Decision making is the process of choosing a course of action from among alternatives to achieve a desired goal.

According to Haynes and Massie, “Decision making is a process of selection from a set of alternative courses of action which is thought to fulfill the objective of the decision problem more satisfactorily than others.”

There is a close relationship between planning and decision making. First, both are mental processes including reasoning and judgment. Secondly, both are goal oriented designed to achieve the desired aims. Thirdly, decision making like planning is an ongoing or continuous process. Fourthly, planning & decision making both involve choice among alternative courses of action. Lastly ,planners & decision makers both need information about the internal and external environment of the organization.

1. Decision making is a goal oriented process. Decisions are made to achieve certain goals i.e. to bridge the gap between the present position and the desired position.

2. Decision making involves choice or selection of the most appropriate course of action out of various alternatives.

3. Decision making is an ongoing or continuous process.

4. Decision making is an intellectual process. Decisions are the outcome of deliberations, reasoning, judgment and evaluation.

5. Decision making is a dynamic process. It involves a time dimension and a time lag.

6. Decision making involves commitment of time, efforts and resources. Once a decision is taken the organization commits itself in a particular manner.

7. Decision making is situational.

8. Decision making is pervasive. Managers at all levels take decisions through the nature & significance of decisions taken vary from one level to another.

Other significant issues related to decision making are:

Decision making is the vehicle for carrying managerial workload and discharging managerial responsibilities. It is through decision making that managers strive to achieve organization goals. They attempt to bridge the gap between the existing situation and the desired situation by taking and executing decisions.

The life of a manager is a perpetual decision making activity. The factors that determine the importance of a decision are the size of the commitment, the flexibility or inflexibility of plans, the certainty or uncertainty of goals and premises, the degree to which variables can be measured, and the impact on the people .

Decision making can be rational or irrational. Rational decision making means taking decisions on the basis of facts and logical reasoning. A decision maker is said to be rational when he identifies and analyses the problem systematically, identifies alternatives and selects the most appropriate alternative on the basis of relevant data. On the other hand decision making becomes irrational when the decision maker depends purely on hunch and intuition without using the relevant facts and figures.

Thus, in this context, the process leading to making a decision might be thought of as :

1.Premising,

2.Identifying alternatives,

3.Evaluating alternatives in terms of the goal sought, and

4.Choosing an alternative, that is, making a decision.

Rational decision making is the systematic process consisting of the following steps:

1. Identify the problem: The decision making process begins with the recognition of a problem that requires a decision. The problem may arise due to gap between present and desired state of affairs. The threats and opportunities created by environmental changes may also create decision problems. At this stage, a manager should identify and define the real problem. A problem well defined is half solved. Imagination, experience and judgment are required for detection of problems that requires managerial decisions.

2. Diagnose the problem: Diagnosing the real problem implies analyzing it in terms of its elements, its magnitude, its urgency, its causes, and its relation with other problems. In order to diagnose the problem correctly, a manager must obtain all pertinent facts and analyze them carefully. The problem may be analyzed in terms of the following : a) Nature of the decision , b) Impact of the decision , c)Futurity of the decision, d) Periodicity of the decision, and e)Limiting or strategic factor relevant to the decision.

3. Discover alternatives: The next step is to search for the various possible alternatives. An executive should not jump on the first feasible alternative to solve the problem quickly. A reasonably wide range of alternatives increases the managers freedom of choice. Relevant information must be collected and analyzed for this purpose.

4. Evaluate alternatives: Once the alternatives are discovered, the next state is to evaluate or screen each feasible alternative. Evaluation is the process of measuring the positive and negative consequences of each alternative. Management must balance the costs against possible benefits. Considerable knowledge and judgment are required to measure the plus and minus points and to find out the net benefit of each alternative.

Peter Drucker has suggested the following criteria to weigh the alternative courses of action: Risk, Economy of effort, timing and limitation of resources.

5.Select the best alternative: After evaluation, the optimum alternative is selected. Optimum alternative is the alternative that will maximize the results under given conditions. Choice of the best alternative is the most critical point in decision making. The ability to select the best course of action from several possible alternatives separates the successful managers from the unsuccessful ones.

6. Implementation and follow-up: Once a decision is made it needs to be implemented. Implementation involves several steps . First, the decision should be communicated to those responsible for its implementation. Secondly, acceptance of the decision should be obtained. Thirdly, procedures and time sequence should be established for implementation. Necessary resources should be allocated and responsibility for specific tasks should be assigned to individuals.

Herbert Simon has identified three phases in the decision making process:

i. Intelligence activity involves a search for the conditions underlying the decision. It includes identification and diagnosis of the problem, definitions of objectives and collection of information.

ii. Decision activity is concerned with the generation and evaluation of alternative courses of action.

iii. Choice activity implies selection of the best course of action. Post choice activity involves implementation of the decision.

Identify the Problem

Diagnose the Problem

Discover Alternative

Courses of action

Evaluate theAlternatives

Implement andFollow-up

Choose the bestAlternative