Decision making

Decision making
See also
Decision point Operational decision Risk evaluation Impact of information on decision-making Risk response plan Managerial controlling Rational decision making Importance of decision making Stages of project

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:

• 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

See also:

• Impact of information on decision-making
• Selection process in conditions of certainty and uncertainty
• Behavioral aspects of decision-making
• Conditions of decision-making

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