The first step in the decision-making process

Decision-making consists of the following steps in the order of their sequence (see Fig.8.2).

The Decision-making Process Steps

Fig. 8.2 Steps in Decision-Making

1. Making the Diagnosis:The first step in decision-making is finding out what really is the problem. If the problem is not correctly diagnosed, efforts made to solve it will be of no use.

Image describe the first step in the decision-making process

For example, if the sales decline, the management may think that the problem is one of increasing cost. But the real problem may be inadequate sales planning or decrease in quality or inadequate publicity. Hence, the efforts made by the management to reduce cost may not help in increasing sales. Joseph L.Massie has rightly said that "a good decision is dependent upon the recognition of the right problem". A correct diagnosis of the problem is of utmost importance because a disease can be cured only if it is properly diagnosed.

2. Analysing the Problem: After ascertaining the correct problem, it should be thoroughly analysed and information and data relating to it should be collected. This will help the management to get a clear idea of the problem. There may be innumerable factors involved in any problem, but to minimise the expense of time and effort, analysis should be directed towards pertinent and closely connected factors for the purpose of collecting information and data. Further, out of the data and information collected, the management should separate facts from beliefs and opinions and it should depend mainly on facts for making decisions.

3. Developing alternative solutions or courses of action: The next step is to develop alternative solutions or courses of action. The management after evaluating the various alternatives can make the decision and the evaluation of alternatives help the management in taking the best decision. For instance, if the management wants to fill up a vacancy, it should consider various alternatives such as whether to promote from within, or recruit from outside or to appoint a relative of the previous employee. Similarly, the methods of selling its products may involve various alternatives such as whether to sell directly, or through middlemen or a combination of both, viz., direct selling and through middlemen. Thus, for every problem there are alternatives and they should be evaluated before taking a final decision.

4. Selecting the best solution: The next step is to select the best solution out of the several alternatives developed. For this purpose, the management has to consider the merits and demerits of each alternative solution and costs and sacrifices involved in each. Some criteria for selecting the best solution are the economy of effort, degree of risk, time required for implementation, practicability of the solution, availability of resources, consonance with the goals of the enterprise, etc. Generally, sound knowledge and practical experience of the executive will help him to select the best solution.

5. Converting the decision into effective action: After selecting the best solution or decision, the management takes steps to translate the decision into action with the co-operation of the employees. In order to avoid opposition from the employees in implementing the decision, it is desirable that the employees should be associated with the decision-making process.

6. Follow up the decision: Sometimes, it is possible that a decision taken by a manager may not be a correct one. Hence, the manager, while translating the decision into action, should introduce a system of follow up. This helps in safeguarding against incorrect decision and also in modifying or altering the decision without loss of time.

Who Takes the Decision?

In every organisation, very many decisions have to be taken. It may relate to finance, marketing, HRD, quality assurance of product, consumer relationship etc. when such wide variety of decisions have to be taken, decision-makers at different levels have to be identified. Some sort of rationale has to be developed to authorize the persons to take decisions. The rationale will have the following two aspects to be considered:

(i) The scope of the decision and (ii) Management level.

The scope of management decision refers to the span of decision applicable in an organisation. This means, upto what level the decision can be applied.

Whereas "Management level" refers to different levels of management that exist in an organisation. The following picture indicates the decision taken and its span of applicability.

The Scope of Management Decision

Fig. 8.3 The Scope of Management Decision

This diagram explains the span of applicability of decisions and who will take the decision. If top management takes the decision, it will be normally policy decisions and are applicable to bottom level. Whereas the decision is taken by middle management, it is applicable to both middle and bottom level. If the entry level managers take the decision, the span of applicability is only to that level.

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