The decision making process, is a series of steps that starts with identifying a problem and ends with the evaluation of the effectiveness of the decision.
We will describe the decision making process in 8 distinct steps. They are:
Identify the problem
Identify the decision criteria
Assign weightage to decision criteria
Develop possible solutions/alternatives
Analyse each alternative
Select the best alternative/possible solution
Implement
Monitor/Evaluate
Step 1: Identify the Problem
Decision making begins with the presence of problem. Problem is defined as ‘ a discrepancy between an existing and desired state of affairs” .
For example, when a manager notices that her daily sales figure (existing) is lower than her set target (desired state of affairs) than it is a problem. In other words when there is a difference between the actual situation (the actual sales was $5000) and set standards (the original standards was $6000), the difference is a shortfall of $1000. Now we have a problem to solve.
Most of the time it is not easy to identify the real problem. The existing situation could be simply a symptom of other underlying problems.
In analysing and defining a problem, it is necessary to look for information from internal and external sources
Fact-finding is an important part in this stage. Additional information is gathered through personal observation and discussion.
To make it easier for us to follow through the steps, let us look at the decision making process with an example: Your office computer is out of order and it is not worth repairing. That is your problem. You need to buy a new one.
Step 2: Identify the decision criteria
Prior to developing possible solutions to the identified problem, managers normally pay attention to one other specific area. They need to identify and agree on the criteria that will be used to determine the relevance of each alternative.
For example, in buying a replacement computer, you may wish to compare your choices by making reference to price, features, after-sales service etc. This factors you consider in making a choice is known as decision criteria.
Step 3: Allocate weight to criteria
Once decision criteria are identified, you have to allocate to each criterion.
This is based on the assumption that we normally value certain criterion more
than another.
For example in our example, all things being equal, we may make our final
choice based on pricing rather than on other factors. In this case we will
assign higher weightage to this factor.
Step 4: Develop alternatives
Factors such as price, features and after sales service are some of the factors (commonly known as decision criteria) that can be used to validate each possible solution are identified. Criterion, which is considered as most important, is given higher weightage.
Manager lists as many viable solutions as possible. Generating alternatives can be done alone or may involve others through activities such as brainstorming.
In brainstorming, the group leader presents a problem to group members and encourages them to generate as many solutions as possible. The emphasis is on quantity and not on quality of solutions. No criticism of ideas is allowed. Later, each solution is reviewed critically.
Using the earlier example, now you have to identify few brand/models of computers as possible choices. You may collect information on specific models of Acer, Toshiba, and IBM.
Step 5: Analyse each alternative
You, as a decision maker now must compare each model against the decision criteria - price, features and after sales service.
The benefits to be gained from each alternative must be identified.
The possible risk of each alternative must be identified
The amount of resources required for each alternative must be identified.
Step 6: Select the best alternative
Once, each possible alternative is evaluated against set criteria, the decision maker simply chooses the item with the highest score.
Once a systematic approach is adopted, such as using decision criteria, the choice becomes obvious.
Manager can choose an alternative that gives highest possible benefit.
At times highest possible benefit option is not available, a manager may opt for a minimum gain, but that will also reduces high risk.
Risk aversive manager may choose an alternative that is not too risky.
Step 7: Implement
Having selected the preferred choice, manager must now implement the decision. The relevant resources are secured to make the implementation effective. Employees are briefed about the choice and the reason for selecting a particular model.
Successful implementation requires effective planning, organising and leading.
Step 8: Monitor/Evaluate
The last step in decision making involves evaluating the outcome of the decision.
This relates to the control aspect of the functions of management.
The actual performance is monitored closely; It is compared to the set standard to make sure the problem no longer exist. If the problem still exist, then manager need to take corrective action.
If necessary manager need to go back to step 1 of the decision making process.
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