Decision Making

Decision Making
Decision-making is a cognitive process that results in the selection of a course of

action among several alternative scenarios. Decision-making is a daily activity for
any human being. There is no exception about that. When it comes to business
organizations, decision-making is a habit and a process as well. Effective and
successful decisions result in profits, while unsuccessful ones cause losses.
Therefore, corporate decision-making is the most critical process in any
organization.
In a decision-making process, we choose one course of action from a few possible
alternatives. In the process of decision-making, we may use many tools,
techniques, and perceptions. In addition, we may make our own private decisions
or may prefer a collective decision. Usually, decision-making is hard. Majority of
corporate decisions involve some level of dissatisfaction or conflict with another
party.
Decision-Making Process: Following are the important steps of the decision-

making process.
Step 1 − Identification of the Purpose of the Decision:

In this step, the problem is thoroughly analyzed. There are a couple of questions
one should ask when it comes to identifying the purpose of the decision.
 What exactly is the problem?
 Why the problem should be solved?
 Who are the affected parties of the problem?
 Does the problem have a deadline or a specific time-line?
Step 2 − Information Gathering:

A problem of an organization will have many stakeholders. In addition, there can
be dozens of factors involved and affected by the problem.
In the process of solving the problem, you will have to gather as much as
information related to the factors and stakeholders involved in the problem. For the
process of information gathering, tools such as 'Check Sheets' can be effectively
used.
Step 3 − Principles for Judging the Alternatives: In this step, the baseline
criteria for judging the alternatives should be set up. When it comes to defining the
criteria, organizational goals as well as the corporate culture should be taken into
consideration.
As an example, profit is one of the main concerns in every decision making
process. Companies usually do not make decisions that reduce profits, unless it is
an exceptional case. Likewise, baseline principles should be identified related to
the problem in hand.
Step 4 − Brainstorm and Analyze the Different Choices:
For this step, brainstorming to list down all the ideas is the best option. Before the
idea generation step, it is vital to understand the causes of the problem and
prioritization of causes.
For this, you can make use of Cause-and-Effect diagrams and Pareto Chart tool.
Cause-and-Effect diagram helps you to identify all possible causes of the problem
and Pareto chart helps you to prioritize and identify the causes with the highest
effect.
Step 5 − Evaluation of Alternatives:
Use your judgment principles and decision-making criteria to evaluate each
alternative. In this step, experience and effectiveness of the judgment principles
come into play. You need to compare each alternative for their positives and
negatives.
Step 6 − Select the Best Alternative:
Once you go through from Step 1 to Step 5, this step is easy. In addition, the
selection of the best alternative is an informed decision since you have already
followed a methodology to derive and select the best alternative.
Step 7 − Execute the decision:
Convert your decision into a plan or a sequence of activities. Execute your plan by
yourself or with the help of subordinates.
Step 8 − Evaluate the Results:
Evaluate the outcome of your decision. See whether there is anything you should
learn and then correct in future decision making. This is one of the best practices
that will improve your decision-making skills.
Diagram of Decision Making Process
Models of Decision Making: They are as following-
 Rational Model:- The rational models are based on cognitive

judgments and help in selecting the most logical and sensible
alternative. Examples of such models include - decision matrix
analysis, Pugh matrix, SWOT analysis, Pareto analysis and decision
trees, selection matrix, etc. It takes following steps:
 Identifying the problem,

 Identifying the important criteria for the process and the result,
 Considering all possible solutions,
 Calculating the consequences of all solutions and comparing the
probability of satisfying the criteria,
 Selecting the best option.
Normative Model: The normative model of decision-making considers constraints
that may arise in making decisions, such as time, complexity, uncertainty, and
inadequacy of resources. According to this model, decision-making is
characterized by −
 Limited information processing - A person can manage only a limited
amount of information.
 Judgmental heuristics - A person may use shortcuts to simplify the decision
making process.
 Satisfying - A person may choose a solution that is just "good enough".

Decision Making

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Decision Making

Decision-making is a cognitive process that results in the selection of a course of

Decision-Making Process: Following are the important steps of the decision-

Step 1 − Identification of the Purpose of the Decision:

Step 2 − Information Gathering:

Models of Decision Making: They are as following-

 Rational Model:- The rational models are based on cognitive

 Identifying the problem,

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