Decision making

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Decision making
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Methods and techniques

Decision making is procedure of management process taking into account multiple economic, social and psychological considerations. Decision-making can be considered in two senses. In a broad sense it is a complex process, consisting of: registration and evaluation of information, identification of the decision-making problem and application of adopted criteria, the determination and issuing a decision and gathering information about its execution. In the second, the strict sense, decision is only one of the stages of the decision-making process during which the decision maker will knowingly make a non-random choice of one act, from a set of possible variants of solutions to the problem (these variants, of course, must be previously identified or designed).

Stages of the decision-making process

The decision-making process consists of the following stages:

  • Examine the situation: defining the problem, identifying the purpose of the decision - diagnosis of the causes of the problems
  • Development of alternative solutions: generating options, assessment and evaluation, heuristic methods: brainstorming, scenarios,...
  • Selecting of option: evaluation of the options, the choice of the optimal solution.
  • Implementation of decision: identification of resources needed, monitoring during the implementation, measuring results

Each of these steps requires to meet specific information needs, and a continuous flow of appropriate information is possible only with smoothly running IT system.

Methods and techniques used in decision making

  • mathematical models (linear programming, queuing, simulation games), they often require IT support, artificial intelligence,
  • problems of inventory, queuing, routing,
  • network methods: PERT, CPM,
  • forecasting methods: extrapolation of trends, causal models, econometrics, statistics, etc.

Classification of decisions

Classification of decision constitutes an essential element of decision-making. Classification decision is extremely difficult due to their large quantity and diversity.

We can distinguish the following main types of decisions:

  • strategic decisions
  • tactical decisions
  • operational decisions

Due to the structure and repeatability of the decision there are:

  • programmed decisions - have a complete structure or are repeated at certain intervals.
  • not programmed decisions - they have not a very clear structure, taken much less often than the programmed decisions

According to the criterion of decision-making problems decisions are divided into:

  • decisions initiated by the parent company
  • decisions initiated by the manager
  • decisions initiated by subordinates

Decisions classified according to the causes of problems:

  • regulatory decisions
  • control decisions
  • innovative decisions

Due to the amount of information and the conditions under which we make decisions we distinguish:

  • decisions taken under conditions of certainty
  • decisions taken under the risk
  • decisions taken under uncertainty

In accordance with the criterion of quantification the decisions is divided into:

  • quantifiable decisions
  • decisions difficult or impossible to quantify

According to choice of variants we can distinguish:

Due to participation in decision-making they can be divided into decisions on:

  • individual decisions, taken by one person
  • individual decisions with collective diagnosis
  • collective decisions

Taking into account the management function we can distinguish:

  • planning decisions
  • organizer's decisions
  • coordination decisions
  • directing decisions
  • control decisions

See also:

References

  • Bellman, R. E., & Zadeh, L. A. (1970). Decision-making in a fuzzy environment. Management science, 17(4), B-141.
  • Janis, I. L., & Mann, L. (1977). Decision making: A psychological analysis of conflict, choice, and commitment. Free Press.
  • Newell, A., & Simon, H. A. (1972). Human problem solving (Vol. 104, No. 9). Englewood Cliffs, NJ: Prentice-Hall.
  • Plous, S. (1993). The psychology of judgment and decision making. Mcgraw-Hill Book Company.
  • Simon, H. A. (1978). Information-processing theory of human problem solving. Handbook of learning and cognitive processes, 5, 271-295.
  • Wozniak K., Management information system as an instrument of strategic management in the company, PhD Thesis, Cracow University of Economics, Cracow 2005

Author: Krzysztof Wozniak