Decision-making process is a six step process. The stages can be summarized as: (1) identifying and diagnosing the problem, (2) generating alternative solutions, (3) evaluating alternatives, (4) choosing the best alternative, (5) implementing the decisions, and (6) evaluating the results.
Identifying and diagnosing the problem
The first stage of decision-making is identifying and diagnosing a problem or opportunity. An opportunity is a special type of problem that required committing resources in order to improve company performance. A problem occurs when performance is below expected or desired levels of performance. Typical problems include:
A high level of employee turnover.
A reduction in firm profits.
Unacceptable levels of “shrinkage: in store (employee theft). •
Low quality finished goods.
An increase in workplace injuries.
The invention of a new technology that would increase the productivity of the workforce.
Once a problem has been recognized, the decision maker begins to look for causes of the problem. This requires gathering information, exploring possible causes, eliminating as many causes as possible, then focusing on the most probable cause, for example, A manager who observes a high level of employee turnover first gathers information to diagnose the problem and then attempts to understand why the turnover is occurring. Some positive causes of turnover are job dissatisfaction with unchallenging and repetitive work, below market pay rates, job stress, opportunities for better jobs in the labor market, and conflicts between work and family obligations. It is important to fully diagnose the problem before attempting to solve it. If the real manager assumes that it was caused by inadequate compensation and raised employee pay as a solution, the manager may not have solved the problem.
Generating alternative solutions
The second step is to generate possible solutions to the problem based on the perceived causes. Some problems can be solved using programmed solutions, when there are ready-made answers. Novel situations require non-programmed decisions because there are no policies or procedures available to provide direction.
In the case of non-programmed decision making, it is important to come up with creative alternative solutions and to suspend judgment of their worth until all possible alternatives have been developed. If solutions are evaluated too soon during the second stage of decision making, creativity can be stifled, resulting in lower-quality solutions. Many companies use groups to generate solutions for non-programmed decisions because they provide a greater diversely of opinions and more innovative solutions than do people working individually. Consequently, group decision-making is often used to develop continuous improvements in customer services to generate novel solutions to customer needs.
The third stage required the decision maker to examine the alternative solutions using a set of decision criteria. The decision criteria should be related to the performance goals of the organization and its subunits and can include costs, profits, timeliness, whether the decision will work, and fairness. A practical way to apply decision criteria is to consider quality and acceptance. Decision quality is based on such facts as costs, revenues, and product design specifications. For example, a technical engineering problem can be solved by gathering data and using mathematical techniques. Decision acceptance is based on people’s feelings. Decision acceptance happens when people who are affected by a decision agree with what is to be done. Decision can be classified by how important quality and acceptance are to their effectiveness. Some technical decisions require a high degree of quality but low acceptance, since people may be indifferent to the outcome. Buying raw materials at the best price is an example of a...
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