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Decision Making
6.1 Concept and Importance
Decision making is the process of identifying and selecting a course of action to solve a specific problem or to capitalise on an opportunity. It is central to management — all managerial functions (planning, organising, directing, controlling) involve decision making.
Types of decisions:
| Type | Description | Example |
|---|---|---|
| Programmed/Routine | Repetitive, structured, handled by rules/procedures | Employee leave approval, purchase orders up to a limit |
| Non-programmed | Novel, unstructured, requires judgment and creativity | Merger & acquisition decisions, entering new markets |
| Strategic | Long-term, high impact, made by top management | Product line discontinuation, geographic expansion |
| Tactical | Medium-term, department-level | Annual budget allocation, hiring plan |
| Operational | Short-term, routine, lower management | Daily production scheduling |
6.2 Decision-Making Process (Steps)
- Identify the problem: Distinguish symptom from root cause; define the problem clearly
- Analyse the problem: Gather data; understand context, constraints
- Generate alternatives: Brainstorm multiple possible courses of action (never evaluate here — creativity first)
- Evaluate alternatives: Assess each against criteria (cost, risk, feasibility, alignment with objectives)
- Select best alternative: Choose optimal (or satisfactory) solution
- Implement decision: Convert decision into specific actions with assigned responsibilities
- Evaluate and learn: Assess outcome; feed back into future decisions
6.3 Models of Decision Making
| Model | Key Idea | Author/Source |
|---|---|---|
| Rational Model | Decision-maker has complete information, evaluates all alternatives, chooses the optimal one | Classical economics |
| Bounded Rationality (Satisficing) | Managers have limited information, time, cognitive ability — they choose satisfactory (not optimal) solutions | Herbert Simon (1955/1978) |
| Incremental Model | Decisions made in small, successive steps — not comprehensive analysis; "muddling through" | Charles Lindblom (1959) |
| Garbage Can Model | Decision-making in organisations is chaotic — problems, solutions, participants, and opportunities mix randomly | Cohen, March, Olsen (1972) |
| Administrative Model | Combines rational and bounded rationality; describes how decisions are actually made (not ideally) | Herbert Simon |
6.4 Group Decision Making
Advantages:
- More information and perspectives
- Better acceptance of decisions (participation)
- Legitimacy through consensus
- Division of cognitive labour
Disadvantages/Pitfalls:
- Groupthink (Irving Janis, 1972): Desire for harmony suppresses dissent; bad decisions made by cohesive groups (Bay of Pigs invasion as classic example)
- Social loafing: Members reduce individual effort in groups
- Domination by a few: Loud voices suppress minority views
- Time-consuming: Group meetings take longer than individual decisions
Techniques for better group decisions:
- Brainstorming (Osborn, 1953): Quantity over quality; no criticism during idea generation
- Delphi Technique: Sequential rounds of anonymous expert opinion (prevents face-to-face dominance)
- Nominal Group Technique (NGT): Silent individual idea generation followed by structured group ranking
- Synectics: Creative problem-solving using analogy and metaphor