DECISION MAKING1. INTRODUCTION'Decision Making is the act of
choosing between two or more courses of action'.Decision making is
the study of identifying and choosing alternatives based on the
values and preferences of the decision maker. However, it must
always be remembered that there may not always be a 'correct'
decision among the available choices.When trying to make a good
decision, a person must weigh the positives and negatives of each
option, and consider all the alternatives. For effective decision
making, a person must be able to forecast the outcome of each
option as well, and based on all these items, determine which
option is the best for that particular situation.Decision making is
a process of selecting the best among the different alternatives.
It is the act of making a choice. There are so many alternatives
found in the organization and departments. Decision making is
defined as the selection of choice of one best alternative. Before
making decisions all alternatives should be evaluated from which
advantages and disadvantages are known. It helps to make the best
decisions. It is also one of the important functions of management.
Without other management functions such as planning, Organizing,
directing, controlling, staffing cant be conducted because in this
managerial function decision is very important. According to
Stephen P. Robbins, decision making is defines as the selection of
a preferred course of action from two or more alternatives.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 few possible
alternatives. In the process of decision making, we may use many
tools, techniques and perceptions.1.1 The Components of Decision
Making The Decision EnvironmentEvery decision is made within a
decision environment, which is defined as the collection of
information, alternatives, values, and preferences available at the
time of the decision. An ideal decision environment would include
all possible information, all of it accurate, and every possible
alternative. However, both information and alternatives are
constrained because the time and effort to gain information or
identify alternatives are limited. The time constraint simply means
that a decision must be made by a certain time. The effort
constraint reflects the limits of manpower, money, and priorities.
Since decisions must be made within this constrained environment,
we can say that the major challenge of decision making is
uncertainty, and a major goal of decision analysis is to reduce
uncertainty. We can almost never have all information needed to
make a decision with certainty, so most decisions involve an
undeniable amount of risk. The fact that decisions must be made
within a limiting decision environment suggests two things. First,
it explains why hindsight is so much more accurate and better at
making decisions that foresight. As time passes, the decision
environment continues to grow and expand. New information and new
alternatives appear--even after the decision must be made. Armed
with new information after the fact, the hindsighters can many
times look back and make a much better decision than the original
maker, because the decision environment has continued to expand.The
second thing suggested by the decision-within-an-environment idea
follows from the above point. Since the decision environment
continues to expand as time passes, it is often advisable to put
off making a decision until close to the deadline. Information and
alternatives continue to grow as time passes, so to have access to
the most information and to the best alternatives, do not make the
decision too soon. Now, since we are dealing with real life, it is
obvious that some alternatives might no longer be available if too
much time passes; that is a tension we have to work with, a tension
that helps to shape the cutoff date for the decision.
Delaying a decision as long as reasonably possible, then,
provides three benefits:1. The decision environment will be larger,
providing more information. There is also time for more thoughtful
and extended analysis.2. New alternatives might be recognized or
created. Version 2.0 might be released.3. The decision maker's
preferences might change. With further thought, wisdom, and
maturity, you may decide not to buy car X and instead to buy car Y.
Delaying a decision involves several risks:1. As the decision
environment continues to grow, the decision maker might become
overwhelmed with too much information and either make a poorer
decision or else face decision paralysis.2. Some alternatives might
become unavailable because of events occurring during the delay. In
a few cases, where the decision was between two alternatives
(attack the pass or circle around behind the large rock), both
alternatives might become unavailable, leaving the decision maker
with nothing. And we have all had the experience of seeing some
amazing bargain only to hesitate and find that when we go back to
buy the item, it is sold out.3. In a competitive environment, a
faster rival might make the decision and gain advantage. Another
manufacturer might bring a similar product to market before you
(because that company didn't delay the decision) or the opposing
army might have seized the pass while the other army was "letting
the decision environment grow."These decision making tools are
general, they are based on common sense and are used in all the
trades for backing up the decisions taken by the decision making
authorities.
2. TYPES OF DECISION MAKING
IrreversibleThese decisions are permanent, once taken, they
can't be undone. The effects of these decisions are far-reaching
and are taken only when all other options have been exhausted.
ReversibleReversible decisions are not final and binding, they can
be retracted at any point, and another more fitting decision made.
It allows one to acknowledge mistakes and undertake relevant damage
control, depending on how the new circumstances play out.
DelayedSuch decisions are put on hold until the decision maker
thinks that the right time has come. This delay might cause one to
miss certain opportunities that may present themselves, especially
in the case of businesses, and may lead to losses. However, such
decisions are the norm for large bodies like the government, which
decide policies that affect the lives of millions of people. The
time taken to collect all information required and to organize
plans of implementation, is crucial to the ultimate well-being of
the public. Quick DecisionsThese decisions enable one to make
maximum use of the opportunity available at hand. However, only a
very astute personality can take decisions that are both
instantaneous and correct. In order to be able to take the right
decision within a short span of time, one should also take the
long-term results into consideration.
ExperimentalOne of the ways of decision-making is the
experimental type, where the final decision cannot be taken until
the preliminary results appear and are positive. This approach is
used when one is sure of the final destination but is not convinced
of the course to be taken. Experimental decisions are common in
fields such as medicine, where the product being tested goes
through several phases, and decisions may change with every
iteration. Trial and ErrorThis approach involves trying out a
certain course of action. If the result is positive it is followed
further, if not, then a fresh course is adopted. Such a trial and
error method is continued until the decision-maker finally arrives
at a course of action that convinces him of success. This allows a
manager to change and adjust his plans until the final commitment
is made. ConditionalConditional decisions allow an individual to
keep all his options open. He sticks to one decision as long as the
circumstances remain the same. Once the competitor makes a new
move, conditional decisions allow a person to take up a different
course of action.2.1 Kinds of Decisions Programmed
decisions:Programmed decisions are routine and repetitive, and the
organization typically develops specific ways to handle them. A
programmed decision might involve determining how products will be
arranged on the shelves of a supermarket. For this kind of routine,
repetitive problem, standard arrangement decisions are typically
made according to established management guidelines. Non programmed
decisions:Non programmed decisions are typically one shot decisions
that are usually less structured than programmed decision.
Strategic decisionsThese are big choices of identity and direction.
Who are we? Where are we heading? These decisions are often complex
and multi-dimensional. They may involve large sums of money, have a
long-term impact and are usually taken by senior management.
Tactical decisionsThese are about how to manage performance to
achieve the strategy. What resources are needed? What is the
timescale? These decisions are distinctive but within clearer
boundaries. They may involve significant resources, have
medium-term implications and may be taken by senior or middle
managers.
3. PROCESS OF DECISION MAKING SKILLSMany different techniques of
decision making have been developed, ranging from simple rules of
thumb, to extremely complex procedures. The method used depends on
the nature of the decision to be made and how complex it is.The
method described here follows seven stages:
Identification of problem Analysis of problem Listing all
possible solutions/options Setting a time scale and deciding who is
responsible for the decision Information gathering Weighing up the
risks involved Deciding on values, or in other words what is
important Weighing up the pros and cons of each course of action
Implementing the best alternative Review of implementation
Identification of problems: The first step of decision making is
identification of problems. First of all, managers must identify
the problem. The problem has to be found and defined. Symptoms are
identified and problems should be judged, symptoms are not
problems. They are warning signs of problems. So, managers should
search for symptoms for identification of problems. Such symptoms
can be falling of sales, profit etc. It is said that problem
identified is half solved is identification of problem should be
effective.
Analysis of problem:
After identification of problems, the problem should be analyzed
by the decision maker. It is the assembly of fact and clarifying
it. Relevant information must be collected and analyzed according
to the complexity and nature of problems. Listing Possible
Solutions/OptionsIn order to come up with a list of all the
possible solutions and/or options available it is usually
appropriate to work on a group (or individual) problem-solving
process. This process could include brainstorming or some other
'idea generating' process This stage is important to the overall
decision making processes as a decision will be made from a
selection of fixed choices. Always remember to consider the
possibility of not making a decision or doing nothing and be aware
that both options are actually potential solutions in themselves.
Setting a Time Scale and deciding who Responsible is for the
DecisionIn deciding how much time to make available for the
decision making process, it helps to consider the following: How
much time is available to spend on this decision? Is there a
deadline for making a decision and what are the consequences of
missing this deadline? Is there an advantage in making a quick
decision? How important is it to make a decision? How important is
it that the decision is right? Will spending more time improve the
quality of the decision? Before making a decision, it needs to be
clear who is going to take responsibility for the decision.
Remember that it is not always those making the decision that have
to assume responsibility for it. Is it an individual, a group or an
organization? This is a key question because the degree to which
responsibility for a decision is shared can greatly influence how
much risk people are willing to take.If the decision making is for
work then it is helpful to consider the structure of the
organization that you are in. Is the individual responsible for the
decisions he or she makes or does the organization hold ultimate
responsibility? Who has to carry out the course of action decided?
Who will it affect if something goes wrong? Are you willing to take
responsibility for a mistake?Finally, you need to know who can
actually make the decision. When helping a friend, colleague or
client to reach a decision, in most circumstances the final
decision and responsibility will be taken by them. Whenever
possible, and if it is not obvious, it is better to make a formal
decision as to who is responsible for a decision. This idea of
responsibility also highlights the need to keep a record of how any
decision was made, what information it was based on and who was
involved. Enough information needs to be kept to justify that
decision in the future so that, if something does go wrong, it is
possible to show that your decision was reasonable in the
circumstance and given the knowledge you held at the time.
Information GatheringBefore starting on the process of making a
decision, all relevant information needs to be gathered.If there is
inadequate or out-dated information then it is more likely that a
wrong decision might be made. Also, if there is a lot of irrelevant
information then the decision will be difficult to make, it will be
easier to become distracted by unnecessary factors. There is a need
for up-to-date, accurate information on which to make decisions.
Such information needs to be gathered so that a well-informed
decision can be made. The amount of time spent on information
gathering has to be weighed against how much you are willing to
risk making the wrong decision. In a group situation, such as at
work, it may be appropriate for different people to research
different aspects of the information required. For example
different people might be allocated to concentrate their research
on costs, facilities, availability, and so on.
Weighing up the Risks InvolvedOne key question is how much risk
should be taken in making the decision? Generally, the amount of
risk an individual is willing to take depends on: The seriousness
of the consequences of taking the wrong decision. The benefits of
making the right decision. Not only how bad the worst outcome might
be, but also how likely that outcome is to happen.It is also useful
to consider what the risk of the worst possible outcome occurring
might be, and to decide if the risk is acceptable. The choice can
be between going 'all out for success' or taking a safe decision.
Deciding on ValuesEverybody has their own unique set of values -
what they believe to be important.Many people decide to buy a car
for themselves but different people buy different cars based on
their own personal values. One person might feel that price is the
most important feature, whereas another person might be more
concerned with its speed and performance. Others might value
safety, luggage space or the cars impact on the environment or a
combination of these features.Depending on which values are
considered important, different opinions may seem more or less
attractive. If the responsibility for a decision is shared it is
possible that one person might not have the same values as the
others. In such cases, it is important to obtain a consensus as to
which values are to be given the most weight. It is important that
the values on which a decision is made are understood because they
will have a strong influence on the final choice. People do not
make decisions based on just one of their values. They will
consider all their values which are relevant to the decision and
prioritize them in order of importance. If you were to buy a car,
what would be the five most important factors to you?
Weighing up the Pros and ConsIt is possible to evaluate the pros
and cons of each possible solution/option by considering the
possible advantages and disadvantages. One aid to evaluating any
solution/option is to use a 'balance sheet', weighing up the pros
and cons (benefits and costs) associated with that solution.
Implementation of best alternative: After selection of finest
alternative, it must be used in the organization effectively.
Effectiveness of decisions in achieving the desired goals depends
upon its implementation. It they are not implemented effectively
then best results cant be obtained. Therefore proper implementation
of best alternative is necessary. Review of implementation: It is
the last step of decision making process. When the implementation
of best alternative is reviewed, the process of decision making is
finished. The result of implementation should be monitored and
evaluated through which effectiveness can be measured.
4. EFFECTIVE DECISION MAKING The Decision-Making
ProcessDecision-making is the reasoning process we use to select a
course of action from among any number of possibilities that
present themselves mentally or otherwise. Making a decision either
can involve a period of deliberation or seemingly none at all. For
many of lifes decisions, we find ourselves having to decide
precisely how we should make a decision: Should I sleep on it, go
away for a few days, consult someone, flip a coin? Friends, family
and others, sometimes even complete strangers, will advise us to
stop and think before making a decision and never do the first
thing that comes into our heads. Contrast that with wisdom passed
down through the ages recommending we go with our instincts or that
we listen to our hearts. "Once you make a decision, the universe
conspires to make it happen." Ralph Waldo Emerson.We often have you
or someone you know lamented: "That was a bad decision," "I wish I
had it to do over again," "I let my emotions get in the way." It
turns out that our emotions are much more important in the
decision-making process than previously thought. The Institute of
HeartMath has conducted more than 23 years of research and has
compiled substantial data about the role of emotions and the brain
in decision-making. It turns out that quite often, the choices we
make that end in regret are the products of unmanaged emotions, but
when we allow calm and intuitive heart-based feelings to guide us
the outcomes of our decisions are far more favorable. When the
Heart DecidesResearchers with HeartMath and other organizations
believe intuitive feelings emanate from the heart. They have found
evidence showing the human heart has an intuitive intelligence
greater than science and medicine have historically believed. Even
without our realizing it, the heart guides us in much of what we
do, but often we allow our brains or our unmanaged emotions to take
the lead role in our decision-making and later regret our
choices.
"I should have gone with my heart," some people say in
hindsight, unaware that the very act of making such a statement may
have originated in the heart itself. We now know the heart has a
powerful electromagnetic field and complex nervous system and
circuitry that generate up to an estimated 60 times the electrical
amplitude of the brain. The electromagnetic signal our heart
rhythms produce can actually be measured in the brain waves of
people around us. We also know our heart-rhythm patterns say a lot
about our emotional balance and the stress we are experiencing: The
calmer we are, the more regular our heart-rhythm patterns are, and
the more stress we feel, the more irregular the patterns are.
Researchers at HeartMath and elsewhere have concluded the heart
possesses its own organized intelligence network that enables it to
act independently, learn, remember and produce feelings. Until
recently it was believed only the brain was capable of these
functions. Through years of studies involving thousands of people,
researchers at HeartMath and elsewhere have shown when we
intentionally experience positive feelings such as care and
appreciation we can improve our heart-rhythm patterns. That means
reduced stress, getting sick less frequently, thinking more
clearly, even living longer. So go ahead, let your heart decide.
The Stress of Making DecisionsEver wonder how many decisions you
make each day. Hundreds, thousands? The conscious ones we make
every few seconds: Should I get out of bed? Should I hit the snooze
button? Hit it again? Remember my dreams? Plan my day? And the
countless ones our bodys systems, including trillions of cells,
make every fraction of a second. In todays fast-paced, rapidly
changing world, were expected to make countless decisions quickly:
Give the correct answer in class; make a left turn at the signal,
finish that project by 3 p.m.; meet the cable guy. The pressure to
think and act quickly never seems to let up and the consequences of
not keeping up are always hanging over our heads. No wonder stress
levels are at all-time highs among Americans.
Lifes Big DecisionsNot all decisions are equal, and not all take
the same toll on us. "What should I have for lunch?" or "Should I
go somewhere this weekend?" dont compare to "Should we start saving
for the kids college education or pay off our debts first?" or
"Should I change careers?" The big decisions take much more
intellectual thought, clarity and focus. Weighty decisions such as
these are stressful enough, but if we put them off until later,
were bargaining for the stress that comes with indecision and we
dont need any more stess. Organizational Decision-Making"The
results (of HeartMath interventions) speak for themselves. Our
airline, Cathay Pacific, now prides itself on delivering an
individual style of service, straight from the heart. This has
resulted in consistently being rated as having the best in-flight
service in the world."Researchers investigated the impact of
HeartMaths Inner Quality Management program on managers and staff
within the California Personnel Retirement Systems Information
Technology Services Division, which had recently initiated profound
changes to meet the changing information services marketplace.
Learning new technology skills proved challenging. The results
suggested that by facilitating increased self-management of the
participants mental and emotional turmoil, the program enhanced
employees ability to defuse personal and organizational stress.
5. Importance of decision making Implementation of managerial
function: Without decision making different managerial function
such as planning, organizing, directing, controlling, staffing cant
be conducted. In other words, when an employee does, s/he does the
work through decision making function. Therefore, we can say that
decision is important element to implement the managerial function.
Pervasiveness of decision making: The decision is made in all
managerial activities and in all functions of the organization. It
must be taken by all staff. Without decision making any kinds of
function is not possible. So it is pervasive. Evaluation of
managerial performance: Decisions can evaluate managerial
performance. When decision is correct it is understood that the
manager is qualified, able and efficient. When the decision is
wrong, it is understood that the manager is disqualified. So
decision making evaluate the managerial performance. Helpful in
planning and policies: Any policy or plan is established through
decision making. Without decision making, no plans and policies are
performed. In the process of making plans, appropriate decisions
must be made from so many alternatives. Therefore decision making
is an important process which is helpful in planning. Selecting the
best alternatives: Decision making is the process of selecting the
best alternatives. It is necessary in every organization because
there are many alternatives. So decision makers evaluate various
advantages and disadvantages of every alternative and select the
best alternative. Successful; operation of business: Every
individual, departments and organization make the decisions. In
this competitive world; organization can exist when the correct and
appropriate decisions are made. Therefore correct decisions help in
successful operation of business.
6. MODELS OF DECISION MAKING
SWOT AnalysisThis is a very common decision making model
specifically used during feasibility study of the project. SWOT
analysis brings unsorted issue to a conclusion when the project is
gauges based on Strength, Weakness, Opportunity and Threat.The
steps for SWOT analysis are the same as mentioned above, but there
is one caution which needs to be followed which is the emphasis on
deep analysis of strength and weaknesses similarly, opportunities
and threats. Maslows PyramidMaslows Pyramid of hierarchical need
has been very well spoken and discussed in the HR industry which is
an integral part of Project Management. Deduced in 1943, by Abraham
Maslow, this decision model speaks volumes about basic human needs
and their effect on human behaviour. While working on the projects
the most inconsistent variable which a project manager faces is a
human resource. Understanding Maslows pyramid helps project manager
to identify problems related to human resources.Maslow typically
says that there are five levels of human needs and it is through
their accomplishment one by one that the human can reach
self-actualization.The pyramid consists of physiological needs,
security requirements, social relationships, and recognition and
self- actualization.This theory of understood properly can help a
project manager a great deal while working with human
resources.
Pareto PrincipleThis is also called as 80-20 rule wherein you
prioritize your problems and then find out solutions. In order to
understand the concept, this 80-20 rule can be described as an
example of problems in organization created by people. We can say
that the 80% of the problems are created by 20% of the people in
any organization.Let us say you have a BPO and 5 of the problems in
your organization are due to lack of promptness, 3 problems are due
to poor linguistic ability and 2 problems are due to poor
organization skills. So you can say that major problem here is
caused by the lack of training and development because if you
impart training to your employees automatically promptness and
linguistics will be taken care.
Monte Carlo SimulationNow here is a cache, Monte Carlo
simulation is a model which essentially focusses on the numerous
simulations over random sampling yielding results which are
approximate. It just tells us that even models can be random and
have very less reality attached to it. This Monte Carlo simulation
model is interesting because of the random sampling and use of
probability and statistics to determine the result. In project
management Monte Carlo simulation method is used for quantitative
risk analysis wherein you will be able to identify quantitative
impact of a risk on projects objective. Decision tree analysisThis
decision model is used while performing procurement analysis. The
question of whether to build or buy is answered using this decision
tree analysis. You can give each of the possibility a chance of yes
and no in percentages and calculate the amount invested against the
amount received. Based on the profits you can decide whether to
build or buy for a particular project.There are many more decision
making models and those can be effectively used in professional as
well as personal life. These tools are sometimes regarded highly in
the sphere of project management as their capacity of backing up
decisions taken by project manager is enormous. A good project
manager can understand the need of these effective tools which can
be used all through the life cycle of project management
7. CASE ANALYSIS