Sunday, September 7, 2014

Effective decision making skills

Decisions are important part of our life. A decision is a choice. Life is full of choices at every moment of time. Some of the decisions are small and inconsequential, and some are large and life determining.  All decision making occurs in dynamically changing contexts. This context includes psychological aspects of the decision maker and socio-cultural aspects of the situation he or she acts in. Making good decisions is a life skill that can be learned. Each person makes decisions based on his or her knowledge, skills, values and past experiences.  Effective decision making is a matter of defining the situation, weighing the possibilities and choosing the moment to act. Peter Drucker quoted, ‘making good decisions is a crucial skill at every level.’ Decision making is a reasoning process which can be rational or irrational and can be based on explicit assumptions or tacit assumptions. Rational decisions maximize our chances of happiness, successful living and fulfillment. Anthony Robins quoted, ‘Success and failure are not overnight experiences. It’s the small decisions along the way that cause people to fail or succeed.’
Decision is a commitment to a course of action or determination of future action. Making is the process of applying the objectives in proper way. Decision making is primarily concerned with choosing between the available options. Every decision is made within a decision environment, which is defined as the collection of information, alternatives, values and preferences available at the time of decision.   Every decision making process produces a final choice. It can be an action or an opinion. Many decisions involve solving a problem. Wise decisions are decisions that are made using a definite process.  Decision making is an integral part of management, planning, organizing, controlling and motivation processes.
Decision making refers to the mental activities that take place in choosing among alternatives. Decision making is the study of identifying and choosing alternatives based on the values and preferences of the decision maker.

Effective decision making procedure

1. Identify the right decision problem – State your decision problem as goals to focus on the positive and on the future. You need to state your decision problems carefully, acknowledging their complexity and avoiding unwarranted assumptions and opinion limiting prejudices. Identification of the decision problem produces a motivational state that induces action.
2. Create imaginative alternatives to reach that goal - Your alternatives represent the different courses of action you have to choose from. It is better to ‘brainstorm’ and list the possible options. Your decision can be no better than your best alternative.
3. Understand the consequences – Consequences are the end results of each option. Consider all the facts about each alternative.
4. Choose the best alternative – You have to consider the benefits of each alternative as well as the disadvantages or cost. Your values, goals and standards will guide you in making your choice. Weigh the pros and cons and implement the best alternative. Effective implementation of the decision is critical.
5. Evaluate the decision and the process – When a problem is stated as a goal, you can use your standards to judge whether you have reached the goal or not. The decision making process is a valuable resource to help you solve problems and reach your goals. A conscious awareness of your willingness to accept risk will make your decision making smoother and more effective.

Types of decisions

Programmed decisions- are repetitive decisions that can be handled using a routine approach.
Nonprogrammed decisions- are unique decisions that generate unique responses.

Types of decision making

Intuitive decision making –is making decisions on the basis of experience, feelings and accumulated judgement.
Rational decision making – describes choices that are logical and consistent while maximizing values.
Individual decision making – is the decision taken by an individual in an organization.
Group decision making – decisions taken by a group of organizational members.
Creative decision making – The creative decision making may be characterized by the generation of a large pool of diverse and perhaps novel alternatives and a number of evaluation strategies for choosing among options. It may involve using intuition and insight before logic and analysis.

Barriers to good decision making

Hasty – making quick decisions without having much thought.
Narrow – decision making is based on very limited information.
Scattered – our thoughts in making decisions are disconnected or disorganized.
Fuzzy – sometimes, the lack of clarity on important aspects of a decision causes us to overlook certain important considerations.

Conditions in making decisions

Risk – a situation in which an individual is able to estimate the likelihood (probability) of outcomes that result from the choice of particular alternatives.
Certainty – a situation in which an individual can make an accurate decision because the outcome of every alternative choice is known.
Uncertainty – limited information prevents estimation of outcome probabilities for alternatives associated with the problem and may force an individual to relay on intuition or ‘gut feelings.’

Styles of making decisions

Reflexive style – Such people makes quick decisions without taking the time to get all the information that may be needed and without considering all the alternatives.
Reflective style – Such people takes plenty of time to make decisions, gathering considerable information and analysing several alternatives.
Consistent style – Such people tends to make decisions without either rushing or wasting time.
Linear thinking style – a person’s preference for using external data and facts and processing this information through rational, logical thinking.
Non-linear thinking style – a person’s preference for internal resources of information and processing this information with internal insights, feelings and hunches.

Guidelines for effective decision making

1. The decision problem should be defined properly.
2. More quantity of reliable information is gathered for effective decision making.
3. Various views at the same point are taken into account for quality decisions.
4. Decision should be made at proper time to meet the competitive advantages.
5. More alternatives can be generated by brain storming
6. Decisions can also be made on the basis of questionnaire filled by respondents (Delphi technique).
7. Decisions can be made on the basis of majority opinion (consensus).

Benefits of effective decision making

1.       It focuses on what is important
2.       It is logical and consistent
3.       It is straightforward, reliable, easy to use and flexible.
4.       It acknowledges both subjective and objective thinking and blends analytical with intuitive thinking.
5.       It requires only as much information and analysis as is necessary to resolve a particular dilemma.
6.       It encourages and guides the gathering of relevant information and informed opinion.

Errors in decision making

Over confidence – when a decision maker thinks he knows more than he do or holds unrealistic positive views of himself.
Immediate gratification – decision makers tend to want immediate reward and to avoid immediate costs.
Anchoring – decision makers fixate on initial information as a starting point and then once set, fail to adequately adjust for subsequent information.
Selective perception – decision makers selectively organize and interpret events based on their biased perceptions.
Confirmation – decision makers seek out information that reaffirm their past choices and discount information that contradicts past judgement.
Framing – decision makers select and highlight certain aspects of a situation while excluding others.
Availability – decision makers tend to remember events that are the most recent and vivid in their memory.
Representation – decision makers assess the likelihood of an event based on how closely it resembles other events.
Randomness – decision makers try to create meaning out of random events.
Sunk costs – decision makers forget that current choices can’t correct the past.
Self-serving – decision makers who are quick to take credit for their successes and blame failure on outside factors.
Hind sight – decision makers tend to falsely believe that they would have accurately predicted the outcome of an event that outcome is actually known.

Systematic decision making (Simon, a Nobel laureate,SIM 77)

It involves 3 major phases 1) Intelligence or information gathering phase 2)Design phase 3)Choice phase followed by the implementation phase. Decision making phase starts with the intelligence phase where reality is examined and the problem is identified. In the design phase, a model that represents the system is constructed. The choice phase includes selection of a proposed solution to a model. Once the proposed solution seems to be reasonable, it is ready for the implementation.

Significance of good decisions in business world
Good decision making is as important in the working world as it is in the rest of our lives. Every day a number of decisions must be made that determine the direction and efficiency of the organization we work for. Decisions are made concerning production, marketing and personnel. Decisions are made affecting costs, sales and margins. Just as in our personal lives, the key to organizational success is to make good choices. The organization must have effective decision making (ref: Delivering business intelligence with Microsoft SQL server 2008).
                    Decisions determine the direction and efficiency.

“In the long run, we shape our lives, and we shape ourselves. The process never ends until we die. And choices we make are ultimately our own responsibility.” - Eleanor Roosevelt.


  1. Decision making is immensely significant in the study of administration. Decision making is the process through which one optimal alternative/choice is made from several possible alternatives/choices of solutions for a given issue/situation that will ensure maximum benefit and least risk than the others who were not selected.
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  2. Decision making is known as an inseparable part of management functions. It is one of the essential processes for successful operation of business.
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