Elements of Decision-Making
1. Concept of good decision
The first and most important element of the process of decision making is the perception of a decision. The decision should be sound and resulted oriented. The decision should be based on a careful analysis of facts and figure.
2. Environment of decision
The management should create a favourable environment in an organisation structure for good decisions. The decision environment can be divided into two part- internal and external. In internal environments the labour-management relations, organisational pattern, the delegation of authority, decentralization policy are some important factors.
3. Psychological elements
The decision making is a human process so it is but natural that the decision taken will be affected by the psychology of the decision maker. Some personal attributes affecting decisions are – intelligence, educational level, temperature, experience, knowledge, position, attitude etc.
4. Timing of decisions
All decisions should be taken as far as possible immediately and according to circumstances.
5. Communication of decisions
The decision should be communicated to the concerned parties as soon as they are finally taken. Communication must be clear, simple, easy and comprehensive.
6. Participation of employees
As far as possible, the employees should be given due participation in the process of decision-making. They should be motivated and educated for it.
Principles of Decision Making
The following are the important principles of decision making:
1. Marginal theory of decision making
This theory has been contributed by economists. Business organizations cannot survive if costs are consistently greater than revenues. As the main business of a business, is to earn reasonable profit, the management should always keep it in mind. This marginal theory is based on the law of decreasing return of production. As per this slaw, the additional units of inputs, the marginal contribution of each unit is at a decreasing rate. There comes a point when the marginal return is zero. This is a marginal point. A number of decisions in the area of production, sales, marketing and advertising etc. are taken by management as per this theory.
2. Mathematical theories
A large number of mathematical and quantitative techniques have been developed in the area of decision-making. Some tools of Operations Research have revolutionized in the process of decision-making. The linear programming, venture analysis, game theory, queuing theory and probability theory are some examples of the widely used Operation Research techniques. Though these techniques provide a good deal of analysis but the rational and emotional aspect of decision-making cannot be overlooked. The attitude and wisdom of the decision-maker will always have a main role in the process of decision-making.
3. Psychological theories
According to this concept there are certain psychological concepts too affecting the quality of decision like personality of decision-makers, their education, experience, ambition and level of satisfaction etc.
4. Principle of exceptions
This principle also applies to the decision-making process. This principle dictates that any non-recurring or unusual nature should be reported to the senior managers. It helps the tier executives and top managers to make decisions.