TOPIC: DECISION MAKING IN BUSINESS
• KEN-ALBERT ORWA - 069265
• BRENDA MWENDWA MURURU-070997
• FAITH KANJA-068730
• SYLVIA NDUATI-071688
• SAMUEL GITHAIGA-069347
• ROBERT GICHUHI-070903
• JAMES MAINA-070880
DECISION MAKING PROCESS IN BUSINESS
Decision Making refers to a conscious, intellectual activity involving judgment, evaluation and selection from among several alternatives. From this definition, we can derive the nature of decisions as being: • A result of a conscious effort on the part of the decision makers to arrive at a conclusion i.e. they are not mere reflexes, reactions, or habits. • That which entails the selection of an alternative from a group of alternatives. In order to understand the characteristics of managerial decisions, we first need to understand the types of decisions within a business. In C.S. Deverell’s Management Planning and control, one way of categorizing decisions is as follows: a) Risk-Taking decisions- deal with policy and capital expenditure therefore they very much concern the top management. b) Problem-solving decisions- deal with the implementation of policies and falls to the lot of other levels of management. Professor William Dill of the University of Chicago classified decisions as: a) Agenda Decisions- concerned with the identification of problems, selection of those to be tackled and the assignment of an order of priority in doing so. b) Search Decisions- apply to the selection of procedures for finding solutions to problems, and govern the approved limits of funds, time and staff committed to such searches. c) Allocation Decisions- concerned with the commitment of resources to lines of actions or problem solving. d) Evaluation Decisions- setting up methods and procedures of assessment against predetermined goals and standards and exploiting ideas for modification, innovations and new agenda decisions. Alex Simon (The New Science of Management Decision) categorizes decisions as: a) Non-programmed Decisions- they are concerned with basic goals and objectives. b) Partly programmed Decisions- for example, setting of sub-goals, use of man-power, materials and equipment, and evaluation of performance. c) Highly Programmed Decisions- work decisions concerned with selling, purchasing, transport and storing in situations where policies, standards and procedures give clear directions. However, Programmed decisions can be described as those encountered and made before, having objectively correct answers, and solvable by using simple rules, policies or numerical computations. Non-programmed decisions on the other hand can be said to be those that are new, novel, complex and having no proven answers. In light with this, the following can be said to be the four main characteristics of managerial decisions.
CHARACTERISTICS OF MANAGERIAL DECISIONS
1. Lack of Structure
This is especially for non-programmed decisions
2. Uncertainty and Risks
We live in an environment where we are never sure about tomorrow. The danger is that uncertainty can lead to paralysis.
Management spends so much time trying to nail down all possibilities and risks; they never get around taking action. 3. Conflict
It exists when the manager must consider opposing pressures from different sources. It occurs at two levels:
i. Psychological conflict-when several options are attractive or when none is. ii. Interpersonal conflict.
Other Characteristics of Managerial Decisions
a) Long-range organizational objectives.
b) Best choice from among a set of alternatives.
c) Decision involves organizational change.
d) Decision requires a commitment of resources.
e) Choice is a means to an end not an end to itself.
f) Decision makers tend to overestimate...