What is decision-making?

Decision-making is a process done by an individual to choose the right alternative for them. It is a collection of actions performed by managers in an organization to define the discussed course for corporate strategy and to put particular actions in progress. Decision-making abilities can bring change in the workplace, as they can decide the organizational workforce’s progress and future career advancement. Depending on an individual's position in a company, their decisions may have an effect on other employees as well as on the company’s reputation.

The skill of decision-making is essential to a business's strategic plan. Managers must make many decisions during the preliminary stages, such as establishing corporate goals. For each work, they decide on important items, marketing tactics, role allocations, and timetables. Individual goals, team goals, and numerous different other rules and regulations related to the team's structure and function and conflict resolution are all decided by managers.

What is the process of decision-making?

The decision-making process aids in making more deliberate and thoughtful decisions by gathering critical information and finding options. The decision-making process includes identifying a problem, gathering information, and assessing potential solutions.

The seven steps of decision making are as follows:

1. Recognize the need for decision-making.
2. Collect important information
3. Identification of alternatives
4. Estimating the future
5. Identification of risk
6. Take action
7. Estimation of its decision and its impacts.

Recognize the need for decision-making

Individuals must realize the necessity of decision-making while making a choice. An individual should make an effort to clarify the kind of decision that an individual will make.

Collect important information

Before the decision gets made, relevant information regarding the required details, suitable information sources, and the method of obtaining the information should get determined.

Identification of alternatives

Identifying alternatives by gathering information can lead to awareness of different options or pathways available. Different ideas and other facts can also be used to create new options. This phase entails making a list of all viable and desired options.

Estimating the future

The value of decision-making can be seen in its ability to estimate the future. The influence of a decision on a business's growth in the future can be evaluated while making it through a systematic approach.

Identification of risk

In assessing the risk of decisions, good decision-making abilities are essential. They enable individuals to consider the numerous possibilities, measure their benefits and drawbacks, and evaluate the risks.

Take action

At this step, a final decision must be taken and implemented.

Examination of decision and its impacts

Consider the outcomes of the decision in this final phase and assess whether it has satisfied the need identified earlier. If the decision taken does not meet the indicated need, repeating specific process steps to make a new decision can be made.

Importance of decision-making

Decision-making helps in selecting one among many possibilities, and the right decision will result in long-term influence on individual and organizational goals and performance. It is critical to address numerous challenges before making the right decision as there is a relationship between decision-making and the problem-solving process. Making decisions is not an easy task.

Four decision-making styles

Directive

Under a directive decision-making style, the decision-makers are required to make quick decisions. The decisions made by them are somewhat logical and rational. This style can be suited if short-term decisions are required to be made.

Analytical

Under the analytical decision-making style, the decision-makers are probable to analyze all the relevant information before making a final decision. They carefully examine the details, invest their time processing the information, and then come up with the best possible solution.

Conceptual

Under the conceptual decision-making style, the decision-makers are likely to consider a big picture in their mind for the decisions they are going to take. They anticipate all the risks and rewards before finally coming to a decision. This style can be suited if long-term decisions are required to be made.

Behavioral

Under the behavioral decision-making style, the decision-makers are required to give a preference to relationships over tasks. In this style, the decision-makers seek advice from others to form a team consensus.

Common Mistakes

The student should not be confused between the terms ‘responsibility’ and ‘accountability’. These two terms may seem synonymous to each other but have different meanings in terms of decision-making. Responsibility may be understood as an individual’s duty to perform a certain task to complete it effectively. On the other hand, accountability is linked with consequences that may impend an individual as a result of previous actions.

The student should gather reliable and valid data (facts and figures) to make informed decisions. If a student is gathering biased data, the outcome from that data will be wrong and hamper the overall decision-making process.

Context and Applications

Decision-making pattern is a fundamental topic in business management and is important for other courses of study like:

• Bachelors in Business Administration
• Bachelors in Business Management
• Master in Business Administration
• Post Graduate Diploma in Management

Related Concepts

• Decisiveness
• Managing staff
• Accountability
• Directing

Practice Problems

1. Which of the following option is not covered under the strategic decision-making process?

1. Brainstorming the solutions
2. Choosing the alternatives
3. Organizing and controlling
4. Seeking information

Answer: c

Explanation: Organizing and controlling are both identified as management functions. Both functions have nothing to do with the strategic decision-making process.

2. An individual’s duty to perform a certain task with an objective of rightfully completing it is called_____________.

1. Responsibility
2. Accountability
3. Authority
4. Answerability

Answer: a

Explanation: Responsibility may be understood as an individual’s duty to perform a certain task with the objective of completing it effectively.

3. What is a person's ability to deliver orders to their employees called?

1. Accountability
2. Authority
3. Responsibility
4. Delegation

Answer: b

Explanation: A person has every right to get the work done by their subordinates.

4. What among the following is not identified as a step in the decision-making process?

1. Collect important information
2. Identification of alternatives
3. Forecasting accurate future results
4. Identification of risk

Answer: c

Explanation: The future outcomes can be roughly estimated as far as the decision-making process is concerned. However, there is no specific guarantee for accurate results or outcomes.

5. Who among the following in an organization is usually entrusted with decision-making authority?

1. Managers
2. Employees
3. Supervisors
4. Consultants

Answer: c

Explanation: Managers are identified as individuals who are usually entrusted with the responsibility of making decisions in an organization.