The decision making process and its basic steps.

1. Identifying the problem, which must be solved;

2. Setting goals;

3. Generating alternative courses of action (solutions);

4. Considering the consequences of each alternative as well as the likelihood of the occurrence of each;

5. Evaluating alternatives against pre-determined criteria;

6. Selecting the best alternative solution;

7. Implementing the selected alternative;

8. Evaluating the results of the decision implementation – whether the desired result is reached and the problem is solved.

Let us consider separate stages of the decision-making process one by one.

1) Identifying the problem

Problem definition is one of the most crucial steps in the problem solving approach. A wrong definition of the problem would not only fail to resolve the issues involved but could also lead to more complicated problems.

Identifying problems is not as easy as it may seem. There are some warning signals that can help managers to locate problems. For example, deviation from the plan or from the past performance may be such a signal. The actions of outsiders may also indicate problems, for instance customers’ dissatisfaction with a new product, increased attention of regulatory agencies to the organization, and so on.

It is important to distinguish between problems and symptoms. A decline in sales is not a problem but rather its symptom. This decline can be caused by different factors (deterioration of the product quality, insufficient advertising, competitor’s actions, an economic crisis, etc.. It is impossible to reverse the negative trend in sales until a manager identifies the cause of the sales decline.

To identify a problem correctly, one may need additional information.

2) Setting goals

Hierarchy of goals represents the formal linking of goals between organizational levels.

3) Generating alternative solutions

Having identified the problem and set the goals, the decision-maker needs to generate appropriate alternatives for resolving the problem. An understanding of organizational and external constraints as well as organizational resources helps in identifying the range of feasible action alternatives open to the decision-maker. A proper assessment of what is possible helps them to rule out infeasible options.

Before searching for alternatives, a manager should take into account the following limitations on the number of problem-solving alternatives available:

- power factor – the opinion and attitude to certain alternatives of a manager's superior)

- political factor – interests of other individuals and groups in the organization as well as outside organization should also be taken into account

- human factor – whether human resources in the organization are sufficiently qualified for implementing certain alternatives

- physical factors – whether physical facilities and capacities of the organization are appropriate for implementing certain alternatives

- technological factor – whether the level of organizational technology is adequate for certain alternatives

- economic factors – costs associated with implementing alternatives and availability of the necessary financial resources

- legal and moral restrictions , social norms, formal policies and rules of the organization.

4) Considering the consequences of each alternative

In many cases the outcomes of individual alternatives are not known for sure, which means that a decision is made under risk or uncertainty conditions. To choose alternatives under such conditions, special mathematical tools are applied and/or additional information is sought. When deciding whether to seek additional information or not, it is necessary to compare the costs of additional information and expected benefits from the improved quality of decision.

5) Evaluating and comparing alternatives against pre-determined criteria

Once alternatives have been developed, they must be evaluated and compared. The methods and tools, which are used for evaluating alternatives, will be considered later.

In every decision situation, the objective in making a decision is to select the alternative that produces the most favorable outcomes and avoids the most unfavorable ones. When making decisions, a manager should constantly keep organizational goals in mind. However, situations can also exist where an organizational objective would be attained at the expense of a societal objective. In these situations, the values of the decision maker strongly influence the alternative chosen.

To evaluate alternatives and select the best one for solving the problem, it is necessary to specify criteria. Criteria are developed from a proper understanding of the situation and the inherent goals and purposes of the organization and the decision-maker involved in the situation. They would also be influenced by the goals and purposes of other individuals, departments and organizations connected with the situation. Criteria could be economic, social or personal. For effective use, criteria should be specific and measurable through quantification or other means. Usually, any one alternative would not be uniformly superior by all criteria. So, the criteria should be prioritized to assist proper selection among alternatives.

6) Selecting the best alternative solution

Having evaluated alternatives, the decision maker can rank them and choose the one with the highest rank.

7) Implementing the selected alternative

A decision must be effectively implemented to achieve the objective for which it was made. Many good decisions fail because of poor implementation. The success of a decision significantly depends on people involved in its implementation. People cannot be manipulated in the same fashion as other resources. They have their own views, attitudes, and opinions, which may not coincide with those of the decision maker. That is why a manager’s task is not only to choose the best alternative but also to ensure appropriate behavior of the organizational members at the decision implementation stage.

Once the alternative is chosen, an action plan has to be developed. The decision-maker needs to decide who would do what, where, when, how, etc. This phase would require coordination skills to properly organize a variety of resources (human, material and financial) and develop a time-phased program for implementation.

8) Evaluating and controlling the results of the decision implementation)

After the chosen alternative has been implemented, decision makers must determine the effect of the implemented alternative on the identified problem. For a variety of reasons, the original decision (chosen alternative) may not work well. This implies devising feedback mechanisms allowing monitoring of the status of the situation, including results of the action plan. It also implies anticipating the most likely points of failure and devising appropriate contingency to handle the possible failures.

If the identified problem is not being solved, managers need to look for some other alternative.

The additional skills required in this step would be those of devising control and feedback mechanisms.

[1] Richard Michael Cyert (1921 – 1998) was an American economist, statistician and organizational theorist.

[2] James Gardner March (born 1928) is an American political scientist, best known for his research on organizations and organizational decision making.

Date: 2015-01-29; view: 1219