Decision-making Process To solve a decision problem it is necessary that the decision-

maker chooses the best of the available alternatives In the process, managers have to function in
the following manner.

1. The Problems. The first step is to determine what the real and correct problem is and to find
out a satisfactory an what input data is required for this. A problem exists whenever one faces a
question whose answer involves doubt and uncertainty.

2. Search for Alternatives. A problem can be solved in several ways, however, all the ways are
not equally satisfying. If there is only one way of solving a problem, no question of decision
arises. The managers, in order to get most satisfactory result of a decision, must try to find out
the various alternatives available. The practice of developing alternatives is the best guarantee
for ensuring adequate attention on the part of managers.

3. Evaluation of Alternatives. After the various alternatives are identified, the next step is to
evaluate them and select one that will best contribute to the goal. In the various alternatives,
there lie various tangible factors. The tangible factors can be assessed in terms of quantity such
as rupees, ma-hours, units of output, etc. There are intangible factors which cannot be assessed in
terms of quality. However, both these tangible and intangible factors must be weighed in
deciding upon a course of action.

4. Comparison of Alternatives. The evaluation of various alternatives presents a clear picture as

to how each one of them contributes to Organizational objectives. A comparative study of all
such alternatives is made to find out which is the most satisfactory.

5. Selection of Alternatives. Comparative study gives the information about the way various
alternatives are contributing in the solution of problem. The bet among these should be selected.
However, while selecting, factors like risk, economy of efforts, timing and limiting factors
should be considered adequately.

Types of Decision There are various ways of classifying decisions in an organisation.

These base give five sets of decisions.

1. Organizational or Personal Decisions : In an organisation, when an individual takes

decisions as an executive for the organisation, these are known as Organizational decisions. The
authority for taking such decisions can be delegated from a superior to a subordinate. Such
decisions affect Organizational functioning directly.

An executive can take decisions about himself which are personal decisions. These decisions
normally affect personal life of the decision-maker, though at many times they may affect
organisation also, such as, leaving of the organisation by an individual. Decision making power
cannot be delegated to any one else in the case of personal decisions.

2. Routine or Strategic Decisions : Routine decisions are taken in the context of day-to day
operation of the organisation. Mostly, they are of repetitive nature and related with the general
functioning. They do not require much analysis and evaluation and can be made quickly.

Strategic decisions are those which are taken during the current time period, but whose primary
effect is flt during some future period. Strategic decisions affect Organizational structures,
objectives, facilities, and finances. These decisions are mostly non-repetitive in nature. Since thy
have fundamental effects on the organisation, they are taken after careful analysis an evaluation
of various alternatives.

3. Policy or Operative Decisions: Policy decisions are taken by top management in the
organisation which determines the basic policies. The policy decisions are very important and
have long term impact. Tense decisions provide help in establishing the business such as
deciding location of plant, volume of production, sale and purchase decisions, policy decisions
regarding the employees etc.
Operative decisions are related with the day-to-day operation of the business. These are taken
generally by middle and lower managers who are more closely related with the supervision of
actual operations These decisions may be written or otherwise.

4. Programmed or Non-Programmed Decisions: Such classification of decisions is made on

the basis of the use of operational research. Programmed decisions are normally of repetitive
nature and are take3n within the broad policy structure. These generally have short-run impact,
and are taken by lower managers, such as, granting leave to an employee, purchase of materials
in normal routine etc.

Non-programmed decisions are of non-repetitive nature. The necessity of such decisions arises
because of some specific circumstances. Thus, these are very important for the organisation;
such as, opening of a new branch at a new place, introducing a new product in the market, etc.

5. Individual or Group decisions: This classification is based on the basis of persons involved
in the decision-making process. Individual decisions are taken by a single individual. These are
taken is the context of routine or programmed decisions where the analysis of various variables
in simple and for which broad policies are already provided. Sometimes, important decisions are
taken by single individuals also.

Group decisions are taken by a group constituted for this specific purpose or by a standing
committee. These decisions are generally very important for the organisation. Group decisions
have certain positive value such as greater participation of individuals and quality in decisions,
and certain negative values such as delay in decision-making process and difficulty in fixing the
responsibility of decisions.