Documente Academic
Documente Profesional
Documente Cultură
Date: 04/10/2018
2018-2019
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SMC+ UNIVERSITY
ASSIGMENT TOPIC: Decision Making Process by
Manager to drive Company toward success.
Module: Management
Date: 04/10/2018
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Letter of Transmittal
04 October, 2018
Module Leader, KIMT and SMC+ University
Dear Mentor,
Thanking You,
Yours Sincerely,
ABRAR KARIM
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Acknowledgement
One of the most pleasant parts of submitting a report is the opportunity to convey gratitude to
those who have contributed in its successful completion. Unfortunately, no matter how
extensive, the word thanks, it is always inadequate in expressing the earnest gratefulness.
These acknowledgements are no exception.
Acknowledgements must also go to the course coordinator for their sincerity, willingness to
accept differences; enthusiasm for creativity and long hours of earnest hard work under the
pressure of knocking deadline; all of which has made this report possible and successful in
due time.
Gratitude must be conveyed to those who have helped gather information; information which
set the foundation of the report.
At last, I would like to convey our earnest gratefulness to our honorable module leader for
providing me with such an opportunity. The assignment has undoublty helped me gain a lot
of knowledge which can be carried down to my future career.
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Table of Contents
Abstract……………………………………………………………………………………………………………………………………6
Introduction……………………………………………………………………………………………………………………………6
Objective…………………………………………………………………………………………………………………………….……7
Methodology…………………………………………………………………………………………………………………….…….7
Characteristics of Decision Making………………………………………………………………………………..8
Advantage of Decision Making………………………………………………………………………………………..9
Steps involve in Decision Making…………………………………………………………………………….……10
Relationship between Decision Making and Planning…………………………………………...13
Difference between problem analysis and decision Making…………………………………13
Importance of Decision Making……………………………………………………………………………….…….13
Decision Making Style…………………………………………………………………………………………………..…..13
Types of Decision……………………………………………………………………………………………………………..…14
The process of Rational Decision Making……………………………………………………………….…..15
Assumption of Rational Decision Making Process……………………………………………………15
The Decision Making process in 5 steps………………………………………………………………………16
Decision Making Process in 3 steps…………………………………………………………………………..….17
Decisional process based on innovation conceptualization……………………………....…18
Complex decision-making process…………………………………………………………………………….…19
Conclusion ……………………………………………………………………………………………………………………….…..21
Reference……………………………………………………………………………………………………………………….……..22
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Abstract
The decision-making process represents an on-going activity of managers. Contrary to the
common one, the strategic decision is being made in a longer time and on a detailed basis.
The managers can use models of decision -making in their activity to be more effective. This
paper presents a briefing on the development of the concept of management decision and it
illustrates summarized three models of decision-making process. The author’s contribution to
the paper is a conceptualization of the decision making process and a new, more complex
model of decision-making called CDP Model, based on literature review and own
observations and experience. The model takes into account the decision-making process as a
system and is a useful tool to managers in any field.
Introduction
In each and every organization Decision making is the process of making choices by
identifying a decision, gathering information, and assessing alternative resolutions.
Using a step-by-step decision-making process can help the manager of any company to
make more deliberate, thoughtful decisions by organizing relevant information and
defining alternatives. This approach increases the chances that you will choose the most
satisfying alternative possible.
It is rightly said that the first important function of management is to take decisions on
problems and situations. Decision-making pervades all managerial action it is a
continuous process. Decision-making is an indispensable component of the management
process itself.
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Objective
o Recognizing the various factors which influence a leader’s decision-making style
o Identifying the steps and analysing alternatives in a decision-making process
o Differentiate between the three primary decision-making approaches: avoiding,
problem solving, and problem seeking
o Identifying the characteristics of the rational decision-making process
o Summarizing the inherent flaws and arguments against the rational model of decision-
making within a business context
Methodology
For making this report I have used several sources of information. Mainly, I have used the
notes provided by our course professor. I have also used Google Scholar as the search engine
for finding and gathering some basic information for the assignment from several websites. I
also read many articles and journals from internet and prepared this assignment. For
preparing this report, I have also taken help from various management text books.
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Characteristics of Decision Making
Decision making implies choice: Decision making is choosing from among two or more
alternative courses of action. Thus, it is the process of selection of one solution out of many
available. For any business problem, alternative solutions are available. Managers have to
consider these alternatives and select the best one for actual execution. Here, planners/
decision-makers have to consider the business environment available and select the
promising alternative plan to deal with the business problem effectively. It is rightly said that
"Decision-making is fundamentally choosing between the alternatives". In decision-making,
various alternatives are to be considered critically and the best one is to be selected. Here, the
available business environment also needs careful consideration. The alternative selected may
be correct or may not be correct. This will be decided in the future, as per the results
available from the decision already taken. In short, decision-making is fundamentally a
process of choosing between the alternatives (two or more) available. Moreover, in the
decision-making process, information is collected; alternative solutions are decided and
considered critically in order to find out the best solution among the available. Every problem
can be solved by different methods. These are the alternatives and a decision-maker has to
select one alternative which he considers as most appropriate. This clearly suggests that
decision-making is basically/fundamentally choosing between the alternatives. The
alternatives may be two or more. Out of such alternatives, the most suitable is to be selected
for actual use. The manager needs capacity to select the best alternative.
The benefits of correct decision-making will be available only when the best alternative is
selected for actual use.
Means and not the end: Decision-making is a means for solving a problem or for
achieving a target/objective and not the end in itself.
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Relates to specific problem: Decision-making is not identical with problem solving
but it has its roots in a problem itself.
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government policies may change. All this leads to change in the environment around
the business unit. Such change leads to new problems and new decisions are needed.
Decision-making is a delicate and responsible job: Managers have to take quick and
correct decisions while discharging their duties. In fact, they are paid for their skill,
maturity and capacity of decision-making. Management activities are possible only
when suitable decisions are taken. Correct decisions provide opportunities of growth
while wrong decisions lead to loss and instability to a business unit.
The figure given below suggests the steps in the decision making process:-
Process of
Decision
Making
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1. Identifying the Problem: Identification of the real problem before a business
enterprise is the first step in the process of decision-making. It is rightly said that a
problem well-defined is a problem half-solved. Information relevant to the problem
should be gathered so that critical analysis of the problem is possible. This is how the
problem can be diagnosed. Clear distinction should be made between the problem and
the symptoms which may cloud the real issue. In brief, the manager should search the
'critical factor' at work. It is the point at which the choice applies. Similarly, while
diagnosing the real problem the manager should consider causes and find out whether
they are controllable or uncontrollable.
2. Analysing the Problem: After defining the problem, the next step in the decision-
making process is to analyse the problem in depth. This is necessary to classify the
problem in order to know who must take the decision and who must be informed
about the decision taken. Here, the following four factors should be kept in mind:
3. Collecting Relevant Data: After defining the problem and analysing its nature, the
next step is to obtain the relevant information/ data about it. There is information
flood in the business world due to new developments in the field of information
technology. All available information should be utilised fully for analysis of the
problem. This brings clarity to all aspects of the problem.
4. Developing Alternative Solutions: After the problem has been defined, diagnosed on
the basis of relevant information, the manager has to determine available alternative
courses of action that could be used to solve the problem at hand. Only realistic
alternatives should be considered. It is equally important to take into account time and
cost constraints and psychological barriers that will restrict that number of
alternatives. If necessary, group participation techniques may be used while
developing alternative solutions as depending on one solution is undesirable.
5. Selecting the Best Solution: After preparing alternative solutions, the next step in the
decision-making process is to select an alternative that seems to be most rational for
solving the problem. The alternative thus selected must be communicated to those
who are likely to be affected by it. Acceptance of the decision by group members is
always desirable and useful for its effective implementation.
6. Converting Decision into Action: After the selection of the best decision, the next step
is to convert the selected decision into an effective action. Without such action, the
decision will remain merely a declaration of good intentions. Here, the manager has to
convert 'his decision into 'their decision' through his leadership. For this, the
subordinates should be taken in confidence and they should be convinced about the
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correctness of the decision. Thereafter, the manager has to take follow-up steps for the
execution of decision taken.
7. Ensuring Feedback: Feedback is the last step in the decision-making process. Here,
the manager has to make built-in arrangements to ensure feedback for continuously
testing actual developments against the expectations. It is like checking the
effectiveness of follow-up measures. Feedback is possible in the form of organised
information, reports and personal observations. Feedback is necessary to decide
whether the decision already taken should be continued or be modified in the light of
changed conditions.
Every step in the decision-making process is important and needs proper consideration by
managers. This facilitates accurate decision-making. Even quantitative techniques such as
CPM, PERT/OR, linear programming, etc. are useful for accurate decision-making. Decision-
making is important as it facilitates entire management process. Management activities are
just not possible without decision-making as it is an integral aspect of management process
itself. However, the quality of decision-making should be always superior as faulty/irrational
decisions are always dangerous.
Various advantages of decision-making (already explained) are easily 'available when the
entire decision-making process is followed properly. Decisions are frequently needed in the
management process. However, such decisions should be appropriate, timely and rational.
Faulty and hasty decisions are wrong and even dangerous. This clearly suggests that various
advantages of decision-making are available only when scientific decisions are taken by
following the procedure of decision-making in an appropriate manner.
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Relationship between Decision Making and
Planning
There is close 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. According to Peter Drucker, it is
the top management which is responsible for all strategic decisions such as the objectives of
the business, capital expenditure decisions as well as operating decisions such as training of
manpower and so on. Without management decisions, no action can take place and naturally
the resources would remain idle and unproductive. The managerial decisions should be
correct to the maximum extent possible. For this, scientific decision-making is essential.
While they are related, problem analysis and decision making are distinct activities.
Decisions are commonly focused on a problem or challenge. Decision makers must gather
and consider data before making a choice. Problem analysis involves framing the issue by
defining its boundaries, establishing criteria with which to select from alternatives, and
developing conclusions based on available information. Analysing a problem may not result
in a decision, although the results are an important ingredient in all decision making.
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Psychological: Decisions derived from the needs, desires, preferences, and/or values
of the individual making the decision. This type of decision-making is cantered on the
individual deciding.
Types of Decision
There are 3 approaches to decision making are avoiding, problem solving and problem
seeking.
Every decision-making process reaches a conclusion, which can be a choice to act or not to
act, a decision on what course of action to take and how, or even an opinion or
recommendation. Sometimes decision making leads to redefining the issue or challenge.
Accordingly, three decision-making processes are known as avoiding, problem solving, and
problem seeking.
Avoiding
One decision-making option is to make no choice at all. There are several reasons why the
decision maker might do this:
Problem Solving
Most decisions consist of problem-solving activities that end when a satisfactory solution is
reached. In psychology, problem solving refers to the desire to reach a definite goal from a
present condition. Problem solving requires problem definition, information analysis and
evaluation, and alternative selection.
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Problem Seeking
On occasion, the process of problem solving brings the focus or scope of the problem
itself into question. It may be found to be poorly defined, of too large or small a scope,
or missing a key dimension. Decision makers must then step back and reconsider the
information and analysis they have brought to bear so far. We can regard this activity as
problem seeking because decision makers must return to the starting point and specify
the issue or problem they want to address.
The approach follows a sequential and formal path of activities. This path includes:
Formulating a goal(s)
Identifying the criteria for making the decision
Identifying alternatives
Performing analysis
Making a final decision
Measurable criteria exist for which data can be collected and analysed.
An individual has the cognitive ability, time, and resources to evaluate each
alternative against the others.
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The rational-decision-making model does not consider factors that cannot be quantified, such
as ethical concerns or the value of altruism. It leaves out consideration of personal feelings,
loyalties, or sense of obligation. Its objectivity creates a bias toward the preference for facts,
data and analysis over intuition or desires.
Options examination: various versions and options are formulated and considered and
possible options, any assumptions and missing information are written down. Brainstorming
is a technique that implies the group and helps the decision maker in deciding steadily.
Gathering information: missing information may be gathered on the internet, at the library
or other sources (analysis of market maturity, marketing studies, studies on competition,
analysis of growth opportunities, cost analysis etc.).
Decision making: the gathered information is included in the evaluation options (step 2).
The decision maker should feel happy after the decision made and if the decision is team-
made then the decision maker should get the group support for it to be successful.
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Decision-making process in 3 steps
Another author (Chestnut, D., 2013) considers that the decision-making process includes
three stages: identification, building decision components and implementation, which are
shortly presented in Figure no. 2.
Identification: managers gather data within the organization; they apply mathematical and
statistical methods on data gathered and use the results to sustain the decision choice.
Implementation: in order to implement decision, a support system may be used for collecting
and analysing data inside the organization and offering useful information to managers
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Decisional process based on innovation
conceptualization
Different decisional process models analysis allows the conceptualization of the process,
where the innovation takes a distinctive role (Figure no. 3). The innovation based on
decision-making process allows the creativity stimulation.
Innovation
The process components are the followings: context description, innovation, decision and
management. In this process specific techniques such as brainstorming, Delphi method and
others are used to stimulate the creativity.
Context description: information is gathered and conditions, restrictions and criteria for
decision making are determined.
Innovation: options are determined and substantiated with an innovative process.
Decision: version that best meets the conditions, restrictions and criteria determined is
chosen.
Management: it involves the management of gathering information and of defining the
context in which decisions are made, innovation management in determining decision
alternatives, decision-making management and decision-making results management.
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Complex decision-making process
The managers in the organizations may choose any of the process models summarized above.
According to gathered analysis models and to own observations and experience, we consider
that a more complex model might be useful to managers and might be adapted to any
situation. We called the model CDP (Complex Decisional Process) as is synthesized in
Figure no. 4.
The inputs are: environmental factors, information and/or data, knowledge, team’s creative
ideas and ethical principles. Environmental factors influence the decisions. Constraints in the
external environment, internal risks and limits, especially those related to resources are taken
into account. Information gathered or had in possession, as well as historical data, current or
forecasted ones of the organization and of the external environment represent the starting
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point in developing decision alternatives in accordance with organization’s internal
possibilities.
The organization, teams and manager’s accumulated knowledge complete the context and the
ethical principles had in view refines it.
The decision process includes: defining the problem, gathering information, identifying the
alternatives, finding consensus and selecting the alternative, foreseeing consequences of the
decision and implementing it.
Defining the problem coincides most of the time with the decision making although there are
a series of debates and arguments regarding the difference between solving a problem and
decision-making process (FEMA, 2005). The clear description of the problem facilitates the
other steps of the process. Gathering information suppose selecting those information and
data which match the best with the problem described and which are taken from the system
inputs. Proceeding to identify alternatives is made on the basis of data and information
collected. Selecting the most suitable situation analysed among the alternatives identified is
made by involving team members. The communication with team members leads not only to
a consensus but to reduce the stress and decision-making timing. Here is useful the 80/20 rule
which means obtaining 80% outputs with 20% inputs. Before applying the decision it is
analysed in terms of the consequences implied on organization and its environment and of the
risks of success or failure of the decision
The outputs of the system can be: the management success or failure, the organization’s
knowledge in the organizational learning process, the team reinforcement, the organization’s
values and beliefs. The process is repeated by changing the option if the decision fails. But
never mind whether management is successful or not in decision-making, organization has to
gain by acquiring new knowledge, by closing relationships within the team and by
developing its values.
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Conclusion
The managers’ decision-making process has developed over time not only due to the
complexity of the problems they are facing, but also to the contribution of theorists and
practitioners in enriching specific literature.
Achieving the organization’s goals in a complex and volatile environment where managers
are forced to make faster decisions and to change them as fast, decision-making models are
useful. Therefore, in the decision-making process, managers can choose between several
models the one which best suits to the decision-making problem.
The literature, creativity and data bases are conclusive factors in the decision-making
process. The paper presents briefly a few examples. In addition, the decision making process
conceptualization and the CDP Model represent some contributions to their development.
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Reference
Baumhart, R.C. (1961) How Ethical are Businessmen?, Harvard Business Review, 39 (4), pp.
6–8.
Casali, G.L. (2007) A quest for ethical decision making: searching for holy grail and finding
the sacred trinity in ethical decision making by managers, Social Responsibility Journal,
Volume: 3, Issue: 3.
Chestnut, D., Theory Management on Decision Making, Retrieved November, 20, 2013 from
http://www.ehow.com/ facts_6962551_ theory-management-decision-making.html.
Federal Emergency Management Agency (FEMA) (November 2005) Decision Making and
Problem Solving, Independent Study, USA.
Harrison, F.E., Pelletier, M.A. (2000) Levels of strategic decision success, Management
Decision, Vol. 38, Issue 2, pp.107 – 118.
Heyne, P., Boettke, P. J., Prychitko, D. L. (2010) The Economic Way of Thinking, Prentice
Hall, 12th ed., pp. 163, 317–318.
Klain, G. (2004) The Power of Intuition. How to Use Your Gut Feelings to Make Better
Decisions at Work, Crown Business, NY.
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THANK YOU