Importance And Process Of Decision Making In Modern Management
The Significance of Decision Making in Organizations
Today, each organization needs to make a certain decision at one specific point of time in order to manage the entire process of the management. Decisions play a crucial role and they are taken in the best interest of the employees and the organization. Decisions are taken in an organization in order to enlighten the objectives and goals. Being strategic, business activities involves the process of making particular decisions which is very complex in nature. It must involve professionals of different genre. There are many small levels of organizations who involve managers of all levels while large organizations totally depend on the professionals who are trained to make any sort of decisions (Ford & Richardson, 2013). It must be taken into considerations that no single organization will be able to make any decisions without the help of team. Decision making process is the process which is cumulative and consultative by nature. The whole decision making process has its pros and cons and it aims at displaying emanate results based on the organizations goals and targets and overall success (Goodwin & Wright,2014).
Decision making is one of the mist integral parts that come under the category of modern management. The main function of management is making a rational or sound decision in an organization. Today, every manager in a business is highly involved in making thousands of decisions in order to run a business smoothly (Tzeng, & Huang, 2011). Decision plays a significant role because it helps to determine all the activities related to organization as well as managerial capabilities. A decision may be defined as a specific course of actions which are taken and chosen purposely from a well-defined set of several alternatives in order to achieve goals and objectives of the organization. Decision making process is a continuous process which involves indispensable components that take place in all the business activities (David, 2011). It also involved functions of the organizations.
Decisions are taken at every level of organizations that makes sure that the business targets are achieved. Later, decision making skills also involves that each business must adopt an optimal growth in terms of income and products and services offered to the customers.
In addition to this, there are some people who gives an exemplified definition of decision making. As per the Oxford Advanced Learner’s Dictionary, the key word decision making is defined as the process of deciding about something important, especially in a group of people or in an organization.
The Continuous and Dynamic Nature of Decision Making Process
Trewatha & Newport defines decision making process as follows “Decision-making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem”.
Similarly definitions of decision making based on foregone, is defined as a consultative affair done by a comity of professionals to drive better functioning of any organization. Therefore it can be stated from the above mentioned definitions that decision making process is a continuous process that involves all the dynamic activities which helps to pervade all the other unnecessary activities that place inside the business. Decision making is ongoing processes which are taken on a continuous basis and which help in functioning of the business. Decision making process includes many intellectual minds of the professionals because making decision is that easy and simple tasks. It involves lots of efforts and solid scientific skills which is coupled and matched together with knowledge and experiences. It also requires mental maturity which is often missed in many of the organization.
Later, it can also be claimed that decision making process involves the steps such as check and balance systems which enable business in vertical and linear growth directions. It states that decision making develops a goal. Goals are defined as a pre-set of business activities which defines the mission and vision of the organization. In order to achieve those goals an organization may face many hindrances in all the domains such as administrative, marketing, and operational and finance departments. No single decisions are taken on the basis of one end process but it involves lots of departments. Decision making process helps to solve complex problems but when a single problem is solved it does not mean other problems will not take place. When one problem is solved, then it gives rise to another different problem and many more on a continuous basis. So that is reason behind stating that decision making process is a continuous and dynamic in nature. It takes a lot of time to make any certain decisions. When it comes to management, no prompt decisions are taken. It required several steps to be followed thoroughly to avoid abrupt decisions (Zionts, 2012). The steps involved in decision making process are mentioned below.
- Identifying and defining the problem
- Gathering and collecting necessary information and data
- Developing and weighing the options available
- Choosing best options among many
- Plan and execute
- Take follow up action (Lunenburg, 2010).
It takes a lot of time to follow the steps mentioned above. Every business follows the given steps in order to solve all the problems related to management and administrative. Although, the process includes lot of time but if followed, it can be proved beneficial for any organization (Elwyn, Frosch, Thomson, Joseph-Williams, Lloyd, Kinnersley & Edwards, 2012).
Different Models and Techniques of Decision Making
Nominal Group Thinking (NGT)
Nominal group thinking is one of the techniques of decision making. It can be explained as the process of group which involves identification of the problem, solution, and decision making. For instance, it has the ability to recognize the strength versus need of development in the different areas instead of being used as voting alternative for decision making.
It is designed to help to encourage all the team members to participate and express the opinions at the time of building team consensus. It is framed decision making process in which all the group members are need to give the list of their ideas and proposed alternatives. It is actually designed to help to have the right decision by involving the participation of all the group members (Harvey & Holmes, 2012).
Steps under NGT
- 7-10 numbers of people brought together to participate in a framed exercise which involves the following steps:
- The members of the team are given with the problem, challenge or issue.
- Every member of the group writes their own ideas on a paper to solve the problem.
- Each team at a time presents the idea to the whole group.
- Then the members of the group silently vote for the best idea according to them.
Delphi method can be explained as the method which takes the advantage of group’s resources on the other hand avoiding many of the possible disadvantages of depending on the group for decision making process. This technique is much similar to NGT technique in many aspects. But there is one main difference between NGT and Delphi that is the members of under the technique Delphi never actually meet. The biggest advantage of this technique is it is free from biasness and obstacles occurred due to interaction between the groups (Rowe & Wright, 2011).
Steps under Delphi method
- Select the expertise and make a group of experts who possess the knowledge of a given subject.
- Send a questionnaire to the selected experts via mail to know their opinions
- Analyze the responses of the experts.
- Mail the summarized results
- If one of the experts has totally different opinion, he or she may be asked to provide a rationale.
- The whole process is to be repeated several times, the selected experts usually achieve a consensus.
This method is the ultimate solution to the problem of unequal participation of the members in the group. This method helps in improvising the group decision making through framing the entry of group members into a core group. This method ultimately encourages all the members to contribute in the decision making on an individual level. Consequently, variety of ideas, It prevents people from louder group members who dominates the opinions of other people, also from overpowered people (Hwang & Masud, 2012).
The rationale/classic model
The rational model is contemplated as the first step to understand the whole process of decision making and it is also contemplated as the first attempt to know the process properly. Under this model managers take logical decisions in best of economic interest of organization. Classical model of decision making includes some assumptions which are as follows:
- The maker of the decision should take the decisions on the basis of known and agreed goals.
- Uses of logic are necessary to assign the values and evaluating alternatives to have the best decision.
- The decision makers try hard to get the complete information.
- All the alternatives are known to the managers.
The model also defines the norms that how a decision maker should take the decisions and also provides some guidelines to have the best output for the organization. The including values of classical model make the decision makers rational (Chand., 2017).
This model can be described as how the managers make decisions instead of how they should take the decisions. This model is also known as descriptive model. From the point of view of Herbert A. Simon, there are two concepts which can shape the administrative model.
Bounded Rationality: This concept explains the boundaries people have in case of using the amount of information in making of a decision as the managers do not have the enough time to explore the complete information in making of a complex decision.
Satisficing: This concept explains that the decision maker should choose the first solution which can solve the problem or which can satisfy the decision criteria. The manager cannot spare extra time or expense to sustain the full information.
This model also includes following assumptions:
- Limited number of alternatives.
- One alternative is to be assessed at one time till getting a satisficing one.
- Limited set of criteria.
The third model of decision making called retrospective aims at rationalising the choices regarding decisions after they are made. It is also called as implicit favourite model. This model can be clearly understood by the example. Retrospective model have been used several times at the time of shopping of clothes. One start with a product which catches the eye then the person start persuades him or herself and the people around that this is the best choice. If the selected one is cheapest as compare to other brands then the person will emphasize on its price. If it is not the cheapest one then the focus will be on its quality (Aharoni, Tihanyi & Connelly, 2011). Consequently, the person ends up purchasing the product which was favoured by him/her. These types of decisions are known as retrospective decisions.
- Based on personal opinions.
- Depends on the choices of an individual.
A framework for decision making
Numerate feasible solutions and alternatives.
To have the best possible solutions, it is recommended to use the nominal group thinking (group problem-solving process) as this process includes brainstorming and some other ideas which can contribute in the decision making process. This stage is significant for the whole process of decision making as the decision will be taken from decided choices.
Deciding the targets with time limits can help in taking quick decisions. It also helps in considering the deadline for decision making. Before taking any decision, one required to be clear about who is going to be accountable for the decisions taken. Generally accountability is of a group or an organization not of an individual (Skillsyouneed, 2018). The basic concept behind the idea of accountability is to magnify the importance of making the report of how the decision was made, type of information, number of people involved. The report should include enough information to justify the decisions in the future.
Before finalising any decision all the necessary information is to be gathered. The information included should be relevant and consistent as the irrelevant information can lead the organization towards wrong decision. Irrelevant information can also confuse the decision maker with the unnecessary factors involved in the information. Therefore the collected information should be accurate and up to date. One should only consider the latest information as the latest information always has the high level of consistency.
Calculating the risk involved
A question arises that how much risk is involved with the decision. The amount of risk depends upon the consequences of the results and the benefits involved after having the right decision. It is very significant to consider risk involved with the consequences. The choice in risk will be like either the organization or individual or other will go all out from having the success or taking a safe decision to be on safer side.
Considering the values
Every individual has different values and beliefs. Therefore it is to know that decisions taken by an individual is according to his/her values so it might not right for the other individual. So in these types of cases it is recommended to have the consensus under which most of significance is to be given to the values. It is necessary to understand the values on the basis of which the decisions are to be taken (Power, Sharda, & Burstein, 2015).
Weighing up the advantages and disadvantages
It is necessary to know the advantages and disadvantages of the solution by comparing the available options. This let the manager know about the consistency of the solution. For instance, one can use balance sheet to check the pros and cons (cost and benefits) of the solution. The solution with maximum benefits is obviously the right one and with maximum cost is the wrong one.
On the basis of collected data and by knowing the advantages and disadvantages of the solution one should finalise the decision. Once the decision has been reached, it is best to allow the time to reflect on it. As once the decision is out for public, it becomes very difficult to change. A successful decision needs to be kept as a record as it has the worth of keeping the record of the steps followed at the time of decision making. It further helps in understanding the process more properly that how it actually works (Chernoff, & Moses, 2012).
Taxonomy can be explained as the tool which can be used to provide the informed choice of a complex solution to many decision making problems. A factual taxonomy suggests the five alternative ideas of making strategic decisions (Thrall., 1984). The five contributing ideas in decision making process are mentioned below:
Taxonomies implies the classification of (1) criteria of decision making process (2) number of decision makers (3) the number of decisions.
A criterion of decision making process involves the purpose of the decision making process, timeline for execution and resource accessibility. One should know the exact purpose behind decision making process and also set the time limit for execution so that the set target can be easily accomplished by time. The manager should also check the availability of resources needed to execute the decisions (Boss, 2015).
The manager should have the most eligible decision makers to take the important decision for the organization. Manager should involve the top level of management to take the important decisions such as CEO, owners, managers, senior executives and others.
The manager should also consider the number of decisions to be taken in a particular period of time to avoid the ambiguity (Velasquez, & Hester, 2013).
Decisions play a crucial role and they are taken in the best interest of the employees and the organization. Decisions are taken in an organization in order to enlighten the objectives and goals. This report includes a framework of decision making process which involves many important steps in it. It also includes the techniques of decision making process such as NGT, Delphi, and Step ladder method. In addition to this it also include models of decision making process such as administrative model, Retrospective model and Classic model. It also consist of taxonomies of decision making.
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