DECISION MAKING PROCESS A decision is defined as a formal judgment or resolving to carry out a particular course of action. ‘A decision is usually the result of choosing between uncertainties, often a decision is taken on the grounds of future projections and therefore is subject to uncertainties and risk. Managers have varying levels of responsibility according to their position in the organisation structure. At senior management level corporate planning decisions are made, while lower levels of management will be involved in operational decisions. The concept of making decisions within managers prescribed areas of responsibility is known as the law of principles of exception. The law states that each manager carries out the duties allocated to him and will make such decisions as are necessaty,which fall within his scope of authority. If decisions required lie outside his authority then they are referred to higher authority. Managers should concentrate fn matters requiring attention and not duplicate the efforts of others Strategic, administrative and operating decisions ‘The decision structure is subdivided into the following classes; i) Strategic, ii) Administrative iii) Operating decisions. Strategic decisions; These are concerned with problems raised by the environment in which the firm operates, possibif related to product range and market potential which will best achieve its { objectives. The decisions revolve around expansion, diversification or a combination of the two. Particular directions in product market development that the firm should seek, the timing of any development and the allocation of resources among alternatives are distinctly strategic decisions. Administrative decisions are concerned with the development of structuring of the firms resources to give effect to the strategic decisions. The administrative problems is therefore concerned with; \__ Resources acquisition and development of raw materials sources, personnel training and development, financing and the acquisitions of facilities and equipment. Pageliv) Operating decisions tend to be repetitive and are capable of being programmed. These are delegated toa large extent to lower management The application of operating decisions relate to a) Allocation of resources among functional areas and product in service lines. b) Scheduling of operations ¢) Supervisory of performance. The decision sequence The following frame work is generally adopted; a) Identify and specify the problem. b) Analyse the problem ¢) Appraise the available resources d) List and evaluate alternative solution e) Select optimum solution f) Draw up an action plan to implement the solution g) Carry out the decision required h) Review and reassess the planned benefits. This process is illustrated in chart D/O1. a) Defining the problem -it is necessary to examine carefully the definition and the buildup of the problem so that the pertinent causes of the problem are included A careful definition of the problem and examination of its causes often produce a definition of the solution. It should be noted that careful stating of the problem is crucial for the right solution. b) Analyzing the problem; - the next stage in the decision problem solution is classifying the problem, that is finding the details or facts about it. In classifying the problem consider; i) The futurity of the decision. Decisions with a long term effect should be taken by senior management and decisions with a short term effects should be taken by junior managers. The impact of the decision on other areas or functions of the business. _Whether the decision is “one- off” or unique or whether it is a decision involving a problem of a routine nature. Classifying a problem is another way of deciding which manager has formal authority to deal with it. It is also necessary to find out as many facts about the situation.¢) Appraise available resources; in this stage the manager seeks to check whether the resources available equate closely to the solution of the problem. The resources include; - Human resources —the number of personnel available and their skill, training and experience Financial- budget constraints capital expenditure limits, costs of burrowing, etc. = Technical and physical resources. alternative solutions; - there is rarely only one solution to d) Listing and evalu: the problem. The manager is required to frame compare and select between alternative solutions. Elicit information by regular questioning approach or using specialist investigative techniques. The staff should be closely involved in this . The manager should weigh the advantages and disadvantages of each exer course of action which best satisfies the objective. The manager should not consider alternatives as black and white, or, Y or Z, where there is a range of possible solutions between two extreme points. e) Selecting the optimum solution; there may be several different ways of solving the same problem and similarly there may be no satisfactory solution, but several alternatives which go some way towards dealing with the problem. The criteria for selecting the best alternative are; = Risk - each alternative will have an element of uncertainty or risk about what the actual consequences of the decision. High benefit-low risk decisions are more preferable to low-benefit , high risk decisions. Timing - the problem may demand an urgent solution or a long term approach to a solution. For example if a company is faced with liquidation due to low profits the solution could be a dramatic cost cutting exercise. On the other hand if the problem is gradual decline in business the decision might be in favour of a gradual development of new product and new markets. ‘A decision option must be feasible and must not demand the = Limitations of resources; exploitation of resources which the organisation does not have. available in assisting a manager in Quasi mathematical and related quantifying techniques ar‘ the choice between alternatives these include; Cost benefit analysis, Discounted cash flow, Simulation techniques Probability theory and risk analysis. costs and benefits and so assist the decision makers. f) Action plan effecting the new proposal These techniques attempt to quantify the alternative courses of action. They quantify the risk, PageAn action plan to implement the chosen decision should be drawn up. To convert a solution into action demands the cooperation and understanding of the entire organisation staff. 8) Monitoring results; Once a decision has been put into action, it is important to ensure that; i) The decision is implemented fully. ii) The problem has been solved in a manner and extent anticipated.