its products cannot compete with those of others. The choices before management may be to go for a new plant, can rent new premises, consolidate this plant with another plant at other premises, could become the distributors of similar products of other firms.
The management has to evaluate various alternative proposals and then take a decision. Unless otherwise all possible alternatives are developed, a solution may not be good.
Step # 4. Evaluation of Alternatives:
After developing various alternatives, the next step is to evaluate them and select the right one. The pros and cons of different proposals should be foreseen. The desirable and undesirable consequences of adopting each alternative should be tested. This exercise will enable the manager to see the risk involved in each course of action.
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The alternatives should be evaluated in relation to time and money involved in them. Only that alternative which gives maximum economy should be selected. A decision becomes easy when one alternative has more favourable consequences as compared to others.
When more than one alternative have similar good points then it becomes difficult to make a choice. In such cases two or more alternatives can be combined. There may be a situation where none of the alternatives present favourable situation. Not accepting any alternative is also an important decision. The manager should develop new alternatives in such a situation.
Step # 5. Selection of Best Alternative:
In order to select the best alternative, one will have to evaluate all the possible alternatives. There may be various ways to evaluate alternatives. One commonly used method is through intuition choosing a solution which seems to be good at that time. Another method of selecting an alternative may be the past experience of the manager in similar situations. If the past experience of such a selection of an alternative was good, then it can be tried this time also.
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Sometimes alternatives may be put to use to find out the results. For example, there is a need to have a new machine for improving the quality of the product. If one machine is to be selected out of the two, the products produced on both of them may be evaluated to reach a final decision.
Step # 6. Implementation of the Decision:
The choice of a particular alternative will not serve any purpose if it is not put into practice. A manager will not be only concerned about selecting an alternation but also in its implementation. He should try to ensure that systematic steps are taken to implement the decision.
While implementing a decision there may be resistance from subordinates who are affected by the decision. The right thought will be that the manager should talk to the subordinates and explain various aspects of the decision. He should also alley the fears of the subordinates before implementing the decision. It will be better that subordinates are made part of decision making process before selecting a particular alternative. This will help in smooth implementation of the decision.
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Step # 7. Follow-Up:
Follow-up action is the last step in the process of decision making. The results of the decision will come out after its implementation. It should be seen whether results are as per the expectations or not. The difference between the expected results and actual results with clearly expected results and actual results will clearly show whether the decision has been implemented properly or not. If the results are lower than the expectations, then the deficiencies in implementation or otherwise should be reviewed and efforts should be made to take remedial measures.
There may be a need to amend the decision if favorable results are not coming out. The follow up action will help in taking necessary steps so that the results are as per the expectations. The follow up step is also an essential element of decision making process.
Steps Involved in Decision Making – 8 Defined Steps: Identification of Decision Problem, Diagnosis and Definition of the Decision Problem and a Few Other Steps
Decision making is a rational process comprising certain defined steps, which are discussed as follows:
Step # 1. Identification of Decision Problem:
In most of the cases, the problems are difficult to be identified and formulate the decision problem. Problems may be related to any area of management like planning, organising, directing and control. Problem may relate to the sectors, products or people. How the problems are perceived also indicates the degree of managerial effectiveness.
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Step # 2. Diagnosis and Definition of the Decision Problem:
On discovering the decision problem, diagnose and define it in clear terms so as to identify its scope and ramifications. To enable the different functional managers to tackle it effectively, break it down to sub-problems.
Step # 3. Specification of Objectives:
Objectives are the end points towards which decisions are directed. Objectives may be quantitative or qualitative. They may be specific, multiple, flexible attainable and realistic. They serve as yardsticks for measuring and evaluating the outcomes. They can also be used for implementing the decisions and for assessing its effectiveness.
Step # 4. Collection of Relevant Information:
To collect the relevant information, the manager has to design the information system. The information may be quantitative or qualitative, internal or external, historical or projected. The manager has to consider several issues such as – availability, adequacy, reliability, timeliness, cost and relevance, etc., while collecting the information.
Step # 5. Search for Alternative Courses of Action:
Based on the relevant information, the manager has to identify alternative courses of action that lead to desirable solution. The manager may relay on his own expertise, may talk to his staff or may even conduct a brains storming with experts. New alternatives or options have to be generated through creative thinking.
Step # 6. Evaluation of Alternative Courses of Action:
Once the list of alternatives is available, it is necessary to assess, against an objective criteria, the merits and demerits of each alternative. This is a complex process that may call for statistical tools.
Step # 7. Making the Final Choice:
Against the predetermined objective criteria, progressively eliminate the alternatives to narrow down best course of action. The managers have to ensure that they will not be any bias, favouritism in this process. There should not be any external or internal influence on selection of final course of action.
The manager is expected to apply his judgmental skills in making the final choice considering the objectives and values of the organisation, the feasibility, acceptability of the decision, relative simplicity of the likely outcomes, and so on. It is a matter of trade-off between risks and returns, costs and benefits, both quantitative and qualitative issues.
The manager optimises utility function in the context of his responsibility as a manager. Make use of organisational policies, strategies, and previous decisions, and committed resources, interpersonal and human factors as guiding factors for effective decision making.
Step # 8. Implementation of the Decision:
This is the final step in the decision making process. Here the decisions are operationalised; putting them into action is the essence of the whole managerial effectiveness. The decisions can be implemented once necessary structural, administrative and logistic arrangements are made.
Adequate authority has to be delegated for operationalising the decisions taken. Also, commit the financial and other resources required. Take the staff into confidence; provide them an environment that is conducive to empower them for implementation. Establish adequate controls to ensure that decisions are implemented in a faithful but flexible manner.
Steps Involved in Decision Making – 7 Steps Followed by a Manager to Arrive at a Correct Decision
The following procedure should be followed in arriving at a correct decision:
Step # 1. Setting Objectives:
Rational decision-making involves concrete objectives. So the first step in decision-making is to know one’s objectives. An objective is an expected outcome of future actions. So before deciding upon the future course of efforts, it is necessary to know beforehand what we are trying to achieve. Exact knowledge of goals and objectives bring purpose in planning and harmony in efforts. Moreover, objectives are the criteria by which final outcome is to be measured.
Step # 2. Defining the Problem:
It is true to a large extent that a problem well defined is half solved. A lot of bad decisions are made because the person making the decision does not have a good grasp of the problem. It is essential for the decision-maker to find and define the problem before he takes any decision.
Sufficient time and energy should be spent-on defining the problem as it is not always easy to define the problem and to-see the fundamental thing that is causing the trouble and that needs correction. Practically, no problem ever presents itself in a manner that an immediate decision may be taken. It is, therefore, essential to define the problem before any action is taken, otherwise the manager will answer the wrong question rather than the core problem. Clear definition of the problem is very important as the right answer can be found only to a right question.
Step # 3. Analyzing the Problem:
After defining the problem, the next step in decision-making is analyzing it. The problem should be thoroughly analyzed to find out adequate background information and data relating to the situation. The problem should be divided into many sub-problems and each element of the problem must be investigated thoroughly and systematically.
There can be a number of factors involved with any problem, some of which are pertinent and others are remote. These pertinent factors should be discussed in depth. It will save time as well as money and efforts.
In order to classify any problem, we require lot of information. So long as the required information is not available, any classification would be misleading. This will also have an adverse impact on the quality of the decision. Trying to analyze without facts is like guessing directions at a crossing without reading the highway signboards. Thus, collection of right type of information is very important in decision-making. It would not be an exaggeration to say that a decision is as good as the information on which it is based. Collection of facts and figures also requires certain decisions on the part of the manager. He must decide what type of information he requires and how he can obtain this.
Step # 4. Developing Alternatives:
After defining and analyzing the problem, the next step in the decision-making process is the development of alternative courses of action. Without resorting to the process of developing alternatives, a manager is likely to be guided by his limited imagination. It is rare for alternatives to be lacking for any course of action. But sometimes a manager assumes that there is only one way of doing a thing.
In such a case, what the manager has probably not done is to force himself consider other alternatives. Unless he does so, he cannot reach the decision which is the best possible. From this can be derived a key planning principle which may be termed the principle of alternatives. Alternatives exist for every decision problem. Effective planning involves a search for the alternatives towards the desired goal.
Once the manager starts developing alternatives, various assumptions come to his mind, which he can bring to the conscious level. Nevertheless, development of alternatives cannot provide a person with the imagination, which he lacks. But most of us have definitely more imagination than we generally use.
It should also be noted that development of alternatives is no guarantee of finding the best possible decision, but it certainly helps in weighing one alternative against others and, thus, minimizing uncertainties.
While developing alternatives, the principle of limiting factor has to be taken care of. A limiting factor is one which stands in the way of accomplishing the desired goal. It is a key factor in decision-making. If such factors are properly identified, manager can confine his search for alternative to those which will overcome the limiting factors.
In choosing from among alternatives, the more an individual can recognize those factors which are limiting or critical to the attainment of the desired goal the more clearly and accurately he or she can select the most favourable alternatives.
Step # 5. Selecting the Best Alternative:
After developing alternatives one will have to evaluate all the possible alternatives in order to select best alternative. There are various ways to evaluate alternatives. The most common method is through intuition, i.e., choosing a solution that seems to be good at that time. There is an inherent danger in this process because a manager’s intuition may be wrong on several occasions.
The second way to choose the best alternative is to weigh the consequences of one against those of the others. Peter F. Drucker has laid down four criteria in order to weigh the consequences of various alternatives.
They are:
(a) Risk:
A manager should weigh the risks of each course of action against the expected gains. As a matter of fact, risks are involved in all the solutions. What matters is the intensity of different types of risks in various solutions.
(b) Economy of Effort:
The best manager is one who can mobilize the resources for the achievement of results with the minimum of efforts. The decision to be chosen should ensure the maximum possible economy of efforts, money and time.
(c) Situation or Timing:
The choice of a course of an action will depend upon the situation prevailing at a particular point of time. If the situation has great urgency, the preferable course of action is one that alarms the organization that something important is happening. If a long and consistent effort is needed, a slow start gathers momentum approach may be preferable.
(d) Limitation of Resources:
In choosing among the alternatives, primary attention must be given to those factors that are limiting or strategic to the decision involved. The search for limiting factors in decision-making should be a never ending process. Discovery of the limiting factor lies at the basis of selection from the alternatives and hence of planning and decision-making.
There are three bases which should be followed for selection of alternatives and these are experience, experimentation and research and analysis which are discussed below:
In making a choice, a manager is influenced to a great extent by his past experience. He can give more reliance to past experience in case of routine decisions; but in case of strategic decisions, he should not rely fully on his past experience to reach at a rational decision.
Under experimentation, the manager tests the solution under actual or simulated conditions. This approach has proved to be of considerable help in many cases in test marketing of a new product. But it is not always possible to put this technique into practice, because it is very expensive.
Research and analysis is considered to be the most effective technique of selecting among alternatives, where a major decision is involved. It involves a search for relationships among the more critical variables, constraints and premises that bear upon the goal sought.
Step # 6. Implementing the Decision:
The choice of an alternative will not serve any purpose if it is not put into practice. The manager is not only concerned with taking a decision, but also with its implementation. He should try to ensure that systematic steps are taken to implement the decision. The main problem which the manager may face at the implementation stage is the resistance by the subordinates who are affected by the decision.
If the manager is unable to overcome this resistance, the energy and efforts consumed in decision-making will go waste. In order to make the decision acceptable, it is necessary for the manager to make the people understand what the decision involves, what is expected to them and what they should expect from the management.
In order to make the subordinates committed to the decision, it is essential that they should be allowed to participate in the decision-making process. The managers who discuss problems with their subordinates and give them opportunities to ask questions and make suggestions find more support for their decisions than the managers who don’t let the subordinates participate.
The area where the subordinates should participate is the development of alternatives. They should be encouraged to suggest alternatives. This may bring to surface certain alternatives which may not be thought of by the manager.
Moreover, they will feel attached to the decision. At the same time, there is also a danger that a group decision may be poorer than the one man decision. Group participation does not necessarily improve the quality of the decision, but sometimes impairs it.
Someone has described group decision like a train in which every passenger has a brake. It has also been pointed out that all employees are unable to participate in decision-making. Nevertheless, it is desirable if a manager consults his subordinates while making decision.
Step # 7. Follow-Up the Decisions:
Kennetth H. Killer, has emphatically written in his book that it is always better to check the results after putting the decision into practice.
He has given reasons for following up of decisions and they are as follows:
(i) If the decision is a good one, one will know what to do if faced with the same problem again.
(ii) If the decision is a bad one, one will know what not to do the next time.
(iii) If the decision is bad and one follows-up soon enough, corrective action may still be possible.
In order to achieve proper follow-up, the management should devise an efficient system of feedback information. This information will be very useful in taking the corrective measures and in taking right decisions in the future.
Steps Involved in Decision Making – 6 Sequential Steps: Making the Diagnosis, Analysing the Problem and a Few Other Steps
Decision-making consists of the following steps in the order of their sequence:
Step # 1. Making the Diagnosis:
The first step in decision-making is finding out what really is the problem. If the problem is not correctly diagnosed, efforts made to solve it will be of no use. For example, if the sales decline, the management may think that the problem is one of increasing cost. But the real problem may be inadequate sales planning or decrease in quality or inadequate publicity.
Hence, the efforts made by the management to reduce cost may not help in increasing sales. Joseph L. Massie has rightly said that “a good decision is dependent upon the recognition of the right problem”. A correct diagnosis of the problem is of utmost importance because a disease can be cured only if it is properly diagnosed.
Step # 2. Analysing the Problem:
After ascertaining the correct problem, it should be thoroughly analysed and information and data relating to it should be collected. This will help the management to get a clear idea of the problem. There may be innumerable factors involved in any problem, but to minimise the expense of time and effort, analysis should be directed towards pertinent and closely connected factors for the purpose of collecting information and data. Further, out of the data and information collected, the management should separate facts from beliefs and opinions and it should depend mainly on facts for making decisions.
Step # 3. Developing Alternative Solutions or Courses of Action:
The next step is to develop alternative solutions or courses of action. The management after evaluating the various alternatives can make the decision and the evaluation of alternatives help the management in taking the best decision. For instance, if the management wants to fill up a vacancy, it should consider various alternatives such as whether to promote from within, or recruit from outside or to appoint a relative of the previous employee.
Similarly, the methods of selling its products may involve various alternatives such as whether to sell directly, or through middlemen or a combination of both, viz., direct selling and through middlemen. Thus, for every problem there are alternatives and they should be evaluated before taking a final decision.
Step # 4. Selecting the Best Solution:
The next step is to select the best solution out of the several alternatives developed. For this purpose, the management has to consider the merits and demerits of each alternative solution and costs and sacrifices involved in each. Some criteria for selecting the best solution are the economy of effort, degree of risk, time required for implementation, practicability of the solution, availability of resources, consonance with the goals of the enterprise, etc. Generally, sound knowledge and practical experience of the executive will help him to select the best solution.
Step # 5. Converting the Decision into Effective Action:
After selecting the best solution or decision, the management takes steps to translate the decision into action with the co-operation of the employees. In order to avoid opposition from the employees in implementing the decision, it is desirable that the employees should be associated with the decision-making process.
Step # 6. Follow up the Decision:
Sometimes, it is possible that a decision taken by a manager may not be a correct one. Hence, the manager, while translating the decision into action, should introduce a system of follow up. This helps in safeguarding against incorrect decision and also in modifying or altering the decision without loss of time.
Thus, decision-making process can be divided into sequential operations. In a narrow sense it can amount to simply choosing among two or more alternatives. The chosen alternative will be the “Decision”. Whether the decision is routine or unique one, the systematic, step-by-step approach will be effective.
Steps Involved in Decision Making – 7 Steps Generally Followed by Any Organisation
Professionally managed organizations institutionalize the decision-making process involving the following seven steps:
1. Identify, diagnose, and precisely define the problem
2. Work out alternative solutions
3. Evaluate each alternative solution
4. Choose the best alternative
5. Implement the decision
6. Evaluate the decision
7. Review and learn the lessons for future.
The first step in decision-making is to recognize that there is a problem that needs to be tackled. Apart from this, the decision-maker must have the will to do something about the issue and must believe that the resources and abilities needed for resolving it exist. The problem and its boundaries should be understood well by proper diagnosis.
To do so one may have to resolve the following issues:
i. What is happening and what was expected to happen?
ii. Explain the deviations and their causes
iii. The critical objectives that need to be met in the given context
iv. Cause of the problem
v. The decision
vi. Should I make this decision?
vii. What decisions have already been made?
Answers to the above questions would help in defining the precise goals and objectives within the framework of available resources and restrictions/constraints faced.
The importance of each objective needs to be evaluated. Once the problem has been defined in a given context, it should be analysed to track down its causes, which will give further insight about working out its alternative solutions. The solution to the problem may be ready-made or custom-made.
Ready-made alternatives are based on precedents or on the advice of others who have faced similar problems in the past. Custom-made solutions are designed and developed to tackle the particular problem. This requires a creative input to look beyond for arriving at a solution.
After having worked out various alternatives to solve the problem, one has to evaluate each alternative solution in terms of various parameters such as cost, time, quality, efficiency, and benefits. The main purpose of evaluation of alternatives is to find out the expected consequences of each alternative, if put into action and to what extent the various objectives would be met or not met under each alternative solution.
The evolution of various alternatives should also give rise to an insight about the contingency plans that may need to be implemented depending upon the way the future unfolds. Several techniques are available for analysing the options in order to understand their implications. Interpretive structural modeling or concept mapping can be used to analyse the interrelationships of the options.
Based on the evaluation of various alternatives, that is, after having weighed the consequences of various options, the decision-maker has to choose the best possible decision that optimizes achievement of objectives within given constraints, maximizes the benefits, and satisfies the involved individuals to the greatest extent. The process of selection of the best alternative becomes easy and logical, when the criteria for selection are laid down in the initial stage itself. It is the criteria that should help in rating the various alternatives. One should rate each criterion according to its importance.
Criteria are basically clear conditions that must be satisfied to arrive at a useful, objective, effective, and good decision. While arriving at the best decision, a decision-maker should ensure its feasibility.
For ensuring that the results, as envisaged, are achieved from the best decision, it should be effectively implemented. For effective implementation what matters the most is that the people involved in implementing the decision understand the problem as well as an alternative choice made to solve the problem and are fully committed to its successful implementation.
For effective implementation, managers should plan the implementation process very meticulously and carefully. Implementation analysis can provide a clear view of resource requirements, people and groups affected, and any cautions to exercise when implementing the option.
After having implemented the decision, the next step requires evaluating the decision to obtain an insight into what is happening/has happened as against what was expected. This means that one should consider the efficacy of the solution. Irrespective of positive or negative feedback, evaluating a decision is always useful.
A positive feedback reassures that the decision has worked well and should be continued and/or applied elsewhere in similar situations. However, a negative feedback implies that the decision is ineffective requiring additional time, effort, resources, etc. The continuous review of decisions helps in building a feedback mechanism, so that we may learn from them.
The review mechanism sheds light on the weak links in the various steps in decision-making. Accordingly, taking corrective actions to strengthen various steps involved leads to improvements in the quality of decisions and institutionalizes the decision-making process.
Steps Involved in Decision Making – 6 Main Steps: Identifying the Problem, Analysing the Problem and a Few Other Steps
Various steps followed in decision-making process are discussed below:
Step # 1. Identifying the Problem:
This is one of the most important steps in decision-making as all the other steps in the process depend on the nature of the problem. What one has to do depends on the diagnosis of the problem. This step in decision-making is complicated by the fact often that what seems to be the problem is not really the problem but the symptoms of the problem. For example, when an agitation is going on the problem is not the agitation, but the problem is personal interests of the leaders.
Step # 2. Analyzing the Problem:
Once the problem has been correctly diagnosed, the next logical step in decision-making is to analyze it. The important aspect of analyzing the problem is to find the “limiting factor” or the “critical factor”-which must be removed / changed in order to make problem solving decision to accomplish the desired goals. The ability of decision-making manager to identify this limiting or strategic factor in the problem solving is crucial to his success in finding the optimal solution to the problem on hand.
Step # 3. Developing Alternate Solutions:
This is a search process in decision-making. A manager has to search and list out the various alternatives by which he can solve the problem. Many a time it happens that there is a single problem, which cannot be solved in more than one way. If a decision maker finds that there is one and only one solution to the problem, it means that he has not searched for alternative solutions. This process cannot be unending due to limitations of time and cost.
Step # 4. Weighing Alternative Solutions:
Each alternative listed is to be analyzed thoroughly by using commonsense as well as mathematical techniques to find out the consequences associated with each one of them and then compared one against other or against decision criterion. Each alternative solution may have favourable or unfavourable consequences.
For example, if you want to increase the productivity it may require good maintenance schedules to reduce break downs etc. Various quantitative techniques like marginal analysis, cost-benefit analysis, operations research, probability theory etc. are available to modern manager to use them to take quick and effective decision.
Step # 5. Choosing the Best Alternative:
After the evaluation of available alternative solutions to the problem, next step in the process of decision-making is to select the best one/optimal one among them in the best interest of the organization. This is done by comparing each alternative solution with one another in terms of predetermined objectives. The criterion of decision is one or more objectives, which are sought to be attained. In selecting the alterative that satisfies a predetermined objective, the decision maker may find that it is pre-judicial to the attainment of some other objectives.
Drucker suggests four criteria for selecting the best among the possible alternatives:
(i) Risk,
(ii) Economy of Effort,
(iii) Timing and
(iv) Limitation of Resources.
Here, economy of effort refers to efficiency in the utilization of resources. The best decision, other things remaining the same, is the one, which makes the most efficient utilization of scarce resources.
Timing is a very important factor in decision-making. The question to be considered in this connection is, can the organization accommodate a particular decision, will it gain acceptance of the superiors, subordinates and peers who are either affected by it or would require to implement it? As very aptly observed by Barnard, “The fine art of executive decision consists in not deciding questions that are not now [pertinent, in not deciding prematurely, in not making decisions that cannot be made effective and is nor making decisions that others should, make.”
While making a decision, the manager must also consider the availability of existing and potential resources that would be required for implementing it. The most precious resource of an origination is its manpower abilities, competence, motivation, vision and level of aspiration of its employees.
Step # 6. Implementing and Verifying the Decision:
Once the decision is made, it is to be implemented to know the effectiveness of decision in achieving the desired organizational goals. Implementation stage is that much important because if the decision taken is not implemented in time and properly the essence of good decision will be spoiled. Decision verification involves periodic assessment of the effectiveness of the decision in attaining the desired objectives. If the decision is producing the desired results, it may need to change the decision or its implementation or even the objective that might seem unattainable due to environmental constraints.
Steps Involved in Decision Making – Defining the Problem, Analysing the Relevant Facts and a Few Other Steps
The important five factors governing the decision process are:
1. Defining the problem
2. Analysing the relevant facts
3. Preparation of alternative courses of action
4. Deciding the best course of action, and
5. Implementation of the decision.
Step # 1. Defining the Problem:
The first step of decision making process is to know the problem. A problem may be simple or complex. It requires a thorough study of various aspects of the problem, so as to understand its nature. This will lead to find out the ‘critical cause’ of the problem. In an enterprise, for example, a problem can be of sales, production, marketing, personnel welfare, discipline, etc.
Step # 2. Analysing the Relevant Facts:
Once the problem has been defined the next is analysing the facts.
This involves classification of the process into following:
(a) Future effects of the decision – For example, how far the decision can withstand and guide the enterprise to a particular course of action.
(b) Impact of decision – In what manner the decision influences various activities and functions of the enterprise.
(c) Quantitative value – A decision has to be quantitative and consistent in nature.
Step # 3. Preparation of Alternative Courses of Action:
After having defined and analysed the problem, the next step is to develop the alternative solution. When this is developed, it is accepted. It is important to find a correct solution. If the alternatives are not properly analysed, there is every possibility of a decision going wrong.
When the best alternative is available to make decision it is advisable to note that a manager must introspect (examine his own thought) whether the problem requires a decision or it can be left without a decision or what is advantageous to the organisation? In a nut-shell, the manager must visualise the consequences of a decision before it is arrived at and implemented.
Step # 4. Deciding the Best Course of Action:
After preparation of the alternative courses of actions, the decision maker must select the best course of action. He must visualise the consequences of each of the alternatives on their merits/demerits.
It is often advantageous to list out the tangible and intangible facts and distinguish their advantages as well as the disadvantages based on merits, e.g., money and other factors of qualities etc., respectively. When merits and demerits are distinguished properly, a decision can be arrived at for the benefit of the organisation.
Step # 5. Implementation of a Decision:
After the above steps are cleared, the decision is implemented. It may come as an ‘order’, ‘instruction’ or any other form to the concerned personnel.
Steps Involved in Decision Making – 10 Simplified Steps to Decision Making
Decision-making is not an easy job. It requires a lot of skill. A decision-making is affected by a number of factors. So, the manager can take good decisions by adopting a procedure.
A manager may not be able to take good decisions if he fails to follow a sequential set of steps. The decisions-making process depends upon the nature of problem and the nature of organisation.
The following is the simple process followed in taking a decision in normal situations:
Step # 1. Identification of a Problem:
Identification of a problem means recognition of a problem. Problem arises due to difference between what is and what should be. The changes of business environment form the main reason for creating of a problem. So, the manager should define what the problem is. A well-defined problem is half solved. Then, the manager should find the causes of a problem. This is not an easy job. Finding of causes of a problem is used to take quality decision. The manager should continuously watch the decision-making environment and understand the real problem and its causes.
The manager may look into the management reports; find deviations from budget if any, compare the company’s results with the competitor’s results and efficiency of employees etc. These are used to identify the problem correctly. Here, the manager has to use his experience, imagination and judgement in order to find out the real nature of the problem.
Step # 2. Diagnosing the Problem:
There is a slight difference between problem identification and diagnosing the problem. A doctor can diagnose the disease of a patient. A patient cannot find out what is the real disease. But, a doctor can do so with the information given by a patient. Information is very useful to the doctor. In management, the manager is acting as a doctor while diagnosing the problem.
Step # 3. Collect and Analyse the Relevant Information:
The next step is that required at various levels information should be collected by the manager. Then, the manager has to study the information with great care. It is very useful to analyse the problem from different angles. If the problem is analysed from different angles, a quality and quick decision may be taken by the manager. The manager should see that only relevant information alone is collected and analysed.
Step # 4. Discovery of Alternative Course of Action:
Creative thinking is necessary to develop or discover many alternative courses of action. If there is no alternative, there is no need of taking a decision. If there are more and more of alternatives, the manager will have more freedom to take a decision. A problem can be solved in many ways. At the same time, a solved problem should not arise again in the future.
It is advisable to the manager that he should discover a number of alternatives. The problem of limiting factors is also considered by the manager. Some alternatives cannot be selected due to limiting factors. Time and cost are the probable limiting factors of an organisation.
Step # 5. Analysing the Alternatives:
Next, the pros and cons of available alternatives are analysed. Some alternatives offer maximum benefits than others. An alternative is compared with other alternatives. The decision maker can prepare a list of limits for each alternative.
Step # 6. Screening of Alternatives:
The available alternatives are screened in the order of maximum benefits derived from them. Each alternative is evaluated in terms of risks involved in implementing them. Both tangible and intangible factors are considered while evaluating or screening each alternative.
Tangible factors include profits earned, time taken, money invested, rate of returns on investment, rate of depreciation etc. Intangible factors include public relations, goodwill of the company, loyalty of employees etc. Sometimes, two or more alternatives are equally suitable by nature. The decision-maker should find the actual difference of alternatives which will be the deciding factor to select an alternative.
Peter F. Drucker has suggested the following criteria to evaluate the available alternative course of action:
i. Risk – Degree of risks involved in each alternative.
ii. Economy of efforts – Cost, time and efforts involved in each alternative.
iii. Timing or situation – Whether the problem is urgent.
iv. Limitations of resources – Physical, financial and human resources available with the organisation.
Step # 7. Selection of Best Alternative:
Now, the decision maker can select the best alternative after careful evaluation. An alternative which gives maximum benefits to the organisation is selected. At the same time, the selected alternative should fit with the organisational objectives.
The following approaches may be adopted while selecting an alternative:
i. Experience:
A manager can select an alternative on the basis of his past experience. The past prevailed situation cannot be the same as the present prevailing situation. Situation changes from time to time. Past decisions may be rationally amended to suit the present situation. So, the past experience helps a lot to the manager in taking a decision.
ii. Experimentation:
Each alternative is put into practice and the results are observed under this approach. An alternative which gives best results will be selected. For example, before an organisation selects a production technique, it goes to trial production. The organisation finally selects production techniques which result in a quality production with minimum loss and expenses. This approach, being expensive and time consuming, should be used only on limited scale.
iii. Research and Analysis:
This approach is also rarely adopted. In case of critical situation, a decision is taken under this approach. If a lot of calculations are required, they are completed with the help of computers.
Step # 8. Conversion of Decision into Action:
The future course of action is scheduled on the basis of selected alternative or decision. Here, the manager has to consider the policy of the management. The selected alternative decision is communicated to concerned persons. This communication facilitates easy implementation of decision. The language of decision should be simple and easily understandable.
Step # 9. Implementation:
Next, the manager has to implement the decision to achieve desired goals. Decision-making process comes to an end with the actual implementation of decision. Implementation is equally important to the selection of alternatives. Implementation plan should provide for time and procedure sequence. Necessary resources should also be allocated and responsibility for specific tasks should be assigned to individuals.
Step # 10. Verifying the Decision:
It is the duty of every manager to see whether the decision is properly implemented or not. Verification of implementation of decision ensures the achievement of objectives. The selected alternative may be an ill-chosen one and might cause loss to the organisation. This can be measured with the help of verifying the decision if the manager feels that the selected alternative is not the best one; an amendment may be made to achieve desired goals. This is the simple process of decision-making.
Steps Involved in Decision Making – 6 Main Managerial Steps
Every manager in hierarchy is responsible for making decisions on matters falling within his / her scope of work and for which he / she has authority and does not need to refer to higher management for approval. The quality of decisions made by a manager indicates how well the responsibilities given were executed.
Hence a manager needs to use all his decision-making skills and intelligence and follow a proper decision making steps before arriving upon a decision. Decision-making is a process. It has to be done in a systematic manner. Therefore, there are certain steps in the process of decision making.
They are as follows:
(i) Identifying and Diagnosing the Real Problem:
For any organization decisions need to be a taken with a set structure, which is made by predetermined objectives, past actions and decisions and environmental considerations. The first and foremost step in the decision making process is identifying the problem. It is rightly said that, “Problem well identified, is half-solved.”
The manager has to determine the nature, type, level or size of the problem. Problems generally arise because of difference between what is and what should be. Diagnosing the real problem implies knowing the gap between what exist and what is expected and identifying the reason for the gap.
Identifying and diagnosing the real problem involves answers to the following questions:
a. What is the problem?
b. What is the real cause of the problem?
c. How the problem is to be solved?
(ii) Collection of Relevant Information:
All the information required to make the decision is to be collected. Information gives knowledge to reduce the uncertainty and complexity of a problem. So it is quite essential that decision maker should identify resources (people, money, materials, time, equipments) and identify constraints (lack of adequate resources, etc.)
(iii) Discovery of Alternatives:
In any given situation there are a number of forces, which directly or indirectly affect it. Hence management needs to apply principle of the ‘limiting factors’, which means management should limit the discovery of to only key factors also known as ‘strategic factors’, which are critical or strategic to the decision.
For example, for a decision related to expansion, availability of finance / skilled human resources can be limiting factors.
While finding limiting factors, management needs to analyze the limiting factors in terms of the possible contribution to the accomplishment of higher organizational objectives along with current decision.
(iv) Analysis and Evaluation of Available Alternatives:
In the next stage, the alternatives are analyzed and compared against each other for their pros and cons, risk involved and resources required v/s available for implementation. Both tangible & intangible factors should be taken into consideration during evaluation of different alternatives.
a. Tangible factors (immediately visible, expressed numerically) like profits, time, money, and rate of return on capital investment.
b. Intangible factors such as public relations, reputation, and employee morale and personnel relations even though are difficult to express numerically can be very significant and should not be ignored.
As all these factors have an effect on income, expense and cost structure of the enterprise, they can be evaluated by comparing the impact they may have. These factors can also be evaluated on the basis of forecasts and estimates. It becomes very important for the manager to see how much these forecasts and estimates are reliable as decisions would be based on them.
In situations where two or more alternatives are equally good or bad manager might need to have to go for actual implementation and check the difference. In situations when none of the currently available alternatives seem to produce desired results, the manager might not chose any of them and try to find newer alternatives. For evaluating the alternatives techniques of marginal analysis can be used.
The benefit of marginal analysis is it highlights the impact that individual variable may have on the additional revenues vs. the additional costs and de-emphasizes the impact of averages and constants on the same. Alternatives can also be evaluated on the basis of cost effectiveness.
(v) Selection of Alternatives to be Followed:
This is an important step in decision-making process. Drucker gave four criteria to make a good decision (basic condition that must be satisfied to arrive at good decision).
They are:
b. Economy of effort.
d. Limitation of resources.
Thus the manager applies technique, judgment and his past experience to make a final choice.
Koontz and O’Donnell have suggested three bases which should be followed by a manager for selection among the alternatives.
These are:
(a) Experience,
(b) Experimentation and
(c) Research and analysis.
In making a choice, a manager is influenced to a great extent by his past experience. Past experience is useful guide for decisions in the present. So if a decision maker carefully analyses past experience, rather than blindly following it, then such an experience can be useful as a basis for decision making.
Changes in the circumstances and underlying assumptions of decisions in the past should be carefully examined before deciding a problem on the basis of experience.
Another way to decide amongst alternatives is to try one of the alternatives and see what actually happens. In events where no similar past decisions are available or when one wants to explore newer possibilities it is said a manager must experiment. Experimentation has the advantage of incorporating environmental changes and intangible factors.
However experimentation has limitation that it can be most expensive and is usually recommended only when all other decision making help has been tried. For instance, a company may test a new product in a certain area before expanding its sale nationwide.
It is considered to be the most effective technique for selecting alternatives where major decisions are involved. Scientific method can be applied to planning and decision making, this helps the manager to visualize the problem and find how different variables are correlated and expressed in mathematical terms.
In recent years extensive research has been carried out to develop a comprehensive theory and practice of decision-making and management at large. Break-even analysis, marginal contribution analysis, forecasting, capital budgeting, standard costing, sensitivity analysis, operations research and the like, provide examples of research techniques currently in use in the field of decision-making.
(vi) Communication & Implementation of the Decision:
This is the final step in decision making process. Firstly, the decision taken needs to be communicated to those who have to follow the new line of action so as to make them aware of new & changed situation. As a prerequisite, subordinates should be encouraged to participate in decision-making process to gain their commitment and moral support to the decision.
For the decision to be successfully implemented a manager has to take into consideration the beliefs, attitudes and prejudices of people in the organization. A manager also needs to be aware of his / her own contribution required for successful implementation of the decision. Apart from these effective controls also needs to be placed so that any deviations from the expectations can be observed, analyzed and incorporated in future decisions.
Steps Involved in Decision Making – 7 Proposed Steps: Specific Objective, Problem Identification and a Few Other Steps
Decision making is a process having different steps.
Simon’s decision-making process who has proposed three phases of decision making – intelligence (problem identification), design (alternative generation), and choice (choosing an alternative). Additional steps have been incorporated in the decision-making process to reflect decision implementation, thereby making decision making a continuous process. All these steps lead to making rational decision. Therefore, this process is also known as rational decision-making process.
Let us discuss various steps of decision-making process:
Step # 1. Specific Objective:
The need for decision making arises in order to achieve certain specific objective. Every action of human beings is goal directed. This is true for decision making also which is human action. Therefore, the starting point in any analysis of decision making involves the determination of whether a decision needs to be made. In fact, setting of specific objective itself is an outcome. However, since the objective setting is an outcome, this may not be considered truly as the first step of decision-making process but it provides framework for further actions.
Step # 2. Problem Identification:
Since a particular decision is made in the context of a certain given objective, identification of problem is the real beginning of decision-making process. A problem is the gap between actual state of affairs and desired state of affairs on the subject- matter of decision. Problem should be identified clearly and specifically so that it may be solved by taking appropriate action.
Any problem which does not have any alternative for its solution is not treated as a problem from decision making point of view though it may have serious adverse consequence. A problem can be identified by analyzing the situation which is causing gap between actual state of affairs and desired state of affairs at a particular point of time. For example, an organization wants to grow.
This is a problem from the point of view of decision making because of gap between actual state of affairs (organization without growth) and desired state of affairs (organization with growth). In order to overcome this gap (solving the problem), decision is required.
Step # 3. Search for Alternatives:
Based on identification of the problem, the decision maker seeks suitable alternative to solve the problem. A problem can be solved in several ways though all the ways may not be equally suitable. Further, if there is only one way of solving a problem, no question of decision making arises. Therefore, the decision maker must try to find out the various alternatives in order to get the most suitable alternative. Degree of search for alternatives may vary according to the degree of importance of decision under consideration. Information about alternatives may be collected from various sources.
In case of a complex problem, brainstorming can be used. Brainstorming is a technique in which a group of 10-15 members give their ideas without considering their quality. In this process, though many ideas may be worthless, some ideas may emerge which may be relevant for decision making.
Step # 4. Evaluation of Alternatives:
After the various alternatives are identified, the next step is to evaluate these alternatives so that the most desirable alternative is selected. However, all alternatives available for decision making will not be taken for detailed evaluation because of time and cost constraint. Therefore, only those alternatives should be taken for detailed analysis that meet initial criteria set for choosing an alternative.
After identifying the alternatives which require serious consideration, the decision maker should go for evaluating how each alternative may contribute towards achievement of the specific objectives by using relevant techniques of decision making.
Step # 5. Choice of Alternative:
The evaluation of various alternatives presents a clear picture of how each alternative contributes to achievement of the specified objectives. Based on this, the most acceptable alternative is chosen. Though the attempt should be made to choose the most desirable alternative, there are many subjective factors which affect what alternative will be chosen.
Thus, rational process of decision making is considerably affected by these factors and it is not necessary that the chosen alternative is the best one; it is just the most acceptable one. Choice of the most acceptable alternative is based on the satisficing approach rather than the maximizing approach of decision making proposed by Simon.
Step # 6. Action:
After the alternative is selected, it is put into action. Truly speaking, the actual process of decision making ends with the choice of an alternative through which the specified objective can be achieved. However, decision making, being a continuous and ongoing process, must ensure that the objective has been achieved by the chosen alternative. Unless this is done, managers will never know what way their choice has contributed. Therefore, the implementation of decision may be seen as an integral aspect of decision making.
Step # 7. Result:
When the decision is put into action, it brings certain result. The result must correspond with the objective, the starting point of decision-making process, to check whether effective decision has been made and implemented properly. If there is any deviation between objective and result, this should be analyzed and factors responsible for this deviation should be located and suitable actions should be taken.