Individual decisions are taken by a single individual. The one-manager decision-making set up is still prevalent in India as many business units are owned by a single individual. But when business grows in size and complexity it may not be possible for one individual to take all the decisions himself. He needs the help of specialized people and also other individual.

Group decisions are taken by individuals who are identified as a Group for making a decisions. Group decisions have plus values such as greater participation of individual and better quality in decisions. They are generally more effective decisions. They, however, suffer from delay in decision making process and difficulty in fixing the responsibility for decisions.


A decision cannot be taken in isolation. It is influenced by past experience, present conditions and future expectations. Once a decisions is taken, then it becomes difficult to reverse it. It is pertinent to discuss the problem involved and then take a decision after considering various possibilities. Decision-making involves the following steps :

Steps in Decision Making

Decision making is a complex mental process. A good-decision-maker has to follow certain steps in decision making. They are :

1. Identify the problem and define it.

2. Develop objectives.

3. Seek the facts and identify the problem.

4. Develop a model.

5. Evaluate the alternatives.

6. Select the best solution.

7. Implement the decision or plan a course of action.

1. Identify the Problem and Define it

"A problem well defined is half-solved". Unless one knows the problem in clear terms, it is not possible to attempt a solution. Critically examine the situation and identify the apparent problem. This is the starting point in decision-making.

The decision-maker must identify the problem correctly. He has to answer questions such as whether the real problem has been identified? Will solving the problem accomplish the results desired now and in the future? Are there any related Problems?

2. Develop Objectives

To develop specific and measurable objectives, it is to be remembered that the real problem should be borne in mind.

3. Seek the Facts

Collect all available information relating to the problem; Seek the facts relating to: The situation factor (What?); The people factor (Who?); The place factor (Where?); The time factor (When) and; The causative factor (Why?).

Information should also be collected regarding the influence of environmental factors such as political, economic and social factors.

4. Develop a Model

The next step is developing a model. Simply stated a model is a representation (usually mathematical) of a given situation. Examples of models are architects making physical models of buildings, engineers developing scale models of chemical plants etc. But a decision-maker uses a mathematical model which is a set of mathematical relationships. These relationships are expressed in equations. Business problems can be easily understood and analyzed by constructing models.

5. Evaluate the Alternatives

We have to find out as many alternatives or solutions to the real problem as we can. We have to be sure that we are considering all the possibilities. The result of each alternative is to be evaluated.

Decision making process.

Fig. 4.1: Decision making process.

6. Select the Best Alternative

After reviewing each of the proposed alternatives, a few will appear to be better than the rest. Take the best alternative that gives the maximum pay-offs according to our selected criterion. The decision-maker should consider questions such as: Is this the best alternative? Whether it can be done? Is it feasible and practical? Will it correct the conditions that caused the problem? Will it have adverse consequences?

7. Implement the Decisions

Put together an action plan to implement the decision. There must be feedback and control after implementing the decision. This will give him valuable information regarding the effectiveness of the decision and also whether the decision taken will achieve the designed objectives.

Dithering on Decisions

One of the hallmarks of a good executive and an effective leader is the ability to take decisions-which will be right decision most of the time. Even if he hits a record of 60 to 70% as right decisions, he would have done an excellent job and would be considered a good executive.

However, most of the executives suffer from a "fear to decide" complex. They may get cold feet with the anticipation that their decisions may turn wrong; and that they may have to pay a very heavy price for it. They forget that they have to pay an even heavier price for not taking a decision at all. All decisions are fought with risks.

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