DECISION MAKING IN MANAGEMENT
and strategic decisions which have a bearing on many aspects of the organization are
Decision-making is an integral part of modern management. Essentially, rational or sound
decision making is a primary function of management.
Decision-making is regarded as the cognitive process resulting in the selection of a belief or a
course of action among several alternative possibilities. Every decision-making process
produces a final choice that may or may not prompt action.
According to George Terry, “Decision making is the selection of a particular course of action,
based on some criteria, from two or more possible alternatives.” It is thus choosing the best
course of action out of the available options while aiming at the achievement of particular
organizational objectives.
TYPES OF MANAGEMENT DECISIONS
Decisions taken by organization may be classified under various categories depending upon
the scope, importance and the impact that they create in the organization: -
(a) Programmed and Non-programmed Decisions
i. Programmed decisions are normally repetitive in nature. They are the easiest to make.
Managers in dealing with such issues of routine nature usually follow the established
procedures.
ii. Non-programmed decisions, on the other hand are non-routine in nature. They are
related to some exceptional situations for which there are no established methods of
handling such things. They arise out of unstructured problems, i.e., these are not
routine or daily occurrences.
(b) Strategic Decisions and Tactical/Operational Decisions
i. Operational or tactical decisions relate to the present. They are related with day-to-
day course of business activities in which there is no specific judgment needed. The
primary purpose is to achieve high degree of efficiency in the company’s on-going
operations.
ii. Strategic decisions on the other hand, concern themselves with the future and have far
reaching impact on the organization. They are concerned with policy matters or they
involve long-term plans.
(c) Organizational and Personal Decisions
i. Organizational decisions: Decisions taken by managers in the ordinary course of
business in their capacity as managers relating to the organizational issues.
ii. Personal Decisions: Decisions which are purely personal in nature. However, their
impact may not exactly confine to their selves and they may affect the organization
also.
(d) Individual and Group Decisions: It is quite common that some decisions are taken by a
manager individually while some decisions are taken collectively by a group of managers.
Individual decisions are taken where the problem is of routine nature, whereas important
generally taken by a group.
IMPORTANCE OF DECISION MAKING
Management with strong decision-making skills has the power to help build an organization
that stands the test of time and stands out against the competition.
1. Better utilization of resources: The manager ensures proper resource allocation
decisions.
2. Facing problems and challenges: Helps the organization to tackle new problems and
challenges.
3. Business growth: Contributes to improved performance.
4. Achieving Objectives: Helps in the achievement of organization goals.
5. Increases Efficiency: Reduce wastages and cut costs.
6. Facilitate Innovation: It helps to develop new ideas, new products, new process, etc.
7. Motivates Employees: Effective decisions promote morale among employees.
DECISION MAKING MODELS/APPROACHES
A decision-making model is a process used to guide teams to make decisions that can benefit
their companies. Each model uses different methods to help individuals analyze and
overcome a challenge. They offer different ways to think about a problem and identify
potential solutions, which is useful for people with different learning styles or time
constraints.
Why are decision-making models important?
Decision-making models can help teams simplify their decision-making processes and
collaborate more effectively. Models provide useful steps for teams to follow to create
solutions and describe their processes clearly to other team members. When everyone on a
team understands the decision-making model being used, they can more easily contribute to
the thinking process for a balanced, successful solution.
The Rational Model
The rational model (sometimes referred to as classic decision theory) focuses on using logical
steps to come to the best solution possible. This often involves analyzing multiple solutions at
once to choose the one that offers the best quality outcome. Teams typically use the rational
decision model when they have time for meetings and research, which allows them to create
a list of potential solutions and discuss the pros and cons of each.
The rational model makes several unrealistic assumptions. It assumes that decision- makers
can be consistently rational and objective in their problem solving, that all the information
needed to solve a problem is readily available, that multiple solutions to a problem will
become evident, and that there will be general agreement on the solution that is finally
proposed.
1
Intuitive decision model DECISION MAKING PROCESS
Rather than logical reasoning, the intuitive decision model uses feelings and instinct to make Decision making involves a certain logical process which should be followed in the sequence
decisions. Compared to the objective judgments of the rational model, the intuitive decision- by the manager.
making model is much less structured and opts for more subjective opinions. Often, team
leaders or managers use this model to make quick decisions when they don't have a lot of
time for research or planning. The process of an intuitive decision is less structured and may
use previous knowledge of similar goals or obstacles to determine a useful solution.

The recognition primed model

A combination of the two models above, the primed model of decision-making begins when a
manager quickly assesses a situation, compares it to past situations, recognizes patterns and
creates a mental ‘action script’ which runs through the scenario up until its conclusion.
The model uses quick-thinking and prior experience to make decisions, often in fast-paced
environments. Team leaders may use this model to assess the basics of a situation and create
a potential solution and then think through the solution to determine if it's usable.

Creative decision model

The creative decision model uses original ideas to create innovative solutions that achieve
goals or overcome obstacles. This involves thinking through a situation and inventing a
solution without referencing similar situations. Often, you can use this model for situations
you haven't experienced before, like new projects or production issues. Using the creative
decision model typically requires flexible thinking to create successful, unique solutions.
The Garbage Can Approach
According to the garbage can approach, decision-making is a haphazard and unpredictable
process. This model envisions the organization as a "garbage can" containing problems,
solutions, participants, and opportunities that "float around" aimlessly. When these four
factors unite, a decision is made. The quality of the decision depends largely on good timing,
that is, the right participants must find the right solution to the right problem at the right
moment in order to make a right decision!
The basic theme of the garbage can approach is that not all organizational decisions are made
in an orderly, step-by-step fashion. When we are confronted with new situations and
circumstances, the decision-making process may become very chaotic. In fact, some of the
best decisions come about "accidentally," without methodical planning.
The Political Approach
The political approach suggests that the primary motivation of decision-makers is to advance
their personal preferences, which are usually based on departmental goals. According to this
approach, decision-makers perceive each step in the decision-making process as an
opportunity to influence the final decision – and hence promote their personal preferences.
In this context, the final decision reflects the power structure of the organization and the
influence of the tactics used by each of the participants.
i.Identifying the problem
This entails recognizing and diagnosing a problem. It involves defining and formulating the
problem clearly and completely. It requires collection and studying of all the information in
detail to understand the root cause of the issue that need to be addressed.
ii.Develop alternatives
Alternatives are various approaches that may be used to solve the problem. The decision
maker identifies several possible paths of action, some of which are common and fairly
obvious. However, new alternatives should be developed through creative thinking.
iii.Evaluate the alternatives
An analysis of each alternative to assess feasibility, acceptability and desirability and to
identify the best. It seeks to establish the pros and cons of each option and rank them in a
priority order.
iv.Making a choice
The process of making the final decision. It entails selection of the best alternative.
v.Decision implementation
This is the operational part of the decision-making process. It involves communicating and
providing instructions to the operational authorities.
vi.Decision monitoring and control
This involves following up decisions and their outcomes. The essence is to take appropriate
corrective action if the decisions being implemented are not yielding the desired results.

2
DECISION MAKING CONDITIONS
There are different conditions in which decisions are made. Managers sometimes have an
almost perfect understanding of conditions surrounding a decision, but in other situations
they may have little information about those conditions. At the same time, the decision taken
by the managers at present will also have an effect on future. For this purpose, the decision-
making process involves the visualization of the conditions that may be present in future. So,
the decision maker must know the conditions under which decisions are to be made.
Generally, the decision maker makes decision under the condition of certainty, risk and
uncertainty. These conditions determine the probability of an error in decision making.
I. CERTAINTY
Decisions are made under the condition of certainty when the manager has perfect
knowledge of all the information needed to make a decision. Under this condition, the
manager is well informed about possible alternatives and their outcomes. The challenge is
simply to study the alternatives and choose the best solution.
The condition of certainty exists in case of routine decisions or problems that tend to arise on
a regular basis. There is little ambiguity and relatively low chance of making an impractical
decision. These issues are structured hence familiar, straightforward, and clear with respect
to the information needed to resolve them.
II. RISK
In a risk environment, the manager lacks complete information. This condition is more
difficult. A manager may understand the problem and the alternatives, but has no guarantee
how each solution will work. In such a condition, managers have knowledge about alternative
course of actions but outcomes are associated with probability estimates (based on their
experience, research and other available information. However, it is more difficult to predict
future conditions without full information, so the outcome of an alternative cannot be
accurately determined. Such decisions are largely subjective as no decision criteria are fully
reliable. Decision making under conditions of risk is accompanied by moderate ambiguity and
chances of an impractical decision.
When new and unfamiliar problems arise, non-programmed decisions are specifically tailored
to the situations at hand. Most managerial decisions are made under conditions of risk.
III. UNCERTAINTY
In case of uncertainty conditions, very little information is available to the managers and the
managers are not sure regarding the reliability of such information. A state of uncertainty
occurs when managers are unaware of the problem they face. They do not know all the
alternatives, the risk associated with them or the likely consequences of each alternative. This
uncertainty arises from the complexity and dynamism of contemporary organization and their
environments.
These unstructured problems involve ambiguities and information deficiencies and often
occur as new or unexpected situations. These problems are most often unanticipated and are
addressed reactively as they occur. Unstructured problems require novel solutions. To make
effective decision in uncertain conditions, managers must acquire as much relevant
information as possible and approach the situation from a logical and rational perspective.
Intuition, judgment and experience always play major roles in the decision-making process.
However, decision under uncertainty is the most ambiguous for managers and there is more
possibility of error.
PERSONAL DECISION‐MAKING STYLES
Managerial decision making depends on many factors, including the ability to set priorities
and time decisions correctly. However, the most important influence on managerial decision
making is a manager's personal attributes or his or her own decision‐making approach. The
three most common decision models are as follows:
1. Rational/logical
2. Intuitive
3. Predisposed
Rational/Logical decision model
This approach uses a step‐by‐step process, similar to the seven‐step decision‐making process.
The rational/logical decision model focuses on facts and reasoning. Reliance is on the steps
and decision tools, such as payback analysis, decision tree, and research. Through the use of
quantitative techniques, rationality, and logic, the manager evaluates the alternatives and
selects the best solution to the problem.
Intuitive decision model
The managers who use this approach avoid statistical analysis and logical processes. These
managers are “gut” decision makers who rely on their feelings about a situation. Although
intuition refers to decision making without formal analysis or conscious reasoning, it is not
irrational or arbitrary style, rather it is based on years of managerial practice and experience.
These experienced managers identify alternatives quickly without conducting systematic
analyses of alternatives and their consequences. When making a decision using intuition, the
manager recognizes cues in the situation that are the same as or similar to those in previous
situations that he or she has experienced; the cues help the manager to rapidly conduct
subconscious analysis. Then a decision is made.
Predisposed decision model
A manager who decides on a solution and then gathers material to support the decision uses
the predisposed decision model approach. Decision makers using this approach do not search
out all possible alternatives. Rather, they identify and evaluate alternatives only until an
acceptable decision is found. Having found a satisfactory alternative, the decision maker stops
searching for additional solutions. Other, and potentially better, alternatives may exist, but
3
will not be identified or considered because the first workable solution has been accepted.
Therefore, only a fraction of the available alternatives may be considered due to the decision
maker's information‐processing limitations.
ETHICAL DECISION-MAKING
Ethical decision-making refers to the process of evaluating and choosing among alternatives
in a manner consistent with ethical principles. In making ethical decisions, it is necessary to
perceive and eliminate unethical options and select the best ethical alternative.
Business ethics
Business ethics deals with the beliefs and principles that guide management decisions. Ethical
issues include the obligations a company has to its employees, suppliers, customers and
neighbors. In particular, business ethics is concerned with situations when those obligations
are inconsistent with economic or strategic choices, or are in conflict with each other.
Framework for ethical decision making
Ethical frameworks are perspectives useful for reasoning what course of action may provide
the most moral outcome. An ethical framework guides decision-making and enables one to
deal with ethical dilemmas. Ethical dilemmas are situations that present various courses of
moral action, none of which are clearly acceptable or preferable. This means that the ethical
solution is not clear, yet a choice needs to be made.
Different ethical norms or standards have been proposed;
The Utilitarian Approach
This approach dictates that the action that is the most ethical is the action that produces the
most good and causes the least harm. In other words, the decision that strikes the greatest
balance between good and evil. In a business environment, it is therefore the decision that
yields the most benefits and causes the least damage to customers, employees, shareholders,
the environment, etc.
The Rights Approach
The rights approach suggests that the most ethical decision is the one that best protects and
respects the moral rights of all concerned. This approach argues that people have a dignity
based on human nature or their ability to freely choose what they want to do with their lives.
Based on that dignity, they have the right to be treated equally by others and not just as a
means to an end.
The Fairness or Justice Approach
All equals should be treated equally. Today, this idea is used to indicate that ethical decisions
treat everyone equally. If not equal, this must be based on a standard that is explainable.
The justice view of ethics is one that endeavors to treat everyone fairly and impartially. A
basic notion of justice is that we should give people what they are due. People are owed
respect, dignity, civility, equity, and humanity for example.
The Common Good Approach
This approach suggests that relationships within society are the basis of ethical reasoning and
acting. Respect and compassion for all others, especially the vulnerable, are prerequisites for
maintaining an ethical way of life.
The Virtue Approach
An ancient approach to ethics is the belief that acting ethically must be in accordance with
certain virtues that ensure the development of humanity in general. Virtues are tendencies
and habits that enable man to act with the highest potential of human character.
Moral Relativism
The construct of moral relativism holds that ethical values and judgements are ultimately
dependent upon one’s culture, society, or personal feelings (DesJardin, 2011). Under this
framework, the right answer to the ethical dilemma will change based on who is analyzing the
ethical problem. Moral relativism makes the ethical decision making simple, in that the local
perspective should guide the reasoning. If a manager is making a decision that is based in
China, the Chinese standards of ethics should apply.
CHALLENGES IN DECISION MAKING
Within the world of organizations, decision making challenges are commonly referred to as
barriers in decision-making. They include: -
a) Bounded rationality: the idea that for complex issues individuals cannot be completely
rational because they cannot fully grasp all the possible alternatives, nor can they
understand all the implications of every possible alternative.
b) Escalation of commitment: the tendency of decision makers to remain committed to
poor decision, even when doing so leads to increasingly negative outcomes. It can seem
easier to “stay the course” than to admit that a decision was poor.
c) Time constraints: when there is little time available to collect information with
rationality and make an effective decision.
d) Uncertainty: the act of not knowing an outcome until the said outcome has transpired
and is tied in the belief that an outcome is envisioned, but not seen.
e) Personal biases: trusting a poor decision based on preconceived notions.
f) Groupthink: a psychological phenomenon that occurs within a group of people in which
the desire for harmony or conformity results in an irrational or dysfunctional decision-
making outcome.
4
 MANAGERIAL PROBLEM SOLVING
Problem solving is the act of defining a problem; determining the cause of the problem;
identifying, prioritizing, and selecting alternatives for a solution; and implementing a solution.
Problem-solving refers to a person's ability to successfully manage and find solutions for
complex and unexpected situations. A company’s success depends on managerial problem-
solvers.
One of a manager’s most important responsibilities is to solve problems. Finding the answers
to difficult questions that are sometimes a source of great perplexity and distress for the
organization often falls to an organization’s leaders.
BENEFITS OF EFFECTIVE PROBLEM SOLVING
Problem solving as a manager is important because it helps a company and its employees
succeed. Managers who can overcome obstacles efficiently can increase their own
productivity, improve job satisfaction of their team and encourage creativity.
1) Better team cohesion: improves organizational harmony.
2) Workflow improvement: removes challenges that improves the quality of work.
3) Client/customer satisfaction: Clients and customers appreciate getting accurate or well-
made services or products on time.
4) Exceeding work expectations: Managers who are skilled at problem-solving can exceed
expectations and complete more work.
5) Timely project completion: Solving problems allows employees to complete and deliver
projects on time.
6) Welcoming work environment: A manager who solves problems with their team can
make their employees feel comfortable asking questions.
PROBLEM SOLVING SKILLS
Managers who have the ability to systematically think through the facts, diagnose the
situation, and find an accurate and workable solution will help the business thrive and
prosper. Effective problem-solvers are able to guide teams towards the achievement of goals
by eliminating frustration, confusion, and misunderstandings before they become
unmanageable. The following skills are useful for you to solve problems as a manager in the
workplace:
1) Listening skills: Active listeners are generally great problem solvers. They can listen to
those around them to gather the information needed to solve the problem at hand. They
recognize the importance of valuing others’ opinions and experiences to help
understand why the problem occurred and the best course of action to remedy it.
2) Analytical thinking skills: Analytical thinkers can identify the logical reasons why a
problem occurred, what the long-term effects of the issue could be, and identify how
effective different solutions might be to select the most practical one.
Protect pdf from copying with Online-PDF-No-Copy.com
3) Creative thinking skills: Creative thinkers can balance their analytical skills with creative
solutions. Creative thinking skills allow individuals to uncover innovative and progressive
solutions to problems.
4) Communication skills: The ability to effectively relay complex information thoroughly yet
succinctly is a huge benefit for employers working in fast-paced environments.
5) Decision-making skills: Those with problem-solving skills will also possess the ability to
make decisions and be confident in them.
6) Teamwork: Although problem-solvers need to be independent thinkers, it’s also vital for
them to work well as part of a team. Determining the best solution often requires
collaboration.
7) Creativity: More complex problems or problems that you have not experienced before
will likely require a more systematic and logical approach to solve, and for these you will
need to use creative thinking.
8) Researching Skills: Defining and solving problems often requires you to do some
research.
9) Emotional Intelligence: the ability to recognize the emotions of yourself and others, will
help guide you to an appropriate solution.
10) Risk Management: Solving a problem involves a certain amount of risk - this risk needs
to be weighed up against not solving the problem.
Stages/Steps of Problem Solving
Effective problem solving usually involves working through a number of steps or stages, such
as those outlined below.
1) Problem Identification: This stage involves: detecting and recognizing that there is a
problem; identifying the nature of the problem; defining the problem.
2) Structuring the Problem: This stage involves: a period of observation, careful inspection,
fact-finding and developing a clear picture of the problem. structuring the problem is all
about gaining more information about the problem and increasing understanding.
3) Looking for Possible Solutions: During this stage you will generate a range of possible
courses of action, but with little attempt to evaluate them at this stage.
4) Making a Decision: This stage involves careful analysis of the different possible courses
of action and then selecting the best solution for implementation.
5) Implementation: This stage involves accepting and carrying out the chosen course of
action. Implementation means acting on the chosen solution. During implementation
more problems may arise especially if identification or structuring of the original
problem was not carried out fully.
6) Monitoring/Seeking Feedback: The last stage is about reviewing the outcomes of
problem solving over a period of time, including seeking feedback as to the success of
the outcomes of the chosen solution.