All managers and workers/employees in organizations make decisions nor make choices that affect their jobs and the organization they work for. This lesson’s focus is on how they make decisions by going through the eight steps of the decision-making process suggested by Robbins and Coulter (2009).
Types of Decisions
A decision is a choice among possible alternative actions. Like planning, decision-making is a challenge and requires careful consideration for both types of decisions, namely:
Structured or programmed decision – a decision that is repetitive and can be handled by using a routine approach.
Such repetitive decision applies to resolving structured problems which are straightforward, familiar, and easily defined. For example, a restaurant customer complains about the dirty utensils the waiter has given him. This is not an unusual situation, and, therefore, standardized solutions to such a problem may be readily available.
Unstructured or nonprogrammed decisions – applied to the resolution of problems that are new or unusual, and for which information is incomplete.
Such nonprogrammed decisions are described to be unique, non-recurring and need custom-made decisions. For example, a hotel manager is asked to make a decision regarding the building of a new hotel branch in another city to meet the demands of businessmen there. This is an unstructured problem and, therefore, needs unstructured or nonprogrammed decisions to resolve it.
Types of Decision-making Conditions
Conditions, under which decisions are made, also vary. These are:
Certainty conditions – ideal conditions in deciding problems; these are situations in which a manager can make precise decisions because the results of all alternatives are known.
For example, bank interests are made known to clients so it is easier for business managers to decide on the problem of where to deposit their company’s funds. The bank which offers the highest interest rate, therefore, is the obvious choice of the manager when asked to make a decision.
Risk or uncertainty conditions – a more common condition in deciding problems. Risk or uncertainty conditions compel the decision-maker to do estimates regarding the possible occurrence of certain outcomes that may affect his or her chosen solution to a problem. Historical data from his or her own experiences and other secondary information may be used as bases for decisions to be made by the decision maker under such risk conditions. For example, a manager is asked to invest some of their company funds in the money market offered by a financial institution. Risk factors must be considered, because of the uncertainty conditions involved, before making a decision—whether to invest or not in the said money market.
The Decision-making Process according to Robbins and Coulter
- Step 1: Identify the Problem. The problem may be defined as a puzzling circumstance or a discrepancy between an existing and a desired condition.
- Step 2: Identify the Decision Criteria. These are important or relevant to resolving the identified problem.
- Step 3: Allocate Weights to the Criteria. This is done in order to give the decision-maker the correct priority in making the decision.
- Step 4: Develop Alternatives. This step requires the decision-maker to list down possible alternatives that could help resolve the identified problem.
- Step 5: Analyze the Alternatives. Alternatives must be carefully evaluated by the decision-maker using the criteria identified in Step 2.
- Step 6: Select an Alternative. This is the process of choosing the best alternative or the one which has the highest total points in Step 5.
- Step 7: Implement the Chosen Alternative. This step puts the decision into action. Changes in the environment must be observed and assessed, especially in cases of long-term decisions, to see if the chosen alternative is still the best one.
- Step 8: Evaluate Decision Effectiveness. This is the last step and involves the evaluation of the outcome or result of the decision to see if the problem was resolved. If the problem still exists, the manager has to assess what went wrong and, if needed, repeat a step or the whole process.