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
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:
- closed decisions
- open decisions (research and development issues)
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
- Impact of information on decision-making
- Selection process in conditions of certainty and uncertainty
- Behavioral aspects of decision-making
- Conditions of decision-making
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- 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