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Management Decision Making – Steps in Decision Making Process.

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Management Decision Making | Decision making style.

Management Decision Making – This article will teach us about Types of managerial decision, programmed decision, Non programmed decision, steps in decision making, condition of decision making, Decision making style and Level of decision making in an organization.

Management Decision Making
Management Decision Making

Management Decision Making

Although managers are decision makers but certainly, not all decision makers are managers. For example, a person sorting fruits or vegetable is required to make decisions, but he is not a manager. However, all managers regardless of their position in the organization must make decisions in the pursuit of organizational objectives.

That is they makes choices. For instance, top-level managers make decisions about their organization’s goals, where to locate manufacturing facilities, what new markets to move into and what products or services to offer.

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Middle and Lower-level managers make decisions about production schedules, validity problems, pay raises, and employee discipline. All organizational members to make decisions that affect their jobs and the organization they work for.

TYPES OF MANAGERIAL DECISIONS

        Different problems require different types of decision making. Routine or minor matters can be handled by a set procedure, a type of programmed decision. More important decisions, such as the location of a new retail, require a non-programmed decision, a specific solution credited through a less structured process of decision making and problem solving. Because all decisions future events, managers must also learn to analyze the certainty, risk, and uncertainty associated with alternative courses of action.

Programmed Decision:

Are made in accordance with written or unwritten policies, procedures or rules that simplify decision making to recurring situations by limiting or excluding alternatives. Routine procedures exist for dealing with routine problems.

        Programmed decisions are used for dealing with recurring problems, whether complex or uncomplicated, if a problem recurs.

        Its component elements can be defined, predicted and analyzed, then it may be a candidate for programmed decision making. The policies, rules or procedures by which we make programmed decisions have time, allowing us to devote attention to other, more important activities.

        A procedure is a series of interrelated sequential steps that a manager can use to respond to a structured problem. A rule is an explicit statement that tells a manager what he or she can or cannot do. Rules are frequently used because they are simple to follow and ensure consistency.

A policy is a guideline for making a decision. In contrast to a rule, a policy establishes general parameters for the decision-maker rather than specifically stating what should or should not be done.

Non-programmed Decisions: Deals with usual or exceptional problems if a problem has not come up often enough to be covered by a policy or as so important that it deserves special treatment, it must be handled as a non-programmed decision. Most of the significant problems are manager will face usually require non-programmed decision.

        As one mores up the organizational important for this reason, most management development programs try to improve manager’s abilities to take non-programmed decisions, usually by teaching than to analyze problems systematically and make logical decisions.

Management Decision Making: STEPS IN DECISION MAKING PROCESS

        Decision making can be understood as a series of steps that run from clearly identifying a problem to implementing and assessing actions. Using such a systematic approach to decision making ensures that relevant information has been gathered, alternative choices have been considered and possible consequences or actions are understood.

        Let’s take the closer look at the process in order to understand what each step involves.

STEP 1: Identifying a Problem: The decision-making process begins with the existence of a problem or, more specifically, the discrepancy between an existing and a desired state of affairs. In the real world, most problems don’t come with neon signs flashing “problem”, few problem are obvious.

Managers also have to caution not to confuse problems with the symptoms of the problem. Is a 5% drop in sales the problem? Or are declining sales merely a symptom of the real problem, such as poor-quality products, high prices, or bad advertising? Also, keep in mind that problem identification subjective, what one manager considers the problem might not be considered problem by another.

In addition, a manager who mistakenly resolves the wrong problem perfectly is likely to perform just as poorly as the manager who doesn’t identify the right problem and does nothing.

STEP 2: Identifying Decision Criteria: Once a manager has identified a problem, the decision criteria important to resolving the problem just be identified. That is, managers must determine what’s relevant in making decision whether explicitly stated or not, every decision maker has criteria at guide his or her decisions. In the purchase of a laptop, these might include criteria such as price, convenience, multimedia capacity, memory and stage capabilities, display quality, battery life, expansion capability, processor, warranty. After careful consideration, you may decide that memory and storage capabilities processor speed, display quality, battery life, warranty and carrying weight i.e. the relevant criteria in your decision.

Step 3: Allocating Weight to the Criteria: If the relevant criteria aren’t equally important, the decision maker must weight the items in order to give them the correct priority in the decision. How do you weight criteria.

A simple approach is to give the most important criterion a weight of 10 and then assign weights to the rest using that standard. Thus, the criterion with the weight of 10 would be twice as important as one given the 5. Your could use 100,1000 percentages or any number s the highest weight.

Step 4: Developing Alternatives: The 4th step requires the decision maker to list viable alternatives that could resolve the problem. This is the step where a decision maker wants to be creative in coming up with possible alternatives.

At this stage, there is no attempt to evaluate the alternatives yet, only to list them. From our laptop example, we can identify possible Laptop brand/models: Toshiba Satellite, Dell Inspiron 15 5000, HP ENVY 17, Acer Aspire F5 – 571, Lenovo Ideapad 100S, Apple MacBook, Pro, Asus Transformer, Book T300.

Step 5: Analyzing Alternatives: Once the alternatives have been identified a decision maker must analyze each one. How? By evaluating it against the criteria established in step 2 and 3 from this comparison the strengths and weaknesses of each alternative become evident.

Step 6: Selecting an Alternative: The 6th step is choosing the best alternative from among those considered once all the pertinent criteria in the decision have been weighted and viable alternatives analyzed, you merely choose the alternative that generated the highest total.

Step 7: Implementing the Alternative: Step 7 is concerned with putting the decision into action by conveying the decision to those affected by it and getting their commitment to it. We do know that if the people who must implement a decision participate in the process. There are more likely to enthusiastically support the outcome than if you just tell them what to do.

Another thing managers also may need to do during the implementation process is to reassess the environment for any changes, especially if the decision is one that takes a longer period of time to implement. Do the criteria, alternatives and choice still seem to be the best ones, or has the environment changed in such needy we need to evaluate.

Step 8: Evaluating Decision for Effectiveness: The last step in the decision making process involves evaluating the outcome or result of the decision to see if the problem has been resolved. How to evaluate results part of the control function of managers.

        What if this evaluation showed the problem still exist? Then the danger would need to assess what went wrong was the problem incorrectly defined? Were errors made in the evaluation of the various alternatives? Has the right alternative selected but poorly implemented? The answers to questions like these might send the manager back to one of the earlier steps. If might even require starting the whole decision process over.

CONDITIONS OF DECISION MAKING

        Management Decision Making: In making decisions, all managers must weigh alternatives, many of which involve future events that are difficult to predict, such as a competitor’s reaction to a new price list, interest rates in three years or the reliability of a new supplier.

There are 3 conditions managers may face as the make decisions:

  • Certainty: The ideal situation for making decisions I one of certainty. Under conditions of certainty, we know our objective and have accurate, measurable, reliable information about the outcome of each alternative we are considering. For example, when Akwa-Ibom State treasure is deciding in which Nigerian bank 10 deposit excess state funds, he/she knows exactly the interest rate being offered by each bank and the amount that will be earned on the funds. He/she is certain about the outcomes of each alternative. As you might expect most managerial decisions aren’t like this.
  • Risk: A far more common situation is one of risk, conditions in which the decision maker is able to estimate the likelihood of certain outcomes. The ability to assign probabilities may be the result of past personal experiences or secondary information. Under risk, managers have historical date that lets them assign probabilities to different alternatives.
  • Uncertainty: What happens if you have  decision where you are not certain about the outcomes and can’t even make reasonable probability estimates? We call this condition uncertainty. Managers do face decision-making situation of uncertainty. Under these conditions, the choice of alternative is influence by the limited amount of information available to the decision maker and the psychological orientation of the decision maker.

DECISION-MAKING STYLES

    Every leader prefers a different way to contemplate a decision. The four styles of decision making are directive, analytical, conceptual and behavioral. Each style is a different method of weighing alternatives and considering solutions.

  1. Directive Style: This form of decision relies on a rational and autocratic style that results in the employee using his own knowledge, experience and judgment to choose the best alternative. This type of leader is very rational, but thinks, mostly about the short-term.

Management Decision Making: The biggest issue in this style of decision making is that rarely does the leader have all of the pertinent information to make an effective decision.

  •  Conceptual Style: Individuals with the conceptual style tend to be very broad in their outlook, is more concerned with long-term results takes creative approach to problem solving and also strikes higher risks.
  • Analytic Style: Decision makers with an analytic style always want more information before making a decision and consider more alternatives to determine the best outcome. Analytical decision makers are characterized as careful decision makers with the ability to adopt or cope with unique situations.
  • Behavioural Style: Decision makers with a behavior style work well with others. They’re concerned about the achievements of those around them and the receptive to suggestions from others. They often use meetings to commensurate, although they try to avoid conflict. Acceptance by others is important to this decision-making style.

LEVELS OF DECISION MAKING IN AN ORGANIZATION

        Managers at all levels must make decisions on behalf of a company. The different between decisions at various levels are in the scope of the choices made. There are basically three levels of decision making.

  1. Strategic Decision: These decisions have a long-term impact on the organization. They affect and shape the direction of the whole business and contribute directly to the achievement of the common goals of the enterprise. They may involve major departures from practices and procedures being followed earlier. Generally, strategic decisions are unstructured and thus, a manager has to apply his business judgment, evaluation, and intuition into the definition of the problem. These decisions are based on partial knowledge of the environmental factors which are uncertain and dynamic. Such decisions are taken at a higher level of management.
  2. Tactical Decisions: These decisions relate to the implementation of strategic decisions. They are directed towards developing divisional plans, structuring workflows, establishing distribution channels, acquisition of resources such as men, materials, and money, these decisions are taken at the middle level of management.
  3. Operational Decisions: These decisions relate to the day-to-day operations of the enterprise. They have a short term horizon as they are taken repetitively. These decisions are based on facts regarding the events and do not require much of business judgment. Operational decisions are taken at lower levels of management. As the information is needed for helping the manager to make rational, well-informed decisions, information systems need to focus on the process of managerial decision making.

Management Decision Making Table1

Category of ActivityStrategyTacticalOperational
General types of decisionsPlans for acquisition of resourcesPlans for utilization of resourcesDeclined resources of schedules
Managerial levelTopMiddleLow
Time HorizonLong (2 years)6 to 24 monthsShort range
Level of detailVery aggregatedAggregatedVery detailed
Degree of uncertaintyhighmediumlow
Examples of variables  under control of managementProducts to sell, on which dimension to complete, six and location of facilities, nature of equipment (e.g general purpose vs specialized) long-term raw materials and energy contracts, labour skills needed, nature of production planning and inventory management decision systemsOperation be hours of plants, workforce sizes, inventory levels, subcontracting levels, output rates.What to produce (procure) when on what machine (from which vendor, in what quantity in what video consider processing.

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This Article (Management Decision Making) is Written By Schoolflash.com.ng team and Reviewed By Emmanuel Fred. This material is free for learning, research and for education purposes only.

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