Decision making is every manager’s primary responsibility. To make good decisions, managers should invariably follow a sequential set of steps as presented below :-
1. Identifying and diagnosing the real problems: The first step in the decisionmaking process is the identification of the problem. Diagnosing the problem implies knowing the gap between what we want to happen and what is likely to occur if no action is taken. As pointed out by Newman and Summer, identifying the ‘cause of the gap’ and understanding the problem solve the problem.
According to Peter F. Drucker, critical factor analysis is helpful in identifying the causes of the problem properly. A decision maker should collect as much information as possible before attempting to solve it. If possible, in addition to tacts, opinion should also be collected, which would aid in diagnosing the problem effectively.
2. Developing alternatives: While selecting the alternative course of action a manager should consider the viable and realistic alternatives only. Further, he should consider the time and cost constraints and psychological barriers that would restrict the number of reasonable alternatives. Newport and Trewatha contend that the brain storing and group participants may be fruitfully employed in developing alternatives. Ingenuity, research and creative imagination are required to ensure that the best alternatives are considered before a course of action is selected for inclusion of it among the alternatives.
3. Evaluation of alternatives : Perhaps one of the most important steps in decision making is the evaluation of each alternative. Here, the decision-maker draws balance sheet of every alternative by identifying the advantages as well as disadvantages of these alternatives. All pertinent facts about each alternative should be collected, the pros and cons must be considered and the important points must be distinguished from the trivial or peripheral matters. The purpose of all this exercise is to limit the number of alternatives to a manageable size and then consider the alternatives for the selection.
Some of the criteria for evaluating an alternative could be —
- resources available for implementing the alternative
- economy of effort
- element of risk involved
- results expected
- time constraint
- accomplishment of common goal
- implementation problems etc.
4. Selection of an alternative : The next important step in decision-making process is the selection of best alternative from various available alternatives. Indeed, the ability, to select the best course of action from several possible alternatives separates the successful managers from the less successful ones. Drucker mentions four criteria viz. the risk, economy of effort timing, and limitation of resources, before one alternative is selected among the available ones.
5. Implementation and follow up of the decision : The final step in decision making process is the implementation of the selected alternative in the organisation.The alternative-selected should be properly communicated to those members of organisation who are concerned with the decision. Acceptance of the decision by group-members is absolutely essential to the successful implementation Further , after implementation of the decision it is necessary to follow up to see whether the decision is yielding the desired results or not. A manager should least hesitate to ride out a decision that does not accomplish its objective. A manager should see it nesessary, that all organisational members participate in the decision making as decision implementation.