What is Decision Making?

The process of making choices is called decision making. This is done by identifying a decision information gathering and assessing alternative resolution. It is a selection of a course of action among options. It is the most fundamental managerial activity from all the activities of managers. Decision making is a daily activity and it can be small, big, easy, complex, depending upon the operations of the organization.

Features of Decision Making

Following are the features of decision making.

  1. Establishing and classifying the objective Establishing and classifying the objective is an important characteristic of decision making. There must be an alternative action developed and evaluated. Alternative decisions must be able to achieve all the objectives. Alternative decisions should be evaluated for all possible consequences. An optimal production plan is prepared by following steps involved in the decision model. Prediction of decision is made by role playing in a situation featuring conflict.
  2. Programmed decisions: Programmed decisions is a well-structured decision-making model. It is a routine and regular basis. They are usually made by the lower level of the hierarchy of the organization. It is based on the information already available and has short term consequences. For example, ordering office supplies, raw materials.
  3. Non programmed decisions: Non programmed decisions are new and unstructured. The previous rules in Non-programmed decisions cannot be applied. It is a totally new decision-making model and hence there is few information available in Non programmed decisions. It is made for a long time frame. Non-programmed decisions are organized by a higher level of authority.

Steps in Decision Making

Following are the steps involved in decision making.

  1. Identify the decision: In the first step, the decision maker realises the need of decision making. The nature and need of decision is clearly defined.
  2. Gather information: In this step the information is gathered from various and best sources. The sources may be internal or external.
  3. Identify the alternatives: After collecting information, the next step is to identify various options. Various possible alternatives are listed in this step.
  4. Evaluate the Evidence: The gathered information is then evaluated to find best alternatives.
  5. Choose among alternatives: after evaluating each and every alternative the best decision is then selected.
  6. Take action: Based on the selection of options, the action is then taken.

 Review decision and consequences: This is the last step-in decision-making process. In this process a decision maker reviews decision making results and sees the consequences of decision making.

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Difference Between Problem Solving and Decision Making

Problem solving is the process of investigating the given information and finding possible solutions whereas decision making is a way ahead of problem solving as the process is towards making a relevant decision.

Decision making techniques: There are 2 main categories in decision making techniques.

Group decision making: Group decision making is the process of taking decisions with help of a group

Voting method: There are several types of voting-based decision making such as score voting quadric voting approval voting. Voting method is based on majority rules. This requires support from 50% of more members of the group. The quadratic voting helps the decision maker to cast the preferences for each decision in a score voting, voting paradox and majority rule is followed.

Delphi technique: Delphi technique is a communication method for groups which is developed for callability for forecasting and policy making. It is a structured communication technique.it is a systematic estimating method relies on a group of experts.

 Dotmocracy: Dotmocracy is a method of decision making. There is a special form named dotmocracy in which multiple sheets are there which allows groups of people to brainstorm and recognize agreements on unlimited ideas written by them.

Participative decision making: It is a process in which a group of people are involved in order to reach a collaborative decision.

 Individual decision making

  1. Decisional balance sheet: Decisional balance sheet is the list of pros and cons of every option given by individuals.
  2. Expected value optimization: expected value optimization involves consideration of risk occurrence and opportunity cost of different alternatives.
  3. Decision support system: Decision support system method is used when there are many stakeholders or other categories that affect the decisions. It is used while making complex decisions.
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Barriers to Making a Good Decision

There are many challenges involved in making a good decision. A decision can result in gains or losses. A proper decision frame prefers the perception made by a decision maker associated with the result of a decision.

Decision framing is important as it may be responsible for decision failure in many risky decisions making. Illusion of control is also a barrier to decision making when a decision maker is over confident, this can affect the decision making.

Following are some barriers to decision making:

Analysis paralysis: analysis paralysis occurs at the time when a group or an individual fails to take a proper decision with the help of problem solving and decision-making steps. Following are the types of analysis paralysis:

  1. Process analysis paralysis when a group or an individual fail to make a decision and they get jumbled over gathered information, a wrong decision could be made.
  2. Decision paralysis: in this case a decision maker, after decision making, finds new questions and information from the research which leads to further possibilities.
  3. Uncertainty paralysis: when a decision maker wants to eliminate an uncertainty but the examination fails to avoid all uncertainty, this is called Uncertainty paralysis.

Information overload: sometimes excessive information affects problem solving and decision making. This leads to hurdle in decision making

Decision fatigue: decision fatigue is a situation when an individual or a group declines in decision making skills. This happens because of lack of will power and limited capacity.

Approaches to Decision Making

Following are the Approaches to decision making:

Rational approach: Rational approach is a systematic step by step process of decision making. Rational approach is followed by the assumption that the complete information is provided by the organization and it is economically based and managed by decision makers.


Behavioral approach: In this approach it is assumed that the decision maker operates with the bounded rationality. It is the idea that decision makers cannot deal with information about all aspects and alternatives.

Practical approach: In this approach the decision maker tries to go beyond the thumb rule to generate as many alternatives as possible.

Content and Applications

This topic is significant in the professional exams for both undergraduate and graduate courses, especially for

  • B.A Economics
  • Bachelor of Commerce
  • Master of Commerce
  • MBA

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