SUBMITTED TO :- SUBMITTET BY :-
Dr. RAJAN SHARMA RAKESH KUMAR
MBA 1st YEAR
ROLL NO. 17
Consciously or sub-consciously , we make a
number of decision (important and routine) in
our daily lives. Sometimes, decision are taken
without analysing their impact on our behaviour.
In the business world, however, decision-making
is done in a scientific and rational manner as
decision affect the efficiency of business
operations and interest with the business.
Decision-making means selecting a
course of action out of alternative
courses to solve a problem.
FEATURES OF DECISION-MAKING
Decision is a goal-oriented. The purpose of decision is to achieve a goal;
sectional, departmental and organizational.
It is required for every managerial function through it is closely related to
It is a process of choosing a course of action out of various courses to solve
a specific problem.
Problem-solving is the basic for decision-making as decision are made to
solve problem. Unless there are problem, there will be no decision-making.
Decisions are made to solve organizational problem and exploit
environmental opportunities. Both problem and opportunities, thus, need
It is a pervasive process. Decisions are made in business and non- business
organizations. In business organizations, they are made at all levels.
Decision are made in all levels in the organization; though nature and
importance of decision vary at different levels. However, overall
organization effectiveness is determined by the quality of decision made at
all the levels.
It is required for every situation _ certainty, risk or uncertainty.
It is continuous process. Managers continuously evaluate organizational
activities and find problems that require decision-making.
Identify the problem
Diagnose the problem
Select the alternative
Implement the alternative
Monitor the implementation
STEP 1. IDENTIFY THE PROBLEM
Decision are made to solve problems. As a first step to
decision-making, therefore, managers identify the
problem. Problem is any deviation from a set of
expectations. Managers scan the internal and
external environment to see if the organizational
operations conform to environmental standards.
If company’s sales target is 10,000 units per annum but
actual sales are 7,000 units, managers sense problem
in company. The problem is identified with the
marketing department. Managers use their judgment,
imagination and experience to identify the problem as
wrong identification leads to wrong decision
STEP 2. DIAGNOSE THE PROBLEM
Manager find cause of problem by collecting facts and
information that have resulted in the problem.
Diagnosis help to define the problem; its cause,
dimensions, degree of severity and origin so that
remedial action can be taken. Manager get to the core
of the problem and isolate the problem in a separate
category of operations called the problem-solving
area. In the above example, manager search for
reasons of low sale. It could be low quality, poor
promotion, better product introduced by competitors
etc. The exact reason is found and the problem is said
to have been diagnosed.
STEP 3. ESTABLISH OBJECTIVES
Objective is the end result that managers achieve
through the decision-making process. Establish
objectives means deciding to solve the problem.
The resolution forms the objective of decision-
making. If the reason low sales is poor
salesmanship, managers form the objective of
improving the skills of salesmen to promote sales.
STEP 4. COLLECT INFORMATION
In order to generate alternatives to solve the
problem, managers collect information from the
internal and external environment. Information
provides inputs for generating solutions.
Information can be quantitative or qualitative. It
should be reliable, adequate and timely so that
right action can be taken at the right time.
STEP 5. GENERATE ALTERNATIVES
Alternatives means developing two or more ways
of solving the problem. Members develop as many
solution as possible to choose the best, creative
and most applicable alternative to solve the
STEP 6. EVALUATE ALTERNATVS
All the alternatives are weighed against each other with respect to their strength
and weakness. They are useful if they help to achieve the objective. Alternatives are
evaluated in terms of acceptable criteria to analyse their impact on the problem.
Various quantitative and qualitative criteria against which alternatives are
evaluated are as follows :
COSTS :- Alternatives should not be costly. Improving the skills of salesmen by
firing the existing salesmen and hiring new once may involve strain on company’s
financial resources. Such alternatives should be avoided.
RESOURCES :- The alternatives must fit into the organization’s resource structure.
They must be feasible with respect to budgets, policies and technological set up of
ACCEPTABLE :- Alternatives should e acceptable to decision-making and those who
are affected by the decision.
REVERSIBLE :- A decision is reversible if it take back and other measures can be
STEP 7. SELECT THE ALTERNATIVE
After evaluating the alternatives against accepted criteria,
managers screen the non-feasible alternatives and select the most
alternative to achieve the desire objective. Alternative can be
selected through the following approaches:
EXPERIENCE :- Past experience guides the future. Manager follow
past action, search for their successes and failures, analyse them in
the context of future environment and select the most suitable
alternative that suits the present situation.
EXPERIMENTATION : - An alternative to experience is
experimentation where each alternative is put to practice and the
most suitable alternative is selected. This method is costly, in terms
of time and money .
RECEARCH AND ANALYSIS :- It helps to search and analyse the
impact of future variables on the present situations, apply
mathematical models and select the most suitable alternative. This
method is more suitable and less costly in terms of time and money.
STEP 8. IMPLEMENT THE ALTERNATIVE
The selected alternative should be accepted and implemented by
the organizational members. Implementation must be planned.
Those who will be affected by implementation should participate
in the implementation process to make effective and fruitful.
Implementation of the alternative should ensure the following :
The selected alternative should be communicate to everyone in the
Changes in the organization structure because of implementation
should be communicated to everyone in the organization.
Authority and responsibility for implementation should be
Resources should be allocated to departments for carrying out the
Budget, schedule procedures and control should be established
to ensure effective implementation.
A committed workforce should be promoted. Unless everyone is
committed to the decision, the desired outcome will not be
STEP 9. MONITOR THE IMPLEMENTATION
The implementation process should be monitored
to know its acceptability amongst organizational
member. The alternative should be regularly
monitored, through progress report, to see
weather the objective for which it was selected is
achieved or not.
A decision that is repetitive and routine and can be made by
using a definite, systematic procedure.
A decision that is unique and novel.
The Principle of Exception
“Only bring exceptions to the way things should be to the
manager’s attention. Handle routine matters yourself.”
Types of Decisions