Decision Making In Business

Decision Making

Decision making is defined as the selection of a course of action from among alternatives; it is at the core of planning. A plan cannot be said to exist unless a decision—a commitment of resources, direction, or reputation—has been made. Until that point, there are only P1anning studies and analyses. Managers sometimes see decision making: as their central job because they must constantly choose what is to be done, who Is to do it, and when, where, and occasionally even how it will be done. Decision making is, however, only a step in planning. Even when It is done quickly and with little thought or when it Influences action for only a few minutes, it Is part of planning. It is also part of everyone’s daily life. A course of action can seldom be judged alone because virtually every decision must be geared to other plans.

The Importance and Limitations of Rational Decision Making

In the discussion of the steps in planning In Chapter 4, decision making was considered a major part of planning. As a matter of fact, given an awareness of an opportunity and a goal, the decision-making process is really the core of planning. Thus, in t1is context, the process leading to making a decision might be thought of as (1) premising, (2) identifying alternatives, (3) evaluating alternatives in terms of the goal sought, and (4) choosing an alternative, that is, making a decision.

Although this chapter emphasizes the logic and techniques of choosing a course of action, the discussion will show that decision making is really one of the steps in planning.

Rationality in Decision Making

It is frequently said that effective decision making must be rational. But what is rationality? When is a person thinking or deciding rationally? People acting or deciding rationally are attempting to reach some goal that cannot be attained without action they must have a clear understanding of alternative courses by which a goal can be reached under existing circumstances and limitations. They also must have the information and the ability to analyze and evaluate alternatives in light of the goal sought. Finally, they must have a desire to come to the best solution by selecting (1w alternative that most effectively satisfies goal achievement.

People seldom achieve complete rationality, particularly in managing.’ In the first place, since no one can make decisions affecting the past, decisions must operate for the future, and the future almost invariably involves uncertainties In the second place, it is difficult to recognize all the alternatives that might be followed to reach a goal; this Is particularly true when decision making Involves doing something that has not been done before.