Decision-making is the cognitive process whereby an individual gets to choose between two or more alternatives, ranging from simple to complex in nature. Thus, it is a problem-solving process that ends with a satisfying solution.
- What Is Decision Making?
- History Of Decision Making
- Characteristics Of Decision Making
- Types Of Decision Making
- What Are The Various Decision Making Strategies?
- Factors Involved In Decision Making
- Steps Involved In Rational Decision Making
- Importance Of Decision Making
- You Cannot Grow Without Decision Making
What Is Decision Making?
Decision-making refers to a cognitive process that results in choosing a course of action or belief from several possibilities. It can be considered as a particular type of problem-solving skill, whereby the problem is held solved when the final solution reached is deemed to be satisfactory.
”Decision making refers to the act of assessing or judging several alternatives and choosing the one that is most likely to achieve one or more goals” says Minds Help. Common actions include deciding for whom to vote, what to eat or buy, which college to attend, and many such decisions that happen in our day to day lives. Additionally, decision making plays a key role in several professions, such as public policy, medicine, and management.
According to study, every minute of our lives goes by in making decisions. The study goes on to say that ”decisions can be as small as our selections of words or what to have for lunch, and they can be as big as how to plan for retirement or what treatment to choose for a disease”. Decision making is all about balancing the certainties against risks, such as balancing short-term gratification against long-term benefits.
Psychological scientists have been interested to know for several decades how people make decisions and experts have been studying decision making for centuries. The most famous scholarly consideration of making a decision in cases when all the facts aren’t on hand is that of Blaise Pascal. In 1670, in his Pensées, the French philosopher articulated what was, in his time, a pretty profound dilemma for rational people, to believe or not believe in the existence of God. Pascal reasoned it out that if God exists, believing in him will mean eternal salvation. If He doesn’t exist, Pascal said that one loses nothing by believing. So the choice was clear, that was believing is the safest bet.
According to another study 1 , decision making ”refers to making choices among alternative courses of action, which may also include inaction”. While it can be explained that management is decision making, half of the decisions made by managers within organizations fail. Therefore, increasing effectiveness in decision making is an important part of maximizing one’s effectiveness at work.
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History Of Decision Making
According to a study, somewhere in between the previous century, Chester Barnard had introduced the term “decision making” from the dictionary of public administration into the business world. Thus, with the introduction of the phase, it replaced other, more conventional descriptors such as “resource allocation” and “policymaking.” The introduction of ”decision making” altered how managers viewed their actions and thus, encouraged a new crispness of action and desire for conclusiveness, as argued by William Starbuck, a professor in residence at the University of Oregon’s Charles H. Lundquist College of Business. Therefore, Barnard and other such theorists such as James March, Herbert Simon, and Henry Mintzberg, laid the foundation for the study of managerial decision making.
According to another study 2 , Nobel Laureate Herbert Simon (1967, 1983) introduced a change in decision theory while introducing bounded rationality. It is a concept that requires improvement in the existing models of rational choice, including cognitive and situational constraints. ”However, Simon also knew that his theory would be incomplete until the ‘role of emotion’ was specified, thus predicting that the vital role contemporary science has established to give the emotion in decision research” says the study. Spanning across disciplines, ranging from philosophy (Solomon 1993) to neuroscience (e.g., Phelps et al in press), an increasingly active research to identify the impacts of emotion on judgment and decision making was in progress.
However, in recent years, the field has grown rapidly. Yearly scholarly papers on emotion and decision-making have increased from 2004 to 2007 and again from 2007 to 2011. Additionally, many psychological scientists now believe that emotions are the principal influencer of the most important decisions in life (e.g., Ekman 2007, Frijda 1988, Gilbert 2006, Keltner & Lerner 2010, Keltner et al 2014, Lazarus 1991, Loewenstein et al 2001, Scherer & Ekman 1984).
Characteristics Of Decision Making
Just like any other concept or idea around the world, decision-making is also defined by its own set of characteristics. These are as follows.
Decision-making is a goal-oriented process as it is made to attain some purpose or goal. The idea is to move ‘toward some desired state of affairs.
In order to make a decision, we tend to evaluate a pros and cons of the same which provides us with choices or alternatives. A decision should be observed as ‘a point reached in a stream of action’. It is the choices or alternatives that lead to the final decision as we tend to select the alternative that will produce the best result. characterized by two activities – search and choice. When there is no choice of action, no decision is required. The need for decision-making arises only when there is some uncertainty, as to the existing outcome.
Decision-making is not a completely intellectual process but a blend of both intuitive and deductive logic. It is defined by conscious and unconscious aspects. While a part of it is learned, the other part depends on the personal attributes of the decision-maker. Decision-making cannot be completely quantified, based on reason or intuition. Some are also based on emotions or instincts. The decision signifies freedom in the hand of the decision-maker regarding the final selection of the right alternative.
4. Dynamic Process
Decision-making is defined as a process rather than a static entity. It is a process whereby one has to use the inputs effectively in order to come up with a solution for a particular problem. Moreover, it is a process that identifies important things to do in a dynamic setting.
5. Continuous Activity
The life of an individual is a perpetual choice-making activity. He/she decides things on a frequent and regular basis. It is not a one-shot deal.
6. Commitment of Time, Effort And Money
Decision-making indicates the commitment of time, effort, and money (mainly in the case of an organization). The commitment may be short-term or long-term depending on the type of decision. Once a decision is made, individuals choose the specific direction, in order to achieve the goals.
7. Human and Social Process
Decision-making is a human and social process consisting of intellectual intuition, abilities, and judgment. The human, as well as social consequences of a decision, are usually taken into account while making the choice from several alternatives.
Types Of Decision Making
Following are the main types of decisions making that take place in an organization.
- Programmed and Non-Programmed Decisions
- Organizational and Personal Decisions
- Operational and Policy Decisions
- Opportunity and Problem-solving Decision
- Routine and Strategic Decisions
- Research-Based and Interactive Decision
- Individual and Group Decisions
- Major and Minor Decisions
1. Programmed And Non-Programmed Decisions
Programmed decisions are taken in a well-established situation. These decisions are fairly structured and occur maintaining a certain amount of regularity. Decisions are taken concerning problems that are of repetitive nature or routine type matters, following a certain pattern. Decisions of this type may concern the purchase of raw material, allowing leave to an employee, supply of goods to the employee, etc. Such decisions are generally taken by lower-level managers.
Unlike programmed decisions, non-programmed decisions are concerning difficult situations that lack easy solutions. These are decisions that are taken in an unstructured situation. Such decisions occur much less often than programmed decisions. These are non-repetitive and uncertainty-involved decisions that are unique and original. It requires thought and creativity. These settlements are made by top-level managers as intuition and experience play a significant role in taking these types of decisions.
2. Organizational And Personal Decisions
When an individual makes a judgment as an employee in an official setting, it is known as an organizational decision. Such decisions are taken in the organization to fulfill the company’s vision, mission, and goals. The manager governs the employees on how to prioritize effort, which resources should be employed, and the delegation of responsibility for certain activities.
On the other hand, when an individual takes a decision in his personal capacity, it is known as a personal or individual decision. Personal decisions are taken on a day-to-day basis, right from what to eat, what to wear, which stream to choose, which career to choose, etc.
3. Operational And Policy Decisions
Decisions concerning various policy matters of the organization are policy decisions. These are practiced by top managers and have a long-term impact on the functioning of the business. They influence and shape the direction of the whole business. They are generally made by top-level managers.
Operational decisions, on the other hand, are related to the day-to-day functioning or operations of the organization. Middle or lower-level managers take these decisions. These decisions have a short-term impact as they are practiced repetitively. These decisions are based on facts about events and do not need much organizational judgment.
4. Opportunity And Problem-Solving Decision
Several times, decisions are taken by managers to seize the opportunity for growth. These decisions are known as opportunity decisions. These decisions are taken by the manager for the growth and expansion of the organization. Managers make decisions about both problems and opportunities. If there is an emergency or problem in the organization, the manager has to make a smart decision to come out of that situation. These decisions are known as problem-solving decisions. For this, the manager must be a good problem solver as well.
5. Routine And Strategic Decision
Routine decisions are associated with the general functioning of the organization. The decisions are repetitive in nature and do not require much evaluation or judgment as they can be taken quickly.
Strategic decisions influence organizational objectives, goals, and other important policy matters. These decisions usually require a huge amount of investments or funds and are taken after careful analysis and evaluation of many alternatives. Top-level managers are responsible for making such decisions and these decisions have a long-term effect on the organization. Thus, the manager needs to be a good visionary for taking strategic decisions.
6. Research-Based And Interactive Decision
Research-based decisions need lots of evidence to be gathered before actual action is taken. For this, one has to perform research for finding out the alternatives and evaluate the consequences of those alternatives. In the circumstances of a crisis, the manager has to do a lot of research to come out of that crisis. While most of the time, it is the manager who makes the judgments, there are situations where the manager alone cannot take decisions. In such cases, he has to consult or interact with other team members in this regard. These are interactive decisions, which are easier, faster, and can be more accurate.
7. Individual And Group Decisions
When the decision is taken by a single individual, it is known as an individual decision. Usually, routine-type decisions are taken by individuals within the broad policy framework of the organization.
Group decisions are taken by a group of individuals established in the form of a committee. Usually, significant and pertinent matters for the company are referred to this committee. The main aim in making group decisions is the engagement of maximum numbers of individuals in the process of decision making.
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8. Major And Minor Decisions
Major decisions are taken by top management while decisions pertaining to the purchase of office stationery is a minor decision that can be taken by the office superintendent.
What Are The Various Decision Making Strategies?
The process of decision-making, in most cases, follows a certain strategy or series of strategies in order to arrive at a final decision. For the many minor decisions that we make every day, flipping a coin might work. However, for more complex and important decisions, we are more likely to spend a lot of time, effort, research, and mental energy on coming to the right conclusion. The following are some of the major decision-making strategies that one might use for making a complex decision.
1. The Single-Feature Model
This approach involves connecting one’s decision solely on a single feature. For example, someone is planning to buy a bar of soap and is bombarded with a wide variety of options at the local superstore. However, the person decided to buy the soap based on one factor, that is the price of the soap and he/she opted for the cheapest option. In this case, the person has ignored other features such as brand, scent, reputation, and effectiveness of the product.
2. The Additive Feature Model
In this method, one has to take into account all the possible important features of a product and then systematically evaluate each option. This strategy tends to be more methodical when making more complex decisions. For example, if a person wants to buy a new TV set, he/she will create a list of important features that he/she wants the TV set to have. The person will then rate each possible option on a scale of -5 to +5.
TV sets that have important advantages might get a +5 rating while those with major drawbacks might get a -5 rating. Once the person has looked at each option, he/she can then sum up the results to decide which option has the highest rating.
The additive feature model is a great way to discover the best option for multiple choices. It can be, however, quite time-consuming and is probably not the best decision-making strategy to use if one is lacking time.
3. The Elimination by Aspects Model
The elimination by aspects model was first proposed by psychologist Amos Tversky in 1972. In this approach, one estimates each option and characteristic at a time, beginning with whatever feature he/she believes is the most valuable. When an item fails to meet the standards the concerned person has established, he/she cross the item off the list of options. Thus, the list of options becomes smaller with each item getting crossed off, until and unless one eventually reaches the ultimate alternative.
According to a study 3 , Elimination By Aspects (EBA) by Tversky( 1972) ”eliminates options that do not meet a minimum cut-off value” for the most valuable characteristic or do not have a coveted aspect for the most important attribute. ”The elimination process is repeated for the second most important attribute and continues until a single option remains. The order in which attributes are considered reflects the decision-maker’s basic values” adds the study.
Factors Involved In Decision Making
According to a study 4 , there are various factors involved in decision-making. There are some researchers who suggest that decisions as, whereby humans decide without much thinking. For example, in controlled environments, such as classrooms, teachers may try to convince students to weigh the cons and pros before deciding. This strategy is called Franklin’s rule. However, considering the need for enough time, cognitive support, and full access to related information about decision subjects, this rule fails to describe deciding mechanisms of individuals, well. In general, factors influencing decision-making are classified as follows.
- Rational Factors: Quantitative factors such as time, price, predictions, etc. may influence decisions. People usually tend to consider such factors, overlooking the non-quantitative ones.
- Psychological Factors: With human participation in decision-making, factors such as the personality of the decider, her/his capabilities, values, experiences, perceptions, goals, and roles. These factors play a vital role in the whole process.
- Social Factors: Others’ understanding, especially those who influence decision, is a matter of importance. Considering these issues reduces others’ resistance against the decision.
- Cultural Factors: Surrounding environments with multiple layers are called the culture of the region, the culture of the country, and the culture of the universe. Also, the culture of the person’s organization should also be analyzed. ”These cultures influence individual/organization decisions in the form of socially accepted values, trends, and common values” says the study.
Steps Involved In Rational Decision Making
The rational decision-making model is defined by a series of steps that one should consider to achieve the best result as the final outcome. In other words, to make sure one makes the best choice, going through the formal steps of the rational decision-making model may help in the same.
Step 1: Identify the Decision
In the first step, one understands that he/she needs to make a decision. The individual must clearly define the nature of the decision that he/she is planning to make.
Step 2: Collect Important Information
The second step involves collecting relevant information catering to one’s decision-making process. Here, one has to obtain information through some internal and external “work.” Some information is internal where one has to seek it through a process of self-assessment. Other information is external where one has to find it through internet browsing, in books, in the form of a suggestion from other people, and from other sources.
Step 3: Recognize the Alternatives
Upon collecting relevant information, comes the task of finding possible paths of action or alternatives. One can also use his/her creativity and additional information to build new alternatives. In this step, the individual will note down all possible and desirable alternatives.
Step 4: Weigh the Evidence
The next step involves evaluating one’s information and emotions to presume what it would be like to carry out each of the alternatives to the end. It is essential for one to examine whether the need identified in Step 1 would be met or solved through the use of each alternative. In the process of going through such an internal process, one will begin to favor certain alternatives that will seem to have a better potential for reaching one’s goal.
Step 5: Choose Among Alternatives
Once a person has weighed all the evidence, he/she is ready to select the alternative that appears to be the best. The person may even choose a combination of alternatives.
Step 6: Taking Action
Step 6 is the position where an individual is ready to take some positive action by working to implement the option he/she has chosen in Step 5.
Step 7: Reviewing Decisions & Its Consequences
This is the final step where the person will consider his/her results based on his/her decision and evaluate whether it has resolved the need identified in Step 1. If the decision did not happen to meet the identified need, the person may have to repeat certain steps of the process to make a new decision.
Importance Of Decision Making
Here the significance of decision-making is entangled in various aspects of our lives. These are as follows.
1. Provides Information
A good decision-making process gathers enough information before engaging in any final action. It is a phenomenon that either involves a single person or a large number of individuals, especially in an organization. When decision making happens in a group, each person shares his/her perspective to handle a particular situation based on which the manager(s) takes the final, corrective decision(s).
2. Enhances People’s Participation
This is especially true when it comes to an organization. Decision-making in an organization is done by a group of individuals. Each individual actively participates in the decision-making process of the organization. as they get the freedom to present their creative ideas without any boundations. Additionally, none of them are individually criticized for any bad decision or failure as the whole group is held responsible for the same. This increases the participation level of different people in the organization.
3. Fosters More Options or Alternatives
Whether the phenomenon is happening in a group (in an organization) or occurring individually, decision-making provides more than one option for a particular situation. There are different people working as a group for proper decisions. In the case of an individual, the person tries to evaluate a situation from different perspectives, thus coming up with various options for handling that situation. When in a group, different people look at the same situation differently, thus giving their own perspectives and ideas for it. This way there are different options available to choose from. It must be noted that all the alternatives are properly interpreted in light of handling the situation, thus choosing the best one to reach the better result.
4. Enhances the Level Of Acceptance And Commitment
This is especially true when it comes to organizations. While companies constantly face conflict among their staff, group decision-making gives each person an equal right to share their views and ideas. Since decisions are not imposed here, they are created with the participation of individuals. It develops a sense of commitment and belongingness towards the business.
5. Improves the Quality Of Decisions
With time, the decision-making process enables one to take quality decisions at the right time. Individuals learn to interpret each and every aspect of every alternative available to them for handling situations. The best among the different alternatives available is chosen. It facilitates quality decision making which helps in the easy achievement of objectives.
6. Helps in Strengthening Relationships
Good decision-making helps in improving relationships- both personal and professional. It promotes a sense of cooperation and unity among individuals in personal and professional life.
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You Cannot Grow Without Decision Making
The decision-making process can be both simple or complex. Simple decision-making may be defined by an event where we may randomly decide something out of the available options. A complex phenomenon may be defined by an event involving systematically rating different aspects of the existing choices. No matter what strategy we use, it depends on various factors, including the time we take to make the decision, the overall complexity of the decision, and the amount of ambiguity that is involved.
However, be it complex or simple, one cannot bypass the phenomenon of decision-making from his/her daily life. In fact, every small aspect of our lives is defined by our decision-making skills. Thus, when it comes to taking any decision, one must evaluate the pros and cons of the same, to avoid any bad situation in the future.
- 11.3 understanding decision making – Principles of management. (2015). https://open.lib.umn.edu/principlesmanagement/chapter/11-3-understanding-decision-making/
- Lerner, J. S., Li, Y., Valdesolo, P., & Kassam, K. (2014). Emotion and Decision Making. Scholars at Harvard. https://scholar.harvard.edu/files/jenniferlerner/files/annual_review_manuscript_june_16_final.final_.pdf
- Beresford, B., & Sloper, T. (2008). Understanding the Dynamics of Decision-Making and Choice: A Scoping Study of Key Psychological Theories to Inform The Design and Analysis of the Panel Study. University of York. https://www.york.ac.uk/inst/spru/pubs/pdf/decisionmaking.pdf
- Shahsavarani, A. M., & Abadi, E. A. (2015). The Bases, Principles, and Methods of Decision-Making: A Review of Literature. International Journal of Medical Reviews. https://www.ijmedrev.com/article_68259_bec2d0c8319895a8119b8c6027fd75ad.pdf