DECISION - MAKING
1. Steps in the Decision Process
One of the most important tasks a manager performs is decision-making. This may be defined as the process of choosing a course of action (when alternativesare available) to solve a particular problem. The steps listed below provide a simplified framework of the “ideal” decision-making process:
THE DECISION-MAKING PROCESS
define define Gather Develop Evaluate Choose
probelm expectation Data Alternatives Alternatives best alternative
Step 1 Step 2 Step 3 Step 4 Step 5 Step 6
The first step, defining the problem, is perhaps the most difficult step. It involves careful analysis of a situation in order to state the problem and determine its cause. For example, a factory may be experiencing low production (the problem) because the supervisor has failed to schedule the work shifts in the most efficient manner (the cause).
Defining the expectation in Step 2 involves stating the result that is expected once the problem has been solved. The expected result after solving the problem of low production described above would be to increase the output of the factory.
Next, data are gathered about the problem. This information can be obtained form a variety of sources: observations, surveys, or published research. Many businesses rely on computers to process, summarize, and report data. Having sufficient data that are valid and reliable is necessary for Step 4.
Here the decision-maker develops feasible alternatives, or potential solutions to the problem. Using the low production example, some alternatives might include: (1) replacing the current supervisor; (2) providing the current supervisor with the necessary information and training to schedule the work shifts more efficiently; and (3) creating incentives for workers, such as higher pay or time off, in order to increase production.
In the fifth step, the decision-maker evaluates these alternatives in terms of the expected result of the solution (which is to increase production) and limitations, such as time and money. Alternative 1, replacing the current supervisor, does not guarantee increased production, and it would involve training a new supervisor. Alternative 2, providing additional training for the current supervisor, would be time consuming and somewhat expensive but should bring about increased production. Alternative 3, creating worker incentives, may bring about increased production but would be quite expensive.
Finally, the decision-maker compares the alternatives and chooses the one that has the best potential for providing the desired results. In the low production example, the decision-maker decides to try providing the current supervisor with additional training because this alternative should achieve the objectives with the lowest expenditure of time and money.
The decision-making process is followed: (1) implementation of the chosen alternative (putting it into action) and (2) evaluation of that alternative. If the alternative achieves the desired result, it is then known as the solution.
2. The Reality of Decision-Making
Decision-making is a complex business subject which combines the most complicated elements of the operational and theoretical aspects of management. The ability to implement the decision-making process is often determined by environmental factors rather than the steps in some “ideal” model. Decisions are frequently influenced more by the environment and structure of the organization than by the method itself. The process of decision-making will, therefore, be examined in light of environmental factors.
One of these factors – social and cultural background – affects the interaction among people involved in the decision process and provides the cultural framework within which they may comfortably operate. The best alternative for solving a problem, for example, might be to replace an employee who is unsuited for a position. However, if in the society’s culture there is a tradition of lifetime employment with one company, that alternative is not really feasible because of social and cultural restriction.
With regard to the structure of an organization, there are a number of factors that may alter the “ideal” decision-making process. The amount of flexibility within an organization and the available resources (such as facilities, technology, or fiscal reserves) are often controlling factors. The amount of data available may also limit the range of alternatives that can be considered. Another organizational factor is the importance of the decision being made in relation to other problems and responsibilities of management. The relative importance of one decision is weighed against the amount of effort involved in finding a solution and the benefit the company will receive from its implementation.
Three other factors also influence the following of a model decision process: time, creatively, and risk. The amount of time available to make a decision for a given problem is often determined by the environment, not the management. The time factor may affect the creativity of the solution to a problem. The risk associated with a particular course of action may be lessened by use of a group rather than an individual decision-maker. Time, resources, and culture may affect the workability of a group process, although research shows that groups often come up with better solutions than individuals.
Decision theory and the “ideal” decision-making model tend to picture the process as one in which managers operates by themselves, free of restriction of time, data, and resources. The reality of the decision process is much less a step-by-step procedure than it is a series of practical considerations directly influenced by the social, cultural, and organizational environment.
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