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Managerial Decision Making and the Decision Process
If there is one quality that distinguishes a good manager from a poor one, it is decisiveness. A person in managerial position who is poor in decision making is fit to be called only an administrator and not a manager. For a professional manager, the decision making process normally involves the following stages:
1) Defining the problem /issues / situations / challenges which calls for a decision making
2) Collecting relevant facts, figures and statistics to facilitate and support the decision making process
3) Identifying the various alternatives of choice
4) seeking opinions and alternative viewpoints from "people who know" and "people who matter".
5) Pondering over the issues peacefully (where time permits) and
6) Deciding on the best choice or a couple of best courses of action.
Some times, decision making may just involve taking "yes" or "no" decision in which case, if the problem or issue is simple, there may not really be a need for any elaborate data collection or need for wider consultations.
However, at times where the issue is of serious nature, even making yes or no decision may involve all the elaborate stages listed above. Example: A company well established in the manufacture of automobile accessories discusses a proposal to diversify in to manufacture of computer hardware accessories. Opinion in the top management is divided - some want to stick only to the proven core business line and some are very enthusiastic to diversify. The Chief executive has to decide yes or no for diversification.
Where the decision making involves multiple choices, it may get more complicated. Let us take the same example and assume that the chief executive decides in favor of diversifying into manufacture of computer accessories. Now, he would be confronted with decision making on several issues. He has to start off with defining the problems.
1) Defining Problems / Issues
- whether to float a separate company for the purpose in a new name, at a new infrastructure or produce the new products in the existing set up
- whether to use the same company name / brand name (and to utilize the familiarity and reputation)
- whether to go for indigenous or imported technology
- whether to hire totally new managerial team or utilize some of the existing talent pool in the company for key administrative positions
- whether to locate the factory
2) Collecting Information
In our specific example, the manager has to have information (other than market potential, availability of funds and profitability related facts, which he should have already done while deciding prima facie in favor of diversification) covering
- Legal, Tax, statutory and other issues involved in the manufacture of new products from same company or from separate company
- Sources of technology, relative costs, relative reputation, benefits and limitations
- Effect of existing managerial structure and availability of second line of talent in case some of the existing senior executives are shifted to new product line - etc.
In collecting information, there has to be a some limit somewhere; one cannot definitely decide using inadequate and incorrect information. At the same time, one can not keep on accumulating information for the sake of greatest clarity and lose time in the bargain. Some calculated risks must be taken where complete data can not be collected accurately.
3) Identifying Alternative Choices
If the plant is located in place "X" will it get any Government subsidies or special tax benefits and consequently will it be better than locations "Y" or "Z" which are strategically more convenient?
*Will the collaborators "A" help getting export markets when compared to "B" who are more respectable in domestic market only?
4) Seeking Opinion
This is one of the most essential steps and at times a tough step too. Consultation with "people who know" will involve definitely ego clashes and conflicting opinions. Sometimes, involving "those who matter" may not be practical always. (For example, in the current stage of discussions, involving the executives who can be considered for manning the new product-line may create undue expectations and unhealthy rumors about shifts and promotions).
In our example, decision about using existing brand name or creating a new brand name will definitely be one needing more opinions and it can not be simply decided based on any facts and figures.
But a manager, by virtue of being a manager, may not be an expert in all the matters related to the decision making and hence consulting experts and knowledgeable persons, including those in the lower level of managerial pecking order, would be highly essential. "I know it all" attitude and bias on views of certain persons based purely on personal whims and fancies can seriously impede the decision making process.
5) Pondering Over the Facts, Figures And Opinions
For a good decision to emerge, a period of "judgment reserved" is essential. The manager must have the time to digest all that he collected, read and heard and allow them to sink into his sub-conscious mind before arriving at the decision. Certain emergency situations and pressure from higher echelons of management may deprive a manager of the time to ponder and it is an occupational hazard. But a reasonable time spent here will prove its worth in the long run.
6) Making Up The Mind
Once all the above stages are gone through, the manager must take his firm decision and keep every stake-holder clearly informed of the decisions taken. Once a decision is taken, except for minor adjustments, no wavering must be there subsequently.
Finally, Seek Co-operation
One important step a manager must take, in case of decision where there were strong conflicting opinions earlier, is to seek the co-operation of those persons who opposed the line of current decision. It has to be done in a very gentle and diplomatic manner and it will pave the right temperament to get ahead with the decision in a spirit of team work.
In the 2000 year-old Tamil Magnum Opus "Thirukkural", the saint-poet Thiruvalluvar says "Do all your thinking well before jumping into action; it would be foolhardy if you take a decision first and then opt to think later".