Decision Making

• Author: Marcy Satterwhite
• Pages: 192-194

Page 192

Decision making, also referred to as problem solving, is the process of recognizing a problem or opportunity and finding a solution to it. Decisions are made by everyone involved in the business world, but managers typically face the most decisions on a daily basis. Many of these decisions are relatively simple and routine, such as ordering production supplies, choosing the discount rate for an order, or deciding the annual raise of an employee. These routine types of decisions are known as programmed decisions, because the decision maker already knows what the solution and outcome will be. However, managers are also faced with decisions that can drastically affect the future outcomes of the business. These types of decisions are known as nonprogrammed decisions, because neither the appropriate solution nor the potential outcome is known. Examples of nonprogrammed decisions include merging with another company, creating a new product, or expanding production facilities.

Page 193

Decision making typically follows a six-step process:

Identify the problem or opportunity

Gather relevant information

Develop as many alternatives as possible

Evaluate alternatives to decide which is best

Decide on and implement the best alternative

Follow-up on the decision

In step 1, the decision maker must be sure he or she has an accurate grasp of the situation. The need to make a decision has occurred because there is a difference between the desired outcome and what is actually occurring. Before proceeding to step 2, it is important to pinpoint the actual cause of the situation, which may not always be obviously apparent.

In step 2, the decision maker gathers as much information as possible because having all the facts gives the decision maker a much better chance of making the appropriate decision. When an uninformed decision is made, the outcome is usually not very positive, so it is important to have all the facts before proceeding.

In step 3, the decision maker attempts to come up with as many alternatives as possible. A technique known as "brainstorming," whereby group members offer any and all ideas even if they sound totally ridiculous, is often used in this step.

In step 4, the alternatives are evaluated and the best one is selected. The process of evaluating the alternatives usually starts by narrowing the choices down to two or three and then...