Week-7: Decision Making

A decision is an act of selection or choice of one action from several alternatives.

Decision-making can be defined as the process of selecting a right and effective course of action from two or more alternatives for the purpose of achieving a desired result. Decision-making is the essence of management.

According to P. F. Drucker – “What­ever a manager does he does through making decisions.” All matters relating to planning, organizing, direction, coordination, and control are settled by the managers through decisions that are executed into practice by the operators of the enterprise. Objectives, goals, strate­gies, policies and organizational designs are all to be decided upon in order to regulate the performance of the business.

The entire managerial process is based on decisions. Decisions are needed both for tackling the problems as well as for taking maximum advantages of the opportunities available. Correct decisions reduce complexities, uncertainties, and diversities of the organizational environments.

Importance of Decision making

1. Better Utilisation of Resources

Decision making helps to utilise the available resources for achieving the objectives of the organisation. The available resources are the 6 Ms, i.e. Men, Money, Materials, Machines, Methods and Markets. The manager has to make correct decisions for all the 6 Ms. This will result in better utilisation of these resources.

2. Facing Problems and Challanges

Decision making helps the organisation to face and tackle new problems and challenges. Quick and correct decisions help to solve problems and to accept new challenges.

3. Academic Growth

Quick and correct decision making results in better utilisation of the resources. It helps the organisation to face new problems and challenges. It also helps to achieve its objectives. All this results in quick business growth. However, wrong, slow or no decisions can result in losses and academic sickness.

4. Achieving Objectives

Rational decisions help the organisation to achieve all its objectives quickly. This is because rational decisions are made after analysing and evaluating all the alternatives.

5. Increases Efficiency

Rational decisions help to increase efficiency. Efficiency is the relation between returns and cost. If the returns are high and the cost is low, then there is efficiency and vice versa. Rational decisions result in higher returns at low cost.

6. Facilitate Innovation

Rational decisions facilitate innovation. This is because it helps to develop new ideas, new products, new process, etc. This results in innovation. Innovation gives a competitive advantage to the organisation.

7. Motivates Employees

Rational decision results in motivation for the employees. This is because the employees are motivated to implement rational decisions. When the rational decisions are implemented the organisation makes high profits. Therefore, it can give financial and non-financial benefits to the employees

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