Management is essentially a process of decision-making, and managers at various levels are mainly concerned with decision-making. Without decisions, the functions of management could not take place and the entire process of management could not exist.
Decision-making is an important aspect of planning. Without making decision nothing can be done. For performing vat1ous aspects of management functions like planning, organizing, control, etc., decisions should be made because it helps to set objectives, prepare plans of action, introduce innovations, determine organizational structure of the concern and so on.
Phases in decision making process or Rational decision making
Decision-making involves the following phases:
1. Identifying the Problem: The first step in the decision-making process is to identify the actual cause of a problem. It involves defining and formulating the problem clearly and completely. In practice, defining the problem is not an easy task. What seems to be a problem may actually be the symptoms of it. So the manager should dig further to identify the real problem.
Defining the problem involves identifying the critical factors so that such factors can be restricted by the manager and finding out whether there are any limiting factors to solve the problem. For this purpose, manager should refer to the objectives, rules, policies, etc., of business.
2. Analyzing the Problem: After the problem is defined, the next step in the process of decision-making is, analyzing the problem. it involves the collection and classification of as many facts as possible. The assembled information should be classified on the basis of futurity of the decision and the impact of the decision. Collection of relevant and accurate data is essential because the quality of decision will depend upon the quality of data used.
3. Developing Alternative Solution for the Problem: Majority course of action 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. This step involves the identification of limiting factors because it will enable the manager to search for those alternatives which will overcome the limiting factors.
4. Evaluating the Alternatives: After having developed the appropriate alternatives, the next step is evaluating them so as to choose the best one. While comparing the alternatives, various factors that are given here under are to be considered.
- Quantitative Factors – factors which can be measured e.g., fixed and operation costs.
- Qualitative Factors or intangible Factors — factors which cannot be measured i.e., unmeasurable factors, e.g., labor relations, change in technology. While evaluating the qualitative factors, the planner should see whether these factors can be quantitatively measured. If they are found not to be quantitatively measurable, then he should assess the importance and influence and then come to a conclusion.
5. Deciding the Best Course of Action: After the evaluation of various alternatives, the next step is deciding the best alternative. The manager should take into account the economy, risk factors, the limitation of resources, feasibility of its implementations, etc., at the time of deciding the best course of action. Koontz and O’Donnell have suggested three bases for deciding the best one from the alternatives viz.,
- Past Experience,
- Experimentation, and
- Research and Analysis.
6. Conversion of Decision into Action: If the decision taken remain in the paper, there is no meaning in taking decisions. Once a decision is made, it should be converted into action i.e, implemented. Implementation involves the following steps.
- Communicating the decision to all the employees concerned.
- Assigning the responsibility of carrying out the decision to certain employees.
- Developing the procedure for the purpose of executing the decision.
- Developing feed back mechanisms to check on the progress of the implementation.
7. Control: Once the decision is implemented, the next step is controlling. The term controlling involves the following steps:
- Comparing the actuals with the expected results.
- Finding out the deviation.