Importance Of Decision Making In Organization

 decision making processDecisions are necessary to make to fulfill the goals and objectives of an organization. While making a decision, managers have to consider certain factors like external environment, relationships within the organization, past experience and cognition levels of decision makers.

The success of the management and the organization is determined by the decision making process. The process involves the selection of one alternative from all the alternatives available.

Phases of the decision making process

Intelligence activity

This phase involves examining the environmental conditions that lead to decision making process. It is also called the identification phase as identification the problems faced by the organization are identified in this phase.

Design activity

In this phase, the various alternatives available are identified, developed, analyzed and compared.

Choice activity

In this final phase, managers take decision to go ahead with one particular course of action.  The final decision is made considering the existing environmental conditions.

A decision is called a rational decision when it helps in achieving the objectives of the organization. Rational decision making process involves awareness of alternatives, identification of key criteria, stages of problem definition, evaluation of the alternatives and choosing the best alternative. The process helps the managers in making decisions that are purely based on facts. But it has certain disadvantages like lack of availability of information, cost and time constraints, inability of the decision maker to process the information and deduce the result of the available alternatives.

Types of decisions

There are two types of decisions, namely, programmed decisions and non-programmed decisions. In programmed decision, a sufficient amount of information is available with the decision maker. It is a highly structured decision and has clear goals, well established procedures for decision making. It is based on well-defined sources of information. Programmed decisions are generally made by the people who are at the lower levels of management.

Non-programmed decisions are made due to lack of goal clarity and not so well defined structure. Reliable sources of information and well defined procedures for decision making are absent in non-programmed decisions. The responsibility of making these decisions lies with the top management due to their complex nature.

The participation of the employees in the process of decision making is essential as it helps in developing different strategies. Employees may be allowed to participate formally or informally. The involvement of employees in the decision making process create a sense of belongingness in them. Different views and opinions can be gathered with their participation.

This further enhances the quality of decision making and the possibility of discovering creative and innovative solutions is increased. There are fewer chances of occurrences of errors. The final decision made is of high quality. The participation leads to employee satisfaction, better productivity and low attrition rate. But sometimes it may lead to conflicts due to differences in opinions.

Decision making techniques

decision making tech

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Traditional participative techniques- Scanlon plan

The formal committees are set up to encourage employees to participate in the decision making process. The whole team is rewarded if the suggestion given by any team member helps in achieving the desired result. The success of the decision making process depends on two factors- degree of the participation of employees and attitude of top management in implementing the plan. Another technique that is most commonly practiced is the usage of suggestion box. Any employee interested in participating in decision making is supposed to put his or her suggestion into the box. The top management goes through all the suggestions and selects the best one.

Modern participative techniques

In this technique, employees who work at the lower level are given the power to participate in the decision making process.  This technique is very cost effective as the ideas generated help in developing better plans and saving the company’s resources. For effective decision making, work groups and self-managed teams are introduced in the organization system. The members of a self-managed team work to achieve a common objective.

The team encourages other employees of the organization to actively participate in the decision making process. Quality circle is one of the best examples of modern participative techniques. The members of quality circles meet to identify and analyze the problems in their work related areas and find the solutions for them.

Creativity and decision making

Creativity and innovation are essential for the effective decision making processes. A creative individual is able to generate new patterns, ideas or alternatives to solve a particular problem. Creativity helps a company to gain an edge over others. A person with divergent thinking is more creative and helps the organization with his or her innovative ideas. Creativity can be developed by applying various techniques such as self-hypnosis, guided imagery and lateral styles of thinking. These techniques help individuals in making more creative decisions.

People work in groups and make decisions collectively to solve problems. Various issues involved with group decision making are group polarization, group think and group problem solving.

Group polarization

In group polarization, members of a group change their opinions after discussing the problems among themselves. They are willing to accept a decision that is full of risk if it is accepted by all the other members. They do not take the complete responsibility of their decisions.


In groupthink, decision is made considering the opinions of majority of people. The members may not analyze all the alternatives available while arriving at a decision.

Group problem solving

The major group solving techniques are brainstorming, nominal group technique and the Delphi technique.  The brainstorming technique is used to generate maximum alternative courses of action. The technique involves the participation of all the group members. The objective of brainstorming technique is to generate different types of innovative ideas. In the nominal group technique, members do not need to interact face to face with each other. The work of the group members is to identify the problem and evaluate the alternatives available.

All the team members who will be affected by the decision are required to participate in the decision making process. In the Delphi technique, the group members do not meet each other. A questionnaire is sent to all of them to know about their opinions. The feedback of the survey is again sent back to the group members to get their response. The process is repeated again and again until a common decision is obtained.

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