Decision-making is the process by which management chose a specific course of action. It is designed to cause things to happen or not to happen. In organizations, managers are expected to make decisions as an important part of their responsibilities.
Types of decisions
a) Strategic decisions – these are basic long-term decisions, which settle the organization’s relationship with its environment, notably in terms of its products or services and its markets. These are the decisions which set up the goals and objectives of the organization as well as its policies.
Strategic decisions are complex, no routine and a non-repetitive.
b) Operating decisions – are short-term decisions which settle issues such as output levels, pricing and inventory levels. They are routine and repetitive by nature. They also
tend to receive priority over others because of the sheer weight of their volume plus their ability to show results in the short-term.
c) Administrative Decisions – these decisions arise from, and are subject to, the conflicting demands of strategic and operational problems. They are essentially concerned with settling the organization’s structure e.g. by establishing lines of authority and communication.
A final distinction that can be made between types of decisions concerns the so-called programmed and non-programmed decisions.
Programmed decisions are made in accordance with habit, rule or procedure. They are used for dealing with complex as well as with uncomplicated issues.
Non-programmed decisions deal with unusual or unique problems: those which have not come up often enough to be covered by policy or it is so important that it deserves special treatment e.g.
• allocation of resources
• society relations
• falling product lines
Steps to be followed to arrive at the right decisions:
NB: When answering such a question always use an example to explain the different steps. For instance take a decision on computerizing the Accounts department.
Decisions may be affected by feelings and interpersonal relationships and other situational factors but generally it is a rational process that follows the following steps:
(i) Define the situation or problem
Involves an accurate assessment of the problem so that management does not treat mere symptoms.
(ii) Generate alternative solutions
Involves looking for as many ways of dealing with the problem at hand as possible.
(iii) Gather data on and evaluate the alternative solutions
After collecting all the pertinent information, the alternatives are evaluated in terms of their cost and benefit. Consider feasibility, consistency, appropriateness and resultant consequences.
(iv) Select the best alternative
Pick the alternative that has the highest overall levels of feasibility satisfaction and the fewest undesirable consequences.
(v) Implement the alternative
This is the actual action where the alternative selected is put into effect.
(vi) Evaluate results
Every decision is taken to solve a problem. So once the alternative is put into effect, the manager needs to judge how well he is dealing with the problem. The end results of the decision are checked for their appropriateness.