Process of decision making
1. Identification of Problem or Opportunity
First, recognize that there is a problem to solve or an opportunity to take advantage of.
Understanding the situation clearly is important to focus efforts correctly. A well-identified
problem leads to better decision-making. It sets the direction for the next steps.
2. Identification of Possible Alternatives
After defining the problem, different possible solutions or actions are listed. Creative thinking
and experience help to find more options. Having multiple alternatives increases the chances of
finding an effective solution. The goal is to not limit choices early.
3. Evaluation of Alternatives
Each alternative is analyzed carefully based on its advantages, disadvantages, risks, and
expected outcomes. Different tools like cost-benefit analysis can be used. This helps in
comparing which option is most practical and beneficial. It ensures better understanding before
making a choice.
4. Selection of the Best Alternative
The most suitable alternative is chosen after evaluation. It is the one that promises the best
results with minimum risk. The decision should match the organization’s goals and available
resources. Proper selection is crucial for success.
5. Implementation of the Chosen Alternative
The selected decision is put into action by creating a plan and allocating resources. Clear
communication and responsibility sharing are important here. Implementation turns plans into
real results. Proper execution is key to achieving the desired goal.
6. Follow-up and Evaluation of Results
After implementation, the results are monitored and reviewed. If the decision is not working well,
corrective steps are taken. Evaluation helps in learning and improving future decisions. It
ensures that the problem is truly solved or the opportunity is fully captured.
Approaches to Decision Making
1) Classical or Rational Approach
The Classical or Rational Approach to decision-making is the most traditional and ideal method.
It assumes that managers or decision-makers are completely rational — meaning they have the
ability to gather complete information, can objectively analyze all available alternatives, and
always make choices that lead to the maximum benefit for the organization or themselves.
It has following steps
a. Recognizing and defining the problem.
b. Identifying decision criteria (what factors are important?).
c. Allocating weights to criteria (which factors are more important?).
d. Developing all possible alternatives.
e. Evaluating each alternative systematically.
f. Choosing the best alternative that provides the greatest benefit.
2) Behavioural or Bounded Rationality Approach
This approach was introduced by Herbert A. Simon, who criticized the classical model for being
too idealistic. According to the Behavioural Approach, people are not fully rational because they
face limitations such as:
Limited availability of information
Limited time for decision-making
Limited cognitive (mental) capacity to process information
Thus, decision-makers operate under what is called bounded rationality.
(a) Bounded Rationality:
It means rationality is limited by the decision-maker’s capabilities and resources.
Instead of exploring all alternatives, they focus on a manageable number.
Decision-makers simplify complex problems, often by applying rules of thumb, experience, or
judgment.
(b) Satisficing Outcome:
In bounded rationality, decision-makers do not always aim to find the best solution.
Instead, they search until they find an alternative that is "good enough" to meet their minimum
criteria.
This process is called satisficing.
It saves time and effort but might not always result in the optimal decision.
Example:
Suppose a manager needs to hire a new employee quickly. Instead of interviewing hundreds of
candidates to find the absolute best one, he might hire the first applicant who meets the
necessary qualifications and seems suitable.
3) Intuitive Approach
The Intuitive Approach to decision-making is based on gut feeling, instinct, or experience rather
than formal analysis.
In this approach:
Decisions are made rapidly, without conscious logical reasoning.
Managers rely on their experience, emotions, and immediate understanding of the situation.
It is common in situations where:
Information is incomplete or unclear.
Time pressure is high.
Problems are unique or highly complex.
Key Points:
Intuition is subconscious learning — people "feel" what is right based on patterns they have
observed in the past.
It can be very effective when the decision-maker has lots of experience.
However, intuition can also lead to errors if it is based on wrong assumptions or limited
experiences.
Example:
A doctor quickly diagnosing a disease based on subtle symptoms without conducting a long
series of tests.
