DECISION MAKING

1. INTRODUCTION
'Decision Making is the act of choosing between two or more courses of action'.
Decision making is the study of identifying and choosing alternatives based on the values
and preferences of the decision maker. However, it must always be remembered that there may
not always be a 'correct' decision among the available choices.
When trying to make a good decision, a person must weigh the positives and negatives of
each option, and consider all the alternatives. For effective decision making, a person must be
able to forecast the outcome of each option as well, and based on all these items, determine
which option is the best for that particular situation.
Decision making is a process of selecting the best among the different alternatives. It is
the act of making a choice. There are so many alternatives found in the organization and
departments. Decision making is defined as the selection of choice of one best alternative. Before
making decisions all alternatives should be evaluated from which advantages and disadvantages
are known. It helps to make the best decisions. It is also one of the important functions of
management. Without other management functions such as planning, Organizing, directing,
controlling, staffing cant be conducted because in this managerial function decision is very
important. According to Stephen P. Robbins, decision making is defines as the selection of a
preferred course of action from two or more alternatives.
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 make profit to the company and unsuccessful ones
make losses. Therefore, corporate decision making process is the most critical process in any
organization.In the 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.

1.1 The Components of Decision Making

The Decision Environment
Every decision is made within a decision environment, which is defined as the collection
of information, alternatives, values, and preferences available at the time of the decision. An
ideal decision environment would include all possible information, all of it accurate, and every
possible alternative. However, both information and alternatives are constrained because the time
and effort to gain information or identify alternatives are limited. The time constraint simply
means that a decision must be made by a certain time. The effort constraint reflects the limits of
manpower, money, and priorities. Since decisions must be made within this constrained
environment, we can say that the major challenge of decision making is uncertainty, and a major
goal of decision analysis is to reduce uncertainty. We can almost never have all information
needed to make a decision with certainty, so most decisions involve an undeniable amount of
risk.
The fact that decisions must be made within a limiting decision environment suggests
two things. First, it explains why hindsight is so much more accurate and better at making
decisions that foresight. As time passes, the decision environment continues to grow and expand.
New information and new alternatives appear--even after the decision must be made. Armed with
new information after the fact, the hindsighters can many times look back and make a much
better decision than the original maker, because the decision environment has continued to
expand.
The second thing suggested by the decision-within-an-environment idea follows from the
above point. Since the decision environment continues to expand as time passes, it is often
advisable to put off making a decision until close to the deadline. Information and alternatives
continue to grow as time passes, so to have access to the most information and to the best
alternatives, do not make the decision too soon. Now, since we are dealing with real life, it is
obvious that some alternatives might no longer be available if too much time passes; that is a
tension we have to work with, a tension that helps to shape the cutoff date for the decision.

Delaying a decision as long as reasonably possible, then, provides three benefits:

1. The decision environment will be larger, providing more information. There is also time
for more thoughtful and extended analysis.
2. New alternatives might be recognized or created. Version 2.0 might be released.
3. The decision maker's preferences might change. With further thought, wisdom, and
maturity, you may decide not to buy car X and instead to buy car Y.
Delaying a decision involves several risks:
1. As the decision environment continues to grow, the decision maker might become
overwhelmed with too much information and either make a poorer decision or else face
decision paralysis.
2. Some alternatives might become unavailable because of events occurring during the
delay. In a few cases, where the decision was between two alternatives (attack the pass or
circle around behind the large rock), both alternatives might become unavailable, leaving
the decision maker with nothing. And we have all had the experience of seeing some
amazing bargain only to hesitate and find that when we go back to buy the item, it is sold
out.
3. In a competitive environment, a faster rival might make the decision and gain advantage.
Another manufacturer might bring a similar product to market before you (because that
company didn't delay the decision) or the opposing army might have seized the pass
while the other army was "letting the decision environment grow."
These decision making tools are general, they are based on common sense and are used in
all the trades for backing up the decisions taken by the decision making authorities.

2. TYPES OF DECISION MAKING

Irreversible
These decisions are permanent, once taken, they can't be undone. The effects of these
decisions are far-reaching and are taken only when all other options have been exhausted.
Reversible
Reversible decisions are not final and binding, they can be retracted at any point, and
another more fitting decision made. It allows one to acknowledge mistakes and undertake
relevant damage control, depending on how the new circumstances play out.
Delayed
Such decisions are put on hold until the decision maker thinks that the right time has
come. This delay might cause one to miss certain opportunities that may present themselves,
especially in the case of businesses, and may lead to losses. However, such decisions are the
norm for large bodies like the government, which decide policies that affect the lives of millions
of people. The time taken to collect all information required and to organize plans of
implementation, is crucial to the ultimate well-being of the public.
Quick Decisions
These decisions enable one to make maximum use of the opportunity available at hand.
However, only a very astute personality can take decisions that are both instantaneous and
correct. In order to be able to take the right decision within a short span of time, one should also
take the long-term results into consideration.

Experimental
One of the ways of decision-making is the experimental type, where the final decision
cannot be taken until the preliminary results appear and are positive. This approach is used when
one is sure of the final destination but is not convinced of the course to be taken. Experimental
decisions are common in fields such as medicine, where the product being tested goes through
several phases, and decisions may change with every iteration.
Trial and Error
This approach involves trying out a certain course of action. If the result is positive it is
followed further, if not, then a fresh course is adopted. Such a trial and error method is continued
until the decision-maker finally arrives at a course of action that convinces him of success. This
allows a manager to change and adjust his plans until the final commitment is made.
Conditional
Conditional decisions allow an individual to keep all his options open. He sticks to one
decision as long as the circumstances remain the same. Once the competitor makes a new move,
conditional decisions allow a person to take up a different course of action.
2.1 Kinds of Decisions
Programmed decisions:
Programmed decisions are routine and repetitive, and the organization typically develops
specific ways to handle them. A programmed decision might involve determining how products
will be arranged on the shelves of a supermarket. For this kind of routine, repetitive problem,
standard arrangement decisions are typically made according to established management
guidelines.
Non programmed decisions:
Non programmed decisions are typically one shot decisions that are usually less
structured than programmed decision.

Strategic decisions
These are big choices of identity and direction. Who are we? Where are we heading?
These decisions are often complex and multi-dimensional. They may involve large sums of
money, have a long-term impact and are usually taken by senior management.
Tactical decisions
These are about how to manage performance to achieve the strategy. What resources are
needed? What is the timescale? These decisions are distinctive but within clearer boundaries.
They may involve significant resources, have medium-term implications and may be taken by
senior or middle managers.

3. PROCESS OF DECISION MAKING SKILLS

Many different techniques of decision making have been developed, ranging from simple
rules of thumb, to extremely complex procedures. The method used depends on the nature of the
decision to be made and how complex it is.
The method described here follows seven stages:
Identification of problem
Analysis of problem
Listing all possible solutions/options
Setting a time scale and deciding who is responsible for the decision
Information gathering
Weighing up the risks involved
Deciding on values, or in other words what is important
Weighing up the pros and cons of each course of action
Implementing the best alternative
Review of implementation

Identification of problems:
The first step of decision making is identification of problems. First of all, managers must
identify the problem. The problem has to be found and defined. Symptoms are identified and
problems should be judged, symptoms are not problems. They are warning signs of problems.
So, managers should search for symptoms for identification of problems. Such symptoms can be
falling of sales, profit etc. It is said that problem identified is half solved is identification of
problem should be effective.

Analysis of problem:

After identification of problems, the problem should be analyzed by the decision maker.
It is the assembly of fact and clarifying it. Relevant information must be collected and analyzed
according to the complexity and nature of problems.

Listing Possible Solutions/Options

In order to come up with a list of all the possible solutions and/or options available it is

usually appropriate to work on a group (or individual) problem-solving process. This process
could include brainstorming or some other 'idea generating' process
This stage is important to the overall decision making processes as a decision will be
made from a selection of fixed choices. Always remember to consider the possibility of not
making a decision or doing nothing and be aware that both options are actually potential
solutions in themselves.

Setting a Time Scale and deciding who Responsible is for the Decision
In deciding how much time to make available for the decision making process, it helps to

consider the following:

How much time is available to spend on this decision?

Is there a deadline for making a decision and what are the consequences of missing this
deadline?

Is there an advantage in making a quick decision?

How important is it to make a decision? How important is it that the decision is right?

Will spending more time improve the quality of the decision?

Before making a decision, it needs to be clear who is going to take responsibility for the
decision. Remember that it is not always those making the decision that have to assume
responsibility for it. Is it an individual, a group or an organization? This is a key

question because the degree to which responsibility for a decision is shared can greatly
influence how much risk people are willing to take.
If the decision making is for work then it is helpful to consider the structure of the
organization that you are in. Is the individual responsible for the decisions he or she makes or
does the organization hold ultimate responsibility? Who has to carry out the course of action
decided? Who will it affect if something goes wrong? Are you willing to take responsibility for
a mistake?
Finally, you need to know who can actually make the decision. When helping a friend,
colleague or client to reach a decision, in most circumstances the final decision and
responsibility will be taken by them. Whenever possible, and if it is not obvious, it is better to
make a formal decision as to who is responsible for a decision. This idea of responsibility also
highlights the need to keep a record of how any decision was made, what information it was
based on and who was involved. Enough information needs to be kept to justify that decision in
the future so that, if something does go wrong, it is possible to show that your decision was
reasonable in the circumstance and given the knowledge you held at the time.

Information Gathering
Before starting on the process of making a decision, all relevant information needs to be

gathered.
If there is inadequate or out-dated information then it is more likely that a wrong decision
might be made. Also, if there is a lot of irrelevant information then the decision will be difficult
to make, it will be easier to become distracted by unnecessary factors.
There is a need for up-to-date, accurate information on which to make decisions. Such
information needs to be gathered so that a well-informed decision can be made. The amount of
time spent on information gathering has to be weighed against how much you are willing to risk
making the wrong decision. In a group situation, such as at work, it may be appropriate for
different people to research different aspects of the information required. For example different
people might be allocated to concentrate their research on costs, facilities, availability, and so on.

Weighing up the Risks Involved

One key question is how much risk should be taken in making the decision? Generally,

the amount of risk an individual is willing to take depends on:

The seriousness of the consequences of taking the wrong decision.

The benefits of making the right decision.

Not only how bad the worst outcome might be, but also how likely that outcome is to
happen.
It is also useful to consider what the risk of the worst possible outcome occurring might

be, and to decide if the risk is acceptable. The choice can be between going 'all out for success'
or taking a safe decision.

Deciding on Values
Everybody has their own unique set of values - what they believe to be important.Many

people decide to buy a car for themselves but different people buy different cars based on their
own personal values. One person might feel that price is the most important feature, whereas
another person might be more concerned with its speed and performance. Others might value
safety, luggage space or the cars impact on the environment or a combination of these features.
Depending on which values are considered important, different opinions may seem more
or less attractive. If the responsibility for a decision is shared it is possible that one person might
not have the same values as the others. In such cases, it is important to obtain a consensus as to
which values are to be given the most weight. It is important that the values on which a decision
is made are understood because they will have a strong influence on the final choice.

People do not make decisions based on just one of their values. They will consider all
their values which are relevant to the decision and prioritize them in order of importance. If you
were to buy a car, what would be the five most important factors to you?

Weighing up the Pros and Cons

It is possible to evaluate the pros and cons of each possible solution/option by

considering the possible advantages and disadvantages.

One aid to evaluating any solution/option is to use a 'balance sheet', weighing up the pros and
cons (benefits and costs) associated with that solution.

Implementation of best alternative:

After selection of finest alternative, it must be used in the organization effectively.

Effectiveness of decisions in achieving the desired goals depends upon its implementation. It
they are not implemented effectively then best results cant be obtained. Therefore proper
implementation of best alternative is necessary.

Review of implementation:
It is the last step of decision making process. When the implementation of best alternative

is reviewed, the process of decision making is finished. The result of implementation should be
monitored and evaluated through which effectiveness can be measured.

4. EFFECTIVE DECISION MAKING

The Decision-Making Process

Decision-making is the reasoning process we use to select a course of action from among

any number of possibilities that present themselves mentally or otherwise. Making a decision
either can involve a period of deliberation or seemingly none at all. For many of lifes decisions,
we find ourselves having to decide precisely how we should make a decision: Should I sleep on
it, go away for a few days, consult someone, flip a coin? Friends, family and others, sometimes
even complete strangers, will advise us to stop and think before making a decision and never do
the first thing that comes into our heads. Contrast that with wisdom passed down through the
ages recommending we go with our instincts or that we listen to our hearts.
"Once you make a decision, the universe conspires to make it happen."
Ralph Waldo Emerson.
We often have you or someone you know lamented: "That was a bad decision," "I wish I
had it to do over again," "I let my emotions get in the way." It turns out that our emotions are
much more important in the decision-making process than previously thought. The Institute of
HeartMath has conducted more than 23 years of research and has compiled substantial data about
the role of emotions and the brain in decision-making. It turns out that quite often, the choices
we make that end in regret are the products of unmanaged emotions, but when we allow calm
and intuitive heart-based feelings to guide us the outcomes of our decisions are far more
favorable.

When the Heart Decides

Researchers with HeartMath and other organizations believe intuitive feelings emanate

from the heart. They have found evidence showing the human heart has an intuitive intelligence
greater than science and medicine have historically believed. Even without our realizing it, the
heart guides us in much of what we do, but often we allow our brains or our unmanaged
emotions to take the lead role in our decision-making and later regret our choices.

"I should have gone with my heart," some people say in hindsight, unaware that the very
act of making such a statement may have originated in the heart itself. We now know the heart
has a powerful electromagnetic field and complex nervous system and circuitry that generate up
to an estimated 60 times the electrical amplitude of the brain. The electromagnetic signal our
heart rhythms produce can actually be measured in the brain waves of people around us.
We also know our heart-rhythm patterns say a lot about our emotional balance and the
stress we are experiencing: The calmer we are, the more regular our heart-rhythm patterns are,
and the more stress we feel, the more irregular the patterns are. Researchers at HeartMath and
elsewhere have concluded the heart possesses its own organized intelligence network that
enables it to act independently, learn, remember and produce feelings. Until recently it was
believed only the brain was capable of these functions. Through years of studies involving
thousands of people, researchers at HeartMath and elsewhere have shown when we intentionally
experience positive feelings such as care and appreciation we can improve our heart-rhythm
patterns. That means reduced stress, getting sick less frequently, thinking more clearly, even
living longer. So go ahead, let your heart decide.

The Stress of Making Decisions

Ever wonder how many decisions you make each day. Hundreds, thousands? The

conscious ones we make every few seconds: Should I get out of bed? Should I hit the snooze
button? Hit it again? Remember my dreams? Plan my day? And the countless ones our bodys
systems, including trillions of cells, make every fraction of a second.

In todays fast-paced, rapidly changing world, were expected to make countless

decisions quickly: Give the correct answer in class; make a left turn at the signal, finish that
project by 3 p.m.; meet the cable guy. The pressure to think and act quickly never seems to let up
and the consequences of not keeping up are always hanging over our heads. No wonder stress
levels are at all-time highs among Americans.

Lifes Big Decisions

Not all decisions are equal, and not all take the same toll on us. "What should I have for

lunch?" or "Should I go somewhere this weekend?" dont compare to "Should we start saving for
the kids college education or pay off our debts first?" or "Should I change careers?"
The big decisions take much more intellectual thought, clarity and focus. Weighty
decisions such as these are stressful enough, but if we put them off until later, were bargaining
for the stress that comes with indecision and we dont need any more stess.

Organizational Decision-Making
"The results (of HeartMath interventions) speak for themselves. Our airline, Cathay

Pacific, now prides itself on delivering an individual style of service, straight from the heart. This
has resulted in consistently being rated as having the best in-flight service in the world."
Researchers investigated the impact of HeartMaths Inner Quality Management program
on managers and staff within the California Personnel Retirement Systems Information
Technology Services Division, which had recently initiated profound changes to meet the
changing information services marketplace. Learning new technology skills proved challenging.
The results suggested that by facilitating increased self-management of the participants mental
and emotional turmoil, the program enhanced employees ability to defuse personal and
organizational stress.

5. IMPORTANCE OF DECISION MAKING

Implementation of managerial function:

Without decision making different managerial function such as planning,

organizing, directing, controlling, staffing cant be conducted. In other words, when an

employee does, s/he does the work through decision making function. Therefore, we can
say that decision is important element to implement the managerial function.
Pervasiveness of decision making:
The decision is made in all managerial activities and in all functions of the
organization. It must be taken by all staff. Without decision making any kinds of function
is not possible. So it is pervasive.
Evaluation of managerial performance:
Decisions can evaluate managerial performance. When decision is correct it is
understood that the manager is qualified, able and efficient. When the decision is wrong,
it is understood that the manager is disqualified. So decision making evaluate the
managerial performance.
Helpful in planning and policies:
Any policy or plan is established through decision making. Without decision
making, no plans and policies are performed. In the process of making plans, appropriate
decisions must be made from so many alternatives. Therefore decision making is an
important process which is helpful in planning.
Selecting the best alternatives:
Decision making is the process of selecting the best alternatives. It is necessary
in every organization because there are many alternatives. So decision makers evaluate
various advantages and disadvantages of every alternative and select the best alternative.
Successful; operation of business:
Every individual, departments and organization make the decisions. In this
competitive world; organization can exist when the correct and appropriate decisions are
made. Therefore correct decisions help in successful operation of business.

6. MODELS OF DECISION MAKING

SWOT Analysis
This is a very common decision making model specifically used during feasibility study

of the project. SWOT analysis brings unsorted issue to a conclusion when the project is gauges
based on Strength, Weakness, Opportunity and Threat.
The steps for SWOT analysis are the same as mentioned above, but there is one caution
which needs to be followed which is the emphasis on deep analysis of strength and weaknesses

similarly, opportunities and threats.

Maslows Pyramid
Maslows Pyramid of hierarchical need has been very well spoken and discussed in the

HR industry which is an integral part of Project Management. Deduced in 1943, by Abraham

Maslow, this decision model speaks volumes about basic human needs and their effect on human
behaviour. While working on the projects the most inconsistent variable which a project manager
faces is a human resource. Understanding Maslows pyramid helps project manager to identify
problems related to human resources.
Maslow typically says that there are five levels of human needs and it is through their
accomplishment one by one that the human can reach self-actualization.
The pyramid consists of physiological needs, security requirements, social relationships,
and recognition and self- actualization.

This theory of understood properly can help a project manager a great deal while working
with human resources.

Pareto Principle
This is also called as 80-20 rule wherein you prioritize your problems and then find out

solutions. In order to understand the concept, this 80-20 rule can be described as an example of
problems in organization created by people. We can say that the 80% of the problems are created
by 20% of the people in any organization.

Let us say you have a BPO and 5 of the problems in your organization are due to lack of
promptness, 3 problems are due to poor linguistic ability and 2 problems are due to poor
organization skills. So you can say that major problem here is caused by the lack of training and
development because if you impart training to your employees automatically promptness and
linguistics will be taken care.

Monte Carlo Simulation

Now here is a cache, Monte Carlo simulation is a model which essentially focusses on the

numerous simulations over random sampling yielding results which are approximate. It just tells
us that even models can be random and have very less reality attached to it. This Monte Carlo
simulation model is interesting because of the random sampling and use of probability and
statistics to determine the result. In project management Monte Carlo simulation method is used

for quantitative risk analysis wherein you will be able to identify quantitative impact of a risk on
projects objective.

Decision tree analysis

This decision model is used while performing procurement analysis. The question of

whether to build or buy is answered using this decision tree analysis. You can give each of the
possibility a chance of yes and no in percentages and calculate the amount invested against the
amount received. Based on the profits you can decide whether to build or buy for a particular
project.
There are many more decision making models and those can be effectively used in
professional as well as personal life. These tools are sometimes regarded highly in the sphere of
project management as their capacity of backing up decisions taken by project manager is
enormous. A good project manager can understand the need of these effective tools which can be
used all through the life cycle of project management

7.

CASE ANALYSIS