Importance of decision making

In management importance of decision making results from:

• necessity to choose best possible action from several alternatives
• optimal selection of resources needed to perform critical operations, achieve goals and produce results
• importance of proper motivation of employees in achieving strategic and tactical goals
• decision making is the final act of leadership
• planning and coordination functions of management
• analysing information from inside and outside
• need to innovate and grow

There are two possible ways to find out about anything. First of all, we can examine it in terms of its various properties and draw conclusions from these observations. The second possible way is to examine and compare this entity with other such entities. The use of judgments has been considered a practice with doubts, as being objective is the norm. However, even if numbers are objective, their interpretation is always subjective. If intangible assets are involved, the greatest possible credibility of judgements should be ensured (Saaty, 2008).

Most choices involve alternatives that have advantages and disadvantages. Much depends on how people judge compromises between conflicting goals. The attributes of alternatives are not always seen as the same for decisions, which leads to many questions about how to use the relative importance of information to characterise decisions that they and other people make. Global interpretations of relative importance consider this to be a permanent attitude of the decision-maker, which does not depend on specific factors, unless these factors disrupt the person's assumptions. On the other hand, local interpretations of relative importance make it an assessment, like the preference itself, which depends on personal characteristics and stimuli (Goldstein, 1990).

The analytic hierarchy process

In order to make decisions to generate priorities in a structured way, we need to spread this decision over several steps (Saaty, 2008):

1. Identify the problem and the type of knowledge sought.
2. The decisions should be ordered hierarchically. From the top of the objective of the decision, then the objectives from the perspective, through intermediate levels - the criteria on which the next elements depend - up to the lowest level, i. e. most often a set of alternatives.
3. Construct the set in pairs of comparison. Each element from the top level is used to compare elements at the lower direct level with respect to it.
4. Use the most important criteria derived from comparisons. Do it for each element. Then for each element at a lower level, add its values and get an overall or global priority. This process should be continued until the priorities of the solutions are reached.

Importance of decision making — recommended articles

Decision making — Rational decision making — Formalization — Decision table — Management styles — Selection process in conditions of certainty and uncertainty — Centralized organizational structure — Impact of information on decision-making — Sensitivity analysis

References

• Ferrell, O. C., & Gresham, L. G. (1985). A contingency framework for understanding ethical decision making in marketing. The Journal of Marketing, 87-96.
• Heisler M., Bouknight R. R., Hayward R. A., Smith D. M., Kerr E. A. (2002) The relative importance of physician communication, Participtory decision making and patient understanding in diabetes self-management. JGIM, 243-252.
• Saaty T.L. (2008) Decision making with the analytic hierarchy process Int. J. Services Sciences, Vol. 1, No. 1, 83-98.

Author: Karina Obiegła