Managerial decision making is
one of the principal concepts of modern practical management. Effective decision
making has a great impact on organizational performance, and there is a great
deal of historical episodes, when brilliant strategic managerial decisions
helped known successful organizations to survive and avoid bankruptcy. Some
management theorists treat the model of decision making as an act of choosing
the most attractive solution or decision from a number of alternatives.
However, decision making must be understood as a complex step-by-step process,
a course of actions which leads to making an effective decision and solving a
managerial problem.
Step one, Identification of a
problem. This stage includes analyzing the situation and recognition of a
discrepancy or a problem, which is considered to be an obstacle on the way to
achieving a certain organizational goal or objective. This stage is a key point
of the whole process, because if the problem is not identified correctly, then
the final decision will be erroneous. In order to analyze the situation
more effectively, it is very important to collect all available facts and data.
Also, on this stage of a decision-making process managers have to avoid
subjectivity and evaluate the situation from short-term and long-term
perspectives, as well as be sure that the problem was not simplified and all
hidden aspects of it were clarified.
Step two, Identification of
decision criteria. The next stage of the process means finding an answer to the
question, what criteria must be taken into account when choosing alternatives
and making the final decision. In other words, managers must identify the
factors, which are relevant to possible problem solution and must be considered
when developing the alternatives. For example, if a decision must be made about
buying a car for the company’s needs, such decision criteria as the model of
the car, reputation of the manufacturer, price and payment options, gas
consumption, accessories and extra items, safety system of the vehicle, and
other related criteria should be taken into consideration.
Step three, Allocation of
weight of criteria. When a list of decision criteria is created, the next step
of a decision-making process is evaluation of the importance of every single
criterion for final decision. Undoubtedly, some criterion are of more
importance (for our particular example those can be price and manufacturer of
the vehicle), and some are of less importance (for example, color of the car or
its interior design). It is recommended to evaluate the weight of every
criterion by giving the highest mark to the most important one, the lowest mark
to the least important one, and ranking the rest of the criteria according to
their importance for the final decision.
Step four, Development of
alternatives. This stage is connected with cultivation and development of
various solutions, actions or alternatives for resolving the problem and
achieving certain organizational goals. On this stage, it is important to
develop as many alternatives or ideas as possible. Sometimes it can be helpful
to involve experts or other group members into the process of idea cultivation
and use known effective creativity techniques, such as brainstorming, etc. At
that, all impractical and unrealistic ideas should be ignored and only
feasible, rational and effective alternatives must be considered.
Step five, Analysis of alternatives.
After all alternatives have been developed, it is necessary to analyze and
evaluate every one of them. Managers have to choose a logical approach to
evaluating the alternatives and use some effective evaluation techniques,
including SWOT Analysis (considering strengths, weaknesses, opportunities and
threats related to every alternative) or a Decision Matrix (the assessment of
every alternative taking into account its rank on the basis of every chosen
criteria). These evaluation techniques can be of a great assistance for
managers in making mathematically correct assessment, receiving an objective
picture of the situation and considering all relevant data. In some situations,
it can be also necessary to evaluate the risks connected with every alternative
and possible outcomes of every alternative.
Vocab
:
1) Bankruptcy :
Kepailitan 7) Erroneous : Keliru
2) Decision :
Keputusan 8)
Cultivation : Budidaya
3) Includes :
Termasuk 9)
Brainstorming :
Dalam tukar pikiran
4) Discrepancy : Ketidakcocokkan 10)
Feasible : Layak
5) Recognition : Pengakuan 11) Assessment :
Penilaian
6) Obstacle :
Hambatan
7) Criterion :
Kriteria
8) Resolving :
Menyelesaikan
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