Described as the though process of selecting a logical choice from the available options, decisions and their making processes are fundamental to effective management. A wrong decision is as essential to the management process as a right decision since the errors provide a learning experience that leads to the making the right decision. Simplified, decision making is a six step process: (1) Identification and diagnosis (2) Generating alternate solutions (3) Evaluating alternatives (4) Choosing the best alternative (5) Implementation (6) Evaluation. 1. Identification and Diagnosis: Whether an opportunity or problem, proper identification and diagnosis is critical to arriving at the desired result. Upon identifying the problem, a neutral analysis of its cause and effect is the best method to arrive at the right information on which to base the decision. E. g. Sales were erratic in the Western market. Ashok concluded it was the new marketing campaign of the competition that was eroding his gains. 2. Generating alternate solutions: Whether right or wrong, each problem always has more than one way by which it can be addressed.
At this stage an organisation simply lists all its options available. E. g. To boost sales, Ashok considered a price discount, launching his own marketing campaign and releasing an upgraded version of his product. 3. Evaluating alternatives: The integrity of the short-listed solutions must be evaluated on parameters such as a cost, timelines, real & perceived benefits, organisational capability etc. E. g. A price discount would lead to immediate sale gains but reduced quarterly half yearly profits, the marketing campaign will take three months to create and launch while the product upgrade was not yet market-ready. . Choosing the best alternative: The two most common methods are optimising and satisfying.
The former waits for the right opportunity in the ideal conditions, even though it may take time. While the latter encourages a compromise by selecting the first and best option available even though all criteria are not met. Often, decisions are a combination of both these methods. E. g. Ashok opted for a marketing campaign which could be launched in a fortnight. It also offered a price discount. 5. Implementation: If decision making is theory, then the implementation is the practice. The criteria considered at the evaluation stage are put into action and often at this stage the results and process either validate or annul the earlier assumptions. Good decisions have gone wrong with improper implementation. 6. Evaluation: The same criteria used to evaluate alternatives should be used to evaluate a decision’s result. Gathering statistics of the decision’s effect is the best method to its evaluation. E. g.
Sales figures and a retailer survey indicate that Ashok’s quick response marketing campaign was effective in regaining consumer recall which also regained sales. The discount would have been more effective as a quantity rather than price discount. With a properly evaluated decision, a manager has a choice of ten types of decisions across five pairings. While a programmed decision is for routine tasks, most of which are outlined in process manuals, a non-programmed decision is for one off or non-regular situations.
A proactive decision is a pre-emptive response to a situation where waiting for the event to happen in order to react will have an adverse effect. As it suggests, a reactive decision is in response to a situation. E. g. Ashok’s marketing campaign was reacting to his competition taking some of his sales. A systematic decision is more of a process a manger undertakes to understand the situation and arrive at a solution. It involves analysis of a problem’s each aspect independently in a step-by-step manner. An intuitive decision is often based on human instinct.
Sometimes data may indicate a solution, while the manager’s experience and skill lead him to choose another course of action. Policy decisions are for the entire organisation and encompass large aspects. These are sometimes viewed are guidelines on which further decisions specific to the problem are based. Operative decisions are related to operational matters such as implementing policy decisions. Feedback from operation managers regularly lead to revised policy decisions aimed at overall better operations.