What is Decision Making

Strategic decision making, or strategic planning, involves in the process of creating an organization’s mission, values, goals and objectives. Deciding upon a particular action plan a company also involves in altering strategies based on observed outcomes.

Decision Making could be defined as the study of identifying and choosing from alternatives, the best option that suits a purpose. It is usually regarded as a cognitive study as it involves mental and logical reasoning. In decision making, there are various alternatives that worth to be considered but the interest is not on the number of different alternatives rather to identify all the alternatives and choose the one with the highest probability of success or that best fits specific goal or objective.

Decision making is a process that reduces uncertainty to a considerable level. In most decisions, uncertainty is reduced rather than being eliminated. Only in few cases decisions are made with absolute certainty. This implies that most decision involve a certain amount of risk. If there is no uncertainty, then there is no decision; as you are just to act and expect a fixed result. Decisions determine the success of a project, and at times there are difficult moments when they seems to not to be as easy as we think as they are more difficult and nerve racking.

In most cases, decisions are made by moving forth and back between the criteria or set goals and the identification of feasible alternatives. The available alternatives influence the criteria we apply to them and also the set goals can influence the alternatives that will be available.

Types of Decision Making

There are various kinds of decision. They have been grouped into three:

  • Decisions on Whether: This is a decision that involves a yes/no. An instance is the case of a project manager contemplating on whether to get more team members or not. The project manager can either go ahead to recruit more team members or not, there is no middle cause to such decision and you need to decide that before other alternatives might come up. If yes, then alternatives of how many do you need, of what specialisation and any other alternative might come up.
  • Decision on Which: This type of decision involve making a choice from two or more alternatives, measuring the one with highest probability of success or that best fits the conditions. An example of such decision includes an investor deciding on what brand or product to invest in from various options. Different methods are used to make such decision as it involves the nature of the decision maker and also the nature of the decision itself.
  • Conditional or Contingent decision: These are already made decision based on certain conditions being met. This makes it easier for the decision maker to take action once those conditions are met. A good instance is a team leader who said “I have decided to recruit more team members if we are awarded the project”.

Decision Theories

Decision theory is the study of principles and algorithms use for making decision. This is achieved by identifying values, uncertainties and other things that might influence the decision. Decision theories can basically be grouped into two: Normative and descriptive decision theory. While normative theory explains how decision should be made, descriptive theory explains how decisions are made.

Decision theories could be under certainty (each alternative lead to a goal or consequence), risk (each alternative has one or more consequence and the probability of each are known) and uncertainty (each alternative lead to one or more consequence with an unknown probability). There are different types of decision theories that have been implemented. These include:

  • Causal decision theory: This is an old theory that is still in use till date. This theory adopts the principle of rational choice which implies that the outcome of your choice is a consequence of your decision.
  • Evidential decision theory: Evidential decision theory in contrary to causal decision theory believes the best option conditional on having chosen it is the one with the best outcome. This is believed to be an irrational thinking.
  • Game theory: Is a mathematical study of strategic decision making. It is considered to be an interactive decision theory as it takes into consideration the conflict and cooperation between intelligent rational decision makers.
  • Bayesian theory: Bayesian theory is a probability theory used in decision making. Bayesian is regarded to be an extension of logic that enables reasoning with prepositions with either a true or false state. The above theories can all be regarded as mathematical theories of decision making.

Decision making theories can also be viewed by analyzing the approach and procedure in making a decision.

Approaches to Decision Making

In an organisation or a team, there are basically two approaches to decision making, which are

  • Authoritarian: The manager or team leader makes a decision based on his own knowledge or experience and communicate his decision to the group and await their acceptance.
  • Group: The group tends to make the decision together by analysing the different alternatives that fits their objective. Some studies came up with the research that in an Authoritarian approach, the leader spends five minutes to make a decision, thirty minutes to communicate his decision and another 30minutes for the group to accept while a group approach spends 30 minutes to analyse and decide on the best option. Therefore, the group approach is more encouraged as group members tend to appreciate ideas they think of and have more zeal in achieving goals set by their own initiative than when decision are being taken on their behalf.
  • Automating System: This is a computer system that automates significant parts (or all) of an administrative decision-making process. The primary feature of this system is its ability to build and automate administrative decision using some logic in a computer system. Automated systems may range from conventional information technology systems (which may calculate a rate of payment in accordance with a formula set out) through to more complex systems such as ‘expert’, ‘business rules engines’, ‘rules-based’ and ‘decision-support’ tools. The automated system is a developing approach to decision making as managers find it easier to make unbiased decision once the right criteria has been entered.

Get industry recognized certification – Contact us

Menu