Management Decision

Making
Introduction:
Decision making deals with specific problems. Problem
solving and decision-making are important skills for
business and life. Decision making is especially important
for management and leadership of People that are less
natural decision makers. But then need to be more
decisive in acting up on the assessment made.

Two Types of Models:

Rational:
Well as understand all the information then to take
a decision.
Non-rational:
Managerial decision making suggest that
limitations of information gathering to take a decision
Managerial Decisions
a. Programmed:
In this programmed we can take a managerial
decision with simple, common, frequently occurring
problems.
b. Non-programmed decisions:
Deals with unusual or exceptional problems.
There are three situations based on non-programmed
decisions.

i. Certainty
ii. Uncertainty
iii. Risk
i. Certainty:
The decision maker knows with reasonable
certainity what the alternatives are.
ii. Uncertainty:
The decision maker is not aware of all available
alternatives.
iii. Risk:
The decision maker has incomplete
information about available alternatives.
List of Activities in Management
Decision
i. Decision-Making styles:
An activity in which participants are guided
through the different styles of decision making ranging
from participative to autocratic.

ii. Group versus individual decision making:

Participants look at the advantage and
disadvantages of groups, rather than individuals making
decision.

iii. Decision-Making in groups:

Why do we make decisions in groups?
Participants explore this question before going on to work
on a case study that challenges them to come up with a
group decision.

iv. Using your team:

This activity explores the role of the team as a
whole in the decision-making process.

v. Changing the mind set:

 Participants explore how the mind is pre-
programmed and how this affects effective decision
making.

vi. Decision making as part of problem solving:

Managers continually have to solve
problems. This activity explores the part decision making
plays in the problem-solving process.

vii. Planning and evaluating decisions:

This activity explores this issue to assist
managers in implementing and evaluating the decision
they make.

viii. Decision simplification techniques:

In this activity participants are encouraged
to look at the pros and cons of various techniques that
can be used to simplify the decision making process.
Different Decision Making
Techniques
i. Marginal analysis
ii. Financial analysis
iii. Break-even analysis
iv. Ratio analysis

In order to carry out managerial functions

effectively, managers at all levels require vital
information with speed, brevity.
For example:
“We know what happens to people who stay in
the middle of the road. They get run down.

“In any moment of decision the best thing you

can do is the thing, the next best thing is the wrong thing
and the worst thing you can do is nothing.”
JFDI-Just Frigging Do It.
The decision maker’s motto
Decision Making
One of the indispensible components of organizations is
the decision maker.

“Decision making is the electing of an alternative from

two or more alternatives, to determine an opinion or a
course of action.”
-George R. Terry
Herbert A. Simon says “whatever a manager does
is nothing but decision making.”
Decision Making Process
a) Identifying and diagnosing the real
problems:
Once the problem is identified, it is said to be
half-solved. Diagnosing the problem implies knowing the
gap between what we want to happen and what is likely
to occur if no action is taken.

A decision maker should collect as much

information as possible and in addition to facts, opinion
should also be collected, which would aid in diagnosing
the problem effectively.

In essence identifying and diagnosing the real problem

involves answers to the questions-

 What is the problem?

 Which problem to solve?

 What is the real cause of the problem?

 Developing alternatives:
Here the decision maker should consider
the viable and realistic alternatives only. Further, he
should consider the time and cost constraints and
psychological barriers that would restrict the number of
reasonable alternatives. While considering various
alternatives, one of the alternatives is not to take action.
Research and creative imagination are required to ensure
that the best alternatives are considered before a course
of action is selected for inclusion of it among the
alternatives.

b) Developing alternatives:
Here the decision maker should consider
the viable and realistic alternatives only. Further, he
should consider the time and cost constraints and
psychological barriers that would restrict the number of
reasonable alternatives. While considering various
alternatives, one of the alternatives is not to take action.
Research and creative imagination are required to ensure
that the best alternatives are considered before a course
of action is selected for inclusion of it among the
alternatives.
 c) Evaluation of alternatives:
Here, the decision-maker draws balance sheet
of every alternative by identifying the advantages of
these alternatives. All pertinent facts about each
alternative should be collected, the pros and cons must
be considered and the important points must be
distinguished from the trivial or peripheral matters. The
purpose of all this exercise is to limit the number of
alternatives to a manageable size and then consider the
alternatives for the selection
Some of the criteria for evaluating the alternatives
could be-
i. Resources available for implementing the alternative
ii. Economy of effort
iii. Element of risk involved
iv. Results expected
v. Time constraint
vi. Accomplishment of common goal
vii. Implementation problems etc.

A manager has to consider both tangible and

intangible strategic factors while evaluating the
alternatives. Of course, in addition to the strategic
factors, a manager should employ his Judgments,
experience, research, and analysis for the comparison of
alternatives course of action.
d) Selection of an alternative:
The next important step in decision-
making process is the selection of best alternative from
various available alternatives. Indeed, the ability, to
select the best course of action from several possible
alternatives separates the successful managers from the
less successful ones. Drucker mentions four criteria viz.
the risk, economy of effort timing, and limitations of
resources, before one alternative is selected among the
available ones.
e) Implementation and follow up of the
decision:
The final step in decision making
process is the implementation of the selected alternative
in the organization. The alternative-selected should be
properly communicated to those members of the
organization who are concerned with the decision.
Acceptance of the4 decision by group-members is
absolutely essential to the successful implementation.
Further, after the implementation of the decision it is
necessary to follow up to see whether the decision is
yielding the desired results or not. A manager should
least hesitate to ride out a decision that does not
accomplish its objective. A manager should see, if
necessary, that all organizational members participate in
the decision making as well as implementation
Common Difficulties in Decision-
Making
• Incomplete information:
This is a major problem for every manager. Lack
of information leaves a manager aimless in a sea of
uncertainty. Not only this, most decisions too many
complex variables for one person to be able to examine
all of them fully.

• Un-supporting Environment:
The environment- physical and organizational –
that prevails in an enterprise affects both the nature of
decision and their implementation. If there is all round
goodwill and trust and if the employees are properly
motivated, the manager is encouraged to take decision
with confidence. On the other hand, under the opposite
circumstances he avoids decision-making

• Non-Acceptance by Subordinates:
If subordinates have a stake in the decision or are
likely to be strongly affected by it, acceptance will
probably be necessary for effective implementation. On
the other hand, subordinates may not really care what
decision is reached. In such situation, acceptance is not
an issue. Democratic leadership style which encourages
subordinates to suggest, criticize, make
recommendations or decide up on policies or projects is
an effective device for gaining their acceptance and
commitment.

• Ineffective Communication:
Another important problem is decision-making is the
ineffective communication of a decision. This makes
implementation difficult. The manager should, therefore,
take care to communicate all decisions to the employees
in clear, precise and simple language.

• Incorrect Timing:
In decision-making, the problem is not merely of
taking a correct decision. It is also of selecting an
appropriate time for taking the decision. If the decision is
correct but the time is inopportune, it will not serve any
purpose.
For example, if the manager wants to decide about
introducing a new product in the market, he should take
the decision at a correct time. Otherwise, he may lose the
market to his competitors.