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.