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  • 1. Introduction: Decision making is a daily activity for any human being. There is no exception about that. When it comes to business organizations, decision making is a habit and a process as well. Effective and successful decisions make profit to the company and unsuccessful ones make losses. Therefore, corporate decision making process is the most critical process in any organization.In the decision making process, we choose one course of action from a fewpossible alternatives. In the process of decision making, we may use many tools, techniques, and perceptions. In addition, we may make our own private decision or may prefer a collective decision. Usually, decision-making is hard. Majority of corporate decisions involve some level of dissatisfaction or conflict with another party. Let.s have a look at the decision making process in detail.
  • 2. Steps of Decision Making Process:Following are the important steps of the decision making process. Each step maybe supported by different tools and techniques
  • 3. • Step 1: Identification of the purpose of the decision:• In this step, the problem is thoroughly analysed. There are a couple of questions one should ask when it comes to identifying the purpose of the decision.• What exactly is the problem?• Why the problem should be solved?• Who are the affected parties of the problem?• Does the problem have a deadline or a specific time-line?• Step 2: Information gathering:• A problem of an organization will have many stakeholders. In addition, there can be dozens of factors involved and affected by the problem.• In the process of solving the problem, you will have to gather as much as information related to the factors and stakeholders involved in the problem. For the process of information gathering, tools such as Check Sheets can be effectively used.
  • 4. • Step 3: Principles for judging the alternatives:• In this step, the baseline criteria for judging the alternatives should be setup. When it comes to defining the criteria, organizational goals as well as the corporate culture should be taken it to consideration.• As an example, profit is one of the main concerns in every decision making process. Companies usually do not make decisions that reduce profits, unless it is an exceptional case. Likewise, baseline principles should be identified related to the problem in hand.• Step 4: Brainstorm and analyse the different choices:• For this step, brainstorming to list down all the ideas is the best option. Before the idea generation step, it is vital to understand the causes of the problem and prioritization of causes.• For this, you can make use of Cause-and-Effect diagrams and Pareto Chart tool. Cause-and- Effect diagram helps you to identify all possible causes of the problem and Pareto chart helps you to prioritize and identify the causes with highest affect.• Then, you can move on generating all possible solutions (alternatives) for the problem in hand.• Step 5: Evaluation of alternatives:• Use your judgement principles and decision-making criteria to evaluate each alternative. In this step, experience, and effectiveness of the judgement principles come into play. You need to compare each alternative for their positives and negatives.
  • 5. • Step 6: Select the best alternative:• Once you go through from Step 1 to Step 5, this step is easy. In addition, the selection of the best alternative is an informed decision since you have already followed a methodology to derive and select the best alternative.• Step 7: Execute the decision:• Convert your decision into a plan or a sequence of activities. Execute your plan by yourself or with the help of subordinates.• Step 8: Evaluate the results:• Evaluate the outcome of your decision. See whether there is anything you should learn and then correct in future decision making. This is one of the best practices that will improve your decision-making skills.• Conclusion• When it comes to making decisions, one should always weigh the positive and negative business consequences and should favour the positive outcomes.• This avoids the possible losses to the organization and keeps the company running with a sustained growth. Sometimes, avoiding decision-making seems easier; specially, when you get into a lot of confrontation after making the tough decision.• But, making the decisions and accepting its consequences is the only way to stay in control of your corporate life and time.
  • 6. ••• organisation - decision-making in business• Richard Bowett outlines the main methods of business decision-making• Introduction• Decision-making is a crucial part of good business. The question then is ‘how is a good decision made?• One part of the answer is good information, and experience in interpreting information. Consultation ie seeking the views and expertise of other people also helps, as does the ability to admit one was wrong and change one’s mind. There are also aids to decision-making, various techniques which help to make information clearer and better analysed, and to add numerical and objective precision to decision-making (where appropriate) to reduce the amount of subjectivity.• Managers can be trained to make better decisions. They also need a supportive environment where they won’t be unfairly criticised for making wrong decisions (as we all do sometimes) and will receive proper support from their colleague and superiors. A climate of criticism and fear stifles risk-taking and creativity; managers will respond by ‘playing it safe’ to minimise the risk of criticism which diminishes the business’ effectiveness in responding to market changes. It may also mean managers spend too much time trying to pass the blame around rather than getting on with running the business.• Decision-making increasingly happens at all levels of a business. The Board of Directors may make the grand strategic decisions about investment and direction of future growth, and managers may make the more tactical decisions about how their own department may contribute most effectively to the overall business objectives. But quite ordinary employees are increasingly expected to make decisions about the conduct of their own tasks, responses to customers and improvements to business practice. This needs careful recruitment and selection, good training, and enlightened management.
  • 7. • Types of Business Decisions• 1. Programmed Decisions These are standard decisions which always follow the same routine. As such, they can be written down into a series of fixed steps which anyone can follow. They could even be written as computer program• 2. Non-Programmed Decisions. These are non-standard and non- routine. Each decision is not quite the same as any previous decision.• 3. Strategic Decisions. These affect the long-term direction of the business eg whether to take over Company A or Company B• 4. Tactical Decisions. These are medium-term decisions about how to implement strategy eg what kind of marketing to have, or how many extra staff to recruit• 5. Operational Decisions. These are short-term decisions (also called administrative decisions) about how to implement the tactics eg which firm to use to make deliveries.
  • 8. Levels of Decision-Making
  • 9. The Decision-Making Process
  • 10. • The model in Figure 2 above is a normative model, because it illustrates how a good decision ought to be made. Business Studies also uses positive models which simply aim to illustrate how decisions are, in fact, made in businesses without commenting on whether they are good or bad.• Linear programming models help to explore maximising or minimising constraints eg one can program a computer with information that establishes parameters for minimising costs subject to certain situations and information about those situations.• Spread-sheets are widely used for ‘what if’ simulations. A very large spread-sheet can be used to hold all the known information about, say, pricing and the effects of pricing on profits. The different pricing assumptions can be fed into the spread-sheet ‘modelling’ different pricing strategies. This is a lot quicker and an awful lot cheaper than actually changing prices to see what happens. On the other hand, a spread-sheet is only as good as the information put into it and no spread-sheet can fully reflect the real world. But it is very useful management information to know what might happen to profits ‘what if’ a skimming strategy, or a penetration strategy were used for pricing.
  • 11. • The computer does not take decisions; managers do. But it helps managers to have quick and reliable quantitative information about the business as it is and the business as it might be in different sets of circumstances. There is, however, a lot of research into ‘expert systems’ which aim to replicate the way real people (doctors, lawyers, managers, and the like) take decisions. The aim is that computers can, one day, take decisions, or at least programmed decisions (see above). For example, an expedition could carry an expert medical system on a lap-top to deal with any medical emergencies even though the nearest doctor is thousands of miles away. Already it is possible, in the US, to put a credit card into a ‘hole-in-the-wall’ machine and get basic legal advice about basic and standard legal problems.
  • 12. • Organizational Decision Making Landscape• Click to watch a VideoThis framework explores the dynamics of decision making in a model that would ensure balanced and focused decision making in your organization. It is important to manage decion making like any other aspect of the organization. Decision management can excel your company to increased success. This framework provides a conceptual model for excellence in organizational decision making management and practice.• It is very importance for the long term survival of an organization that good decision making practices are followed, as well as sound decision support services. Making good decisions is without any doubt one of the pivotal skills to ensure long term success in the knowledge economy. This framework provides the foundation on which such a sound decision making practice can be developed in an organization.
  • 13. • Organizational Decision LandscapeTheme 1: Decision Making Focus Theme 2: Management Focus Theme 3: Technology Focus Theme 4: Measurement Focus StrategicPromote Resilience Avoid Collapse Regulation Governance Policies Opportunities Culture (Acceptance & Change) Robustness TacticalPromote Success Avoid FailureInfrastructure Structure Scope Organization (Implementation & Embedding) Readiness Performance OperationalPromote Profit Avoid Loss Processes Money Service Functional (Requirements & Specification) Conformance Transactional (Technical)Promote Productivity Avoid WastePeople Machines Technical (Skills,Tools, Expertise) Correctness Completeness
  • 14. • The need for decision-making may be stated as follows:• Decision-making makes it possible to adopt the best course of action in carrying out a given task. When there are different ways of performing a task, it becomes necessary to find out the best way and that is what decision-making is all about. The course of action finally selected should produce the best results.• By choosing the best method of doing any work, decision-making ensures optimum use of the enterprise resources, namely, men, machines, materials and money. Resources are always scarce and therefore, it is necessary to make a proper use of the same.• Decision-making helps to find a solution to any problem in a work place. For example, if an organization faces the problem of low productivity, such a problem cannot be ignored and it becomes necessary to find a remedy. To find a remedy, the actual cause of the problem must be identified after which corrective action may be taken. If negative employee attitude is found to be the root cause of low productivity, the management may have to decide on the right course of action to be adopted to change such a negative attitude.
  • 15. • Decision-making helps to identify the best course of action in each given situation and thereby promotes efficiency. The course of action finally selected should be acceptable to both the workers and the management. Satisfied workers put in their best efforts and this result in higher output. Higher output satisfies the management and it may come forward to share the gain with the workers. Thus, there is improvement in the overall efficiency of the organization.• The conflicts in an organization are resolved through decisions. For example, the workers may want better pay and improved working conditions and put forth their views to the management. If the management avoids taking a decision on the matter, the workers are not going to give up. A decision, therefore, becomes necessary. Such a decision need not be one-sided decision. The management may evolve a formula that is acceptable to the workers as well.
  • 16. • Economic models help managers and economists analyze the economic decision-making process. Each model relies on a number of assumptions, or basic factors that are present in all decision situations. Almost everyone in society engages in economic decision making at some point, from the billionaire investing in real estate, to the small business owner signing a contract with a supplier, to the teenager buying a video game or applying for a job; and these basic factors almost always come into play.• Working on a Budget• Even the wealthiest individuals and organizations have a limited amount of capital resources to work with. The constraints of a budget influence nearly all economic decisions, since the sum of all expenditures should never exceed the availability of capital. Cash availability is not always a direct limiting factor in economic decision making, since credit arrangements can allow people to spend more than they have. Even with credit purchase agreements, however, borrowers still take into account the ability to repay the debt over time, which brings the decision back to the issue of budgets and limited resources.• Maximizing Value• The fundamental basis of economic decision making is individuals or organizations desire to maximize benefits while minimizing costs. This balancing act is referred to as maximizing value, and it is a skill that takes practice to master. For individuals, value maximization decisions may include choosing between name- brand products and generic products, and choosing between small or bulk sizes. For a company, value maximization involves finding the lowest-cost suppliers that meet the companys quality standards, then determining the economic order quantity (EOQ) for each purchase. Economic order quantity is the perfect amount of a product or material to order at a time, taking advantage of quantity discounts while also keeping holding and transportation costs under control.
  • 17. • Rational Decision Making• Nearly all economic models and theories have one irreconcilable flaw: they assume that all economic decision makers act logically and rationally, taking all available information into account in an objective manner before making a decision. While it is true that most people and organizations attempt to do this, the reality of economic decisions is slightly different. Emotional theory in the stock market is a prime example of peoples inability to make purely rational decisions on a consistent basis. Emotional theory states that everyone is influenced by his past experiences, expectations, emotional state and emotional memory when making a decision. People can place too much emphasis on certain information, such as recent news or bad news, which can skew their rational decision making as well.• Costs Versus Benefits• Costs and benefits are key factors that all economic decision makers take into account. Families, small business owners and others weigh the benefits and costs of decisions related to purchases, investments, sales and other expenditures before making a decision. This concept is similar to the idea of value maximization, with a distinct difference. Cost-benefit analyses assume that for every decision, something must be gained and something must be lost. Even in investment decisions, there is an opportunity cost—the cost of not using the money in another way—that must be considered. The goal of economic decision making is to make tradeoffs that allow you to gain more than you lose each time.