Importance of Managerial Decision Making

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Decision making in response to opportunities occurs when managers search for ways to improve organizational performance to benefit customers, employees, & other stakeholder groups. Decision making in response to threats occur when events inside or outside the organization are adversely affecting organizational performance & managers are searching for ways to increase performance. Managers always want to improve the decisions making for organizational performance.

There are four decisional making styles. These styles will vary according to the nature of the problem & the decisions need to be made.

- Directive style

- Analytical style

- Conceptual style

- Behavioral style

Directive style:- Means that the group leader solves the problem using the information. Does not consult with anyone else nor seek information in any form. Managers will make decisions with very little information & very quickly.

Analytical style:- Refers to when the manager does not possess sufficient information to make an effective decision; they will need to obtain information or skill from others. They may not tell what the problem is, they simply ask for information. Then the manager evaluates the information & make the decisions.

Conceptual style:- The leader explains the situation to the group or individuals with relevant information, & together they generate & evaluate many possible solutions. These decisions will be more creative & expensive.

Behavioral style:-Managers explain the situation to the group or individuals & provide the relevant information. Also these managers have a high concern for the people who are getting affected by the decisions & they would select the alternative that is best for people who are getting affected.

2.1 Importance of managerial decision making.

1. Implementation of managerial function: Without decision making different managerial function such as planning, organizing, directing, controlling, staffing can’t be conducted Therefore, we can say that decision is important element to implement the managerial function.

2. Quality of decision making: the decision is made in all managerial activities and in all functions of the organization. It must be taken by all staff. Without decision making any kinds of function is not possible.

3. Evaluation of managerial performance: Decisions can evaluate managerial performance. When decision is correct it is understood that the manager is qualified, able and efficient. When the decision is wrong, it is understood that the manager is disqualified. So decision making evaluate the managerial performance.

4. Helpful in planning and policies: Any policy or plan is established through decision making. Without decision making no plans and policies are performed. In the process of making plans, appropriate decisions must be made from so many alternatives. Therefore decision making is an important process which is helpful in planning.

5. Selecting the best alternatives: Decision making is the process of selecting the best alternatives. It is necessary in every organization because there are many alternatives. So decision makers evaluate various advantages and disadvantages of every alternative and select the best alternative.

6. Successful operation of business: Every individual, departments and organization make the decisions. In this competitive world organization can exist when the correct and appropriate decisions are made. Therefore correct decisions help in successful operation of business.

2.2 Type of decisions

“Decision making is the process of identifying problems & opportunities & then resolving them” (Howard, 1998). There are 2 types of decision making. Programmed & non-programmed.

“Programmed decisions involve situations that have occurred often enough to enable decision rules to be developed & applied in the future” (Simon,1997) Programmed decisions are made in response to recurring organizational problems. If the particular problem occurs repeatedly the managers have to create a routine procedure for handling the situation. Once managers formulate decisions employees & others can make decisions, freeing managers for other tasks. Most organizations face these kind of situations in their daily activities. “Such decisions should be made without expanding unnecessary time & effort”. (Ivancevich Donnelly Gibson, 2005) In many entities decisions are handled using policies. In some they have created mathematical models that help decision making.

“Non programmed decisions are made in response to situations that are unique, poorly defined & largely unstructured, & have important consequences for the organization.”(Danny Samson & Richard L Dafrt, 2012) Many non programmed decisions involves strategic planning because uncertainty is great & decisions are complex. Non programmed decisions are expensive since new strategies should be implemented for each problem. Usually private organizations make these decisions when they innovates new products & government makes these decisions that influence the lives of every citizen in the country. These decisions are usually handled by general problem solving processes, judgment, intuition & creativity.

2.3 Steps in the decision making process

There are 6 steps in the process of decision making. “ Using the work of March & Simons as a basis, researchers have developed a step-by-step model of the decision making process & the issues & problems that managers confront at each step.”(Gareth R Jones, 2003) The 6 steps are,

- Recognize the decision requirement

- Diagnosis & analysis of the cause

- Development of alternatives to solve the problem

- Select the most suitable alternative

- Implement the selected alternative

- Feedback & evaluation

- Recognize the decision requirement:- The first step of the decision making process is to recognize the need for a decision. The manager has to identify whether the problem is an opportunity or threat. A problem occurs when the company won’t be able to achieve its stated goals. An opportunity occurs when the company achieves its