Q. What is Decision Making? Throw light on various techniques used for making decisions in organisations these days.
Ans. MEANING OF DECISION-MAKING: Decision-making is an important function of every manager. When a manager chooses the best alternative out of many available ones, it is called decision and the process that has been adopted in order to reach the final decision is known as the decision-making. In other words, Decision-making is a process and decision is the outcome of such a process.
Decision-making means analysing different alternatives and arriving at decision in the face of a particular situation about what to do and what not to do. In this way, decision-making means reaching a conclusion or final decision which can be implemented as a solution of a problem.
According to Koontz and O’Donnel, “Decision-making is the actual selection from among alternatives of a course of action.”
According to George R. Terry, “Decision-making is the selection based on some criteria from two or more possible alternatives.”
According to Louis A. Allen, “Decision-making is the work which a manager performs to arrive at conclusion and judgement.”
Thus, decision-making involves the selection of the best available alternative as a solution of some problem. It is thus clear that a decision is needed when there are many alternatives to do a work. In other words, if there is only one method of doing a work there is no need to take a decision and in that case that method in itself is a decision.
Decision-making Techniques: Following are the major techniques of decision-making:
1. Judgement Technique: This is the most ancient and simple technique of decision-making. According to this technique, the decisions are taken on the basis of past and present experience. This technique is the most useful for day-to-day small decisions but the use of this technique for taking important decisions is not free from risks.
2. Statistical Techniques: These days statistical technique is used as an important tool in taking important decisions. The various statistical techniques used in taking decisions are the following:
(i) Theory of Probability,
(ii) Sampling Analysis,
(iii) Correlation/Regression,
(iv) Time Series Analysis,
(v) Ratio Analysis,
(vi) Variance Analysis,
(vii) Statistical Quality Control, etc.
3. Operation Research Techniques: Apart from statistical techniques there are other modern techniques which are called Operations Research Techniques. They are used in very important decisions. Following are the Chief Operations Research Techniques:
(i) Linear Programming,
(ii) Game Theory,
(iii) Network Analysis,
(iv) Break-even Analysis,
(v) Waiting Line or Queuing Theory,
(vi) Cost-Benefit Analysis, etc.
4. Model Building Technique: This technique is employed in manufacturing concerns. Under this technique a model of an intended product is prepared and then it is estimated whether the product is according to the taste of the customers or not. Many models of a particular product are prepared and then the decision to produce a particular model which the approval of the taste of the customers is taken.
5. Behavioural Technique: The science of behaviour has also developed many techniques of decision-making. With the help of these techniques factors affecting a particular decision are evaluated. Group decisions are an important contribution of this science.
6. Principles of Management Technique: This technique lays down that while taking decision the principles of management should be kept in mind. In reality it can be observed that the principles of management are not a technique of decision-making, but prepare only an atmosphere for decision-making process.
7. Intuition Technique: Taking decision under this technique employs one’s intuitive feelings and knowledge. The decision maker thinks about a problem and his mind suggests the solution. Decisions by this technique are quick. The correctness of the decision depends on the experience, education, training, etc., of the decision-maker.
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