CHAPTER 4-Decision making

 

Chapter-4   Decision making

Concept of decision making

 

Decision making is the process of  selecting a best course of action out of many alternatives for solution of a problem  or achieve a goal. It means finding out what the issue is, collecting all the important information, thinking about the possible ways to handle it, and then picking the most suitable one. This process helps people or organizations move forward in the right direction.

According to Koontz and Weirich , ”Decision making is defined as the selection of course of action from among alternatives”

Decision making is not only used in big businesses or offices but also in our daily lives. For example, deciding what to cook for dinner, which clothes to wear, or which subject to choose in school all are forms of decision making. In companies, managers make decisions about hiring staff, selling products, making budgets, or expanding business.

A good decision requires proper thinking, enough information, and sometimes experience. It helps to reduce risks, improve results, and make work more efficient. If someone makes a poor decision without proper thought, it can lead to problems or failures.

 

Conclusion:

In simple terms, decision making is like choosing the best path when you reach a crossroads in life or work. It is a very important skill that helps us grow, succeed, and avoid mistakes. Whether the decision is big or small, personal or professional, taking the time to think and choose wisely leads to better outcomes. That is why learning how to make good decisions is important for everyone like students, workers, business people, and leaders .

 

 

Nature/Features of decision making             

1. Selective Process

Decision-making involves choosing the best option from several alternatives. It is not about doing everything, but about selecting what seems most suitable and effective.

🟢 Example: If you have to decide which subject to take , you will look at many options and pick one that matches your interest and future goals.

 

2. Human and Rational Process

It is a process done by humans using their mind, knowledge, logic, and reasoning. Emotions may be involved, but the final decision should be based on facts and thinking.

🟢 Example: A manager uses data, experience, and judgment before choosing the best marketing strategy.

 

3. Dynamic Process

Decision-making is flexible and changes with time, situation, and environment. What is right today may not be right tomorrow.

🟢 Example: During COVID-19, schools changed their decisions from offline to online classes.

 

4. Goal Oriented Process

Every decision is made to achieve a specific goal or objective. It gives direction to actions.

🟢 Example: If a company wants to increase profit, it will make decisions related to cost-cutting or increasing sales.

 

5. Freedom to Decision Maker

The person making the decision has the authority and freedom to choose any option they find best, depending on their role and responsibility.

🟢 Example: A principal has the freedom to decide school rules, while a teacher decides how to teach a topic.

 

6. Continuous Process

Decision-making never stops. It happens regularly as new problems or opportunities arise. It is not a one-time activity.

🟢 Example: A business owner takes decisions daily  from hiring staff to setting prices.

 

7. Positive or Negative Impact

A decision can bring good or bad results. It can help achieve success or cause failure, depending on the quality of the decision.

🟢 Example: Choosing the right supplier improves product quality; the wrong choice may lead to complaints.

🌟 Importance of Decision-Making

1. Pervasive Function
   Decision-making is needed at all levels of management and in every department. From top to bottom, everyone has to make decisions.

🟢 Example: From the CEO to a shop supervisor, all take decisions in their daily work.

 

2. Indispensable Component
   It is an essential part of management. Without decision-making, management cannot work properly.

🟢 Example: Planning, organizing, and controlling all depend on decisions.

 

3. Evaluation of Managerial Function
   The quality of a manager is judged by the quality of their decisions. Good decision = good manager.

🟢 Example: A manager who chooses the right marketing strategy increases sales and gains appreciation.

 

4. Selection of Best Alternative
   Decision-making helps choose the most suitable option from many. It guides which way to go.

🟢 Example: When launching a product, choosing the best design, price, and place is done through decision-making.

 

5. Establishment of Plans and Policies
   All planning and policies are based on decisions. Without it, we can't create future plans.

🟢 Example: A school decides its academic calendar through planning and decision-making.

 

6. Successful Operation of Business
   Right decisions at the right time help the business run smoothly and grow.

🟢 Example: A restaurant that decides to offer online delivery during a lockdown keeps running successfully.

 

 

Types of Managerial Decisions

Managers in an organization face different types of problems and situations. To handle them properly, they have to make different types of decisions. These decisions are made depending on the nature of the problem, the situation, and the level of the manager. The major types of managerial decisions are explained below  with examples:

 

1. Programmed and Non-Programmed Decisions

Programmed decisions are routine decisions made again and again. These are already planned and follow a fixed rule or procedure. They don’t require deep thinking every time.

🔹 Example: Approving employee leave according to company rules is a programmed decision.

Non-programmed decisions are new, unplanned, and not routine. These decisions require careful thinking, creativity, and judgment. There are no fixed rules for these types of decisions.

🔹 Example: Deciding what to do if a new competitor suddenly enters the market is a non-programmed decision.

 

2. Routine and Basic Decisions

Routine decisions are taken daily for the smooth running of the organization. These are simple and less important decisions.

🔹 Example: Ordering stationery when the stock finishes is a routine decision.

Basic decisions are important and long-term in nature. These affect the overall goals of the business and are usually taken by top-level managers.

🔹 Example: Deciding to open a new branch of a business is a basic decision.

 

3. Organizational and Personal Decisions

Organizational decisions are related to the objectives and work of the organization. They are taken in the official position of the manager and affect the whole company.

🔹 Example: A manager deciding to hire a new employee is an organizational decision.

Personal decisions are taken by a person for his or her personal life or benefit. These do not directly affect the organization, but sometimes can have an indirect effect.

🔹 Example: A manager deciding to join a part-time course for self-improvement is a personal decision.

 

4. Individual and Group Decisions

Individual decisions are made by a single person using their authority and experience. These decisions are quick and are used in less complex situations.

🔹 Example: A store manager deciding what time to open the shop is an individual decision.

Group decisions are taken by a group of people or committee. These are used in complex situations where discussion and ideas from many people are needed.

🔹 Example: A board of directors deciding on the company’s future investment plan is a group decision.

 

5. Policy and Operational Decisions

Policy decisions are made for the long-term development of the company. These decisions are taken by top-level management and help set future direction.

🔹 Example: A company deciding to start selling eco-friendly products is a policy decision.

Operational decisions are related to daily work and are taken by middle or lower-level managers. These help in the implementation of policies.

🔹 Example: Assigning daily tasks to workers based on policy is an operational decision.

 

6. Decisions under Certainty and Risk

Decisions under certainty are made when the manager is sure about the outcome. There is no confusion, and the result is predictable.

🔹 Example: Investing in a fixed deposit in a bank where return is guaranteed is a decision under certainty.

Decisions under risk are taken when the outcome is not sure. There is a chance of both success and failure. These decisions involve risk and uncertainty.

🔹 Example: Launching a new product in the market where there is competition is a decision under risk.

 

Conclusion:

In short, managers face many types of situations and problems. To handle them properly, they need to make different types of decisions depending on the need. Some decisions are regular and simple, while others are complex and risky. Knowing the types of decisions helps a manager to choose the right method and take better actions for the success of the organization.

 

 🌟 Conditions of Decision-Making

When a manager or a person takes a decision, they may face different situations. These situations are called the conditions of decision-making. Mainly, there are three major conditions under which decisions are made:

 

 

1. Decision-Making under Certainty

In this condition, the manager knows everything clearly. All the facts, alternatives, and outcomes are available. There is no confusion or risk involved. The decision-maker is confident about what will happen if a certain action is taken.

✅ Key Features:

• Complete information is available.
• Future outcomes are known.
• Less thinking or guessing is needed.
• Safe and easy to make decisions.

🟢 Example:
A person depositing money in a fixed deposit account in a bank knows how much interest they will earn. So, they are making a decision under certainty.

 

2. Decision-Making under Risk

In this condition, the decision-maker has some information but not full information. There is a chance of success or failure. The result is not fully known but the probability (chance) of each outcome can be estimated. Managers use past data, experience, and statistics to take decisions under risk.

✅ Key Features:

• Partial information is available.
• Future outcomes are uncertain but can be estimated.
• There is a possibility of both gain and loss.
• Risk management tools or past experience are helpful.

🟢 Example:
A company launching a new product in the market knows it may succeed or fail based on market demand, but it takes the risk based on research and experience.

 

3. Decision-Making under Uncertainty

In this condition, the manager has little or no information. The outcome of any decision is completely unknown. It is hard to guess what will happen, and no past data or rules are available to help. This is the most difficult condition for decision-making.

✅ Key Features:

• Very limited or no information.
• Future outcomes are unknown.
• Decision depends on judgment, intuition, and creativity.
• High chance of failure or surprise results.

🟢 Example:
During the COVID-19 pandemic, many schools had to suddenly shift to online learning without knowing whether students would be able to attend or understand. That was a decision made under uncertainty.

 

✅ Conclusion:

Managers and individuals make decisions under different conditions.

• When everything is clear and known → it is certainty.
• When some things are known and others are risky → it is risk.
• When almost nothing is known and outcomes are unclear → it is uncertainty.

Understanding these conditions helps in choosing the right decision-making approach, tools, and strategies.

 

 📝 Decision-Making Process

Decision-making is the process of selecting the best option from many possible choices. It is a very important task for managers. A good decision helps solve problems, improve performance, and achieve goals. The decision-making process includes seven main steps:

 

🔴 1. Identification of Problems

This is the first and most important step. In this step, the manager finds out what the real problem is. A problem means there is a gap between what is happening and what should happen. If the problem is not clear, the wrong decision may be taken.

👉 Example: If a company’s profit is going down, the manager needs to find out what the problem is.

 

🔴 2. Analysis of Problems

After identifying the problem, the next step is to study it carefully. The manager collects information to understand the root causes of the problem. It helps to understand how serious the problem is and who or what is affected by it.

👉 Example: Is the profit going down because of high expenses, low sales, or poor marketing?

 

🔴 3. Development of Alternatives

Once the causes are clear, different solutions are created. These are called alternatives. A good manager always tries to find more than one way to solve the problem. More options help to make better decisions.

👉 Example: The company can reduce expenses, improve quality, increase advertisement, or raise prices.

 

🔴 4. Evaluation of Alternatives

Now each alternative is studied in detail. The manager looks at the cost, benefit, time, risk, and impact of each option. This helps to understand which option is good and which one is not suitable.

👉 Example: Reducing cost may affect quality, increasing price may reduce sales, so all must be compared carefully.

 

🔴 5. Selection of Best Alternative

After evaluation, the manager selects the best and most suitable option. This decision should be practical, cost-effective, and useful for the organization. The chosen option should solve the problem without creating a new one.

👉 Example: The company decides to increase online marketing because it is low-cost and reaches more people.

 

🔴 6. Implementation of Alternative

In this step, the selected decision is applied in real life. The manager prepares an action plan, assigns duties, and uses available resources. Everyone involved in the decision must understand their role.

👉 Example: The marketing team starts promoting the product on social media and YouTube.

 

🔴 7. Review of Implementation

This is the final step. After implementation, the manager checks if the decision is working. If the result is good, the decision is successful. If not, the manager may go back and choose another alternative or make some changes.

👉 Example: The manager checks sales figures after the campaign. If sales go up, the decision is successful. If not, they try another option.

 

✅ Conclusion:

The decision-making process is a logical and step-by-step method to solve problems. It helps in selecting the best option after comparing all possible choices. A good decision helps the organization to grow, reduce risks, and improve performance.