What is Decision making.

What is Decision making? Definition, nature, types and conditions

 

Every company and organization needs decision making to fulfill business goals. There are different levels of management that have to make decisions. If you are interested to become a manager, you have to learn more about what a manager does. In this article, we are going to discuss meaning, definition, nature, types and conditions of decision making.

 

What is Decision making? Definition, nature & conditions

What is Decision:-

A decision is the selection of a course of action out of many available alternatives. In our day to day life, we have to make a lot of decisions about our career, personal life, family, friends etc. Same like that the business organization has to make many decisions relating to the business activities.

 

What is Decision Making:-

Decision making is the basic and fundamental key of all managerial activities. It is the study of identifying and choosing best possible choice based on the values and preferences. It is the most important function of management. This function of management is related to all managements. Top management, middle and supervisory/lower level management have to make decisions while working in the business organization.

Definitions of Decision Making

Peter F. Druker: “Whatever a manager does he does through making decisions.”

George R. Terry: “Decision making is the selection based on some criteria from two or more possible alternatives.”

Characteristics/ Nature of Decision-Making

Characteristics of decision-making can be expressed as follows:-

Ø Selective Process – In decision making process the best possible alternative is chosen out of many alternatives available. For that the decision maker must be experienced and skilled person.

Ø Human and Rational process – It is human and rational process that involves the application of intellectual abilities.

Ø Dynamic Process – It involves time dimension and time lag depending upon the situation.

Ø Continuous process – Decision making goes on through the life of an organization. Every day the various decisions are made in the organization. So, it is a continuous process of management.

Ø Environment – There must be healthy atmosphere to achieve the corporate goals of the business enterprise.

Ø Goal Oriented process – Decision-making aims at providing a solution to a given problem before a business enterprise.

Ø Effective communication – Decision maker must have effective communication skills. Because, implementation of decisions can be ensured only when communications clear and proper.

Ø Timing – Timing plays an important role in effective decision making.

Ø Pervasive Process – Decision-making process is pervasive in nature. It means managers working at all levels have to take decisions on matters within their jurisdiction.

Ø Psychological factors – The decisions must be taken after a careful consideration of the psychological factors, situation and information.

'What is Decision making? Definition, nature, types and conditions'

Types of Decisions

q Structured/programmed decision :-

A decision that is repetitive and can be handled by using a routine approach. Such repetitive decision applies to resolving structured problems which are straightforward, familiar and easily defined.

q Unstructured or non-programmed decision :-

Applied to the resolution of problems that are new or unusual, and for which information is incomplete. Such non programmed decisions are described to be unique, non-recurring and need custom-made decisions.

"What is Decision making?"

Decision Making Conditions

Everyday a manager has to make hundreds of decisions in the organization. There are different conditions in which decisions are made. The decision taken by the managers at present will also have an effect on future.

So, the decision maker must know the conditions under which decisions are to be made. The conditions that managers may face are as follows:-

v Certainty :-

Certainty is a condition under which the manager is well informed about possible alternatives and their outcomes. There is only one outcome for each choice.

v Risk :-

In a risk situation, although the factual information may be present but it can be insufficient. Mostly the managers have to take business decisions under risk situation. The managers have several tools that can help in taking decisions under risk conditions.

v  Uncertainty :-

In case of uncertainty conditions, very little information is available to the managers and the managers are not sure regarding the reliability of such information. The managers may use decision trees, risk analysis and preference theory for making the right decisions in uncertainty conditions.