Process of Decision Making (or) Steps Involved In Decision Making

Process of Decision Making (or) Steps Involved In Decision Making

The decision making involves certain logical process which should be followed in the sequence by the manager. A decision to a business problem cannot be arrived immediately without any effort. It is a step by step process and involves mental work also.

STEP 1  Identifying The Problem

The first step in the decision making process is recognising a problem. It involves defining and formulating the problem clearly and completely. Understanding and correct diagnosing of the problem will help in immediate solution. For example: A company product may witness decrease in sales. In a broad sense it will be presumed that due to increase in price may lead the problem to come down. But the actual problem is that customers may not like the quality of the product. Therefore the manager should clearly define for what problem they need a solution. That’s why defining the problem may be a time consuming task but it is time well spent. Defining and analysing the problem involves identifying the critical factors and data which may be obtained from internal such as sales report, profit statements and external sources such as customer feedback etc.

STEP 2: Analysing the Problem

It involves the collection and classification of as many facts as possible. This is done because the quality of decision is depending on the quality of data used. By studying all the information in detail the manager can able to diagnose where the problem got emerged, what is the cause of the problem and what is the present and future damage of the problem.

STEP 3: Identifying and Developing Alternative Solution for the Problem

Majority of problems will have alternatives. A course of action does not become the best merely because it has been in use for a long time. Hence, the sound decision necessitates the consideration of all alternatives. In an organisation there will be some factors that stand in the way of accomplishing a desired objective. This is called limiting factor. So a manager should recognize these limiting factors so that he can develop many alternatives which can be used to overcome the limited factors.

STEP 4: Evaluating The Alternatives

After having developed the appropriate alternatives, the next step is evaluating them so as to choose the best one. Every alternative will have a merit and a de-merit. So the manager want to evaluate (assign weights) to the most suitable alternative. This can did by comparing the alternatives with each other. While evaluating three factors should be considered. (a) Quantitative factors-Factors which can be measured (e.g) fixed cost such as building rent, Labour wages etc (b) Qualitative factors – Intangible factors which cannot be measured such as loss of reputation and goodwill (c) Cost Benefit analysis - finding the least costly way of reaching an objective or getting the greatest benefit out of less expenditure.

STEP 5: Selecting and Deciding the Best Course of Action

After the evaluation of various alternatives the next step is deciding the best alternative. The manager should take in to account the economy, risk factors, the limitation of resources, and feasibility of its implementation etc, at the time of deciding the best course of action. Selecting the best course by a manager will by his past experience in a similar problem, experimenting by applying the alternative to some other problem and he may arrive by doing some research on the problem.

STEP 6: Implementing The Decision

After the best course of action or alternative option is decided the next step is to implement that to the situation and the same should be communicated to all the team subordinates.

STEP 7: Review and Follow Up of the Decisions

The action implemented must be evaluated by comparing the actual results arrived with the expected results. Any deviations must be noticed and corrective action should be taken. Certain alteration or modification in the decision can be made accordingly.