FOM

Unit IV
● Management Planning and Decision Making - Concept of planning,
objectives, Nature, Types of plan, Stages involved in planning,
Characteristics of a good plan, Importance, Limitations of planning, Making
planning effective, Strategic planning in Indian Industry.
● Concept of Decision making, characteristics of decisions, Types of
decisions, Steps Involved in decision making, Importance of decision
making, Methods of decision making, Committee Decision Making.
Planning
Definition: Planning is the fundamental management function, which involves
deciding beforehand, what is to be done, when it is to be done, how it is to be
done and who is going to do it. It is an intellectual process which lays down an
organization’s objectives and develops various courses of action, by which the
organization can achieve those objectives. It chalks out exactly how to attain a
specific goal.

Planning is nothing but thinking before the action takes place. It helps us to
take a peep into the future and decide in advance the way to deal with the
situations, which we are going to encounter in future. It involves logical
thinking and rational decision making.

Objectives of Planning:

The objectives of planning are many and varied. These aims are not
the same for all countries, not are they same for the same country at
all times.

Some major objectives of planning are:

Planning is important because it enables the organization to service and grow in the
dynamic, changing environment. It is important to plan because of the following reasons:

1. Achievement of organizational objectives:Planning helps the organization to achieve its

objectives. Planning provides the path for achievement of organizational goals with minimum

waste of time, money and energy. It bridges the gap between where we are and where we

want to go.

2. Fulfillment of organizational commitments:Organizations have long-term and short- term

commitments towards society, depending on their nature. A defense organization, for

example, has long-term commitments while a retailer is more interested in short term goals

or responsibilities. These commitments or goals of the organization can be fulfilled through

planning.

3. It facilitates decision making:Managers have to make decisions like: what to produce and

how to produce. What are the organizational resources and how can they be effectively

allocated over different functional areas. What are their primary goals- profit or social

responsibility and many more? Planning helps to decide a course of action that will clove the

specific problem.

4. It provides stability to organization: Organizations that plan their operations ate more stable

than others. Managers foresee risk and prepare their organizations to face them when they

occur.

5.Overall view of the organization/Coordination: Organization is a structure of relationships

where each person’s authority and responsibility is clearly defined. Planning coordinates the

functions performed by individual human beings and departments and unifies them into a

single goal-the organizational goal. It unifies inter- departmental activates so that all

departments work according to plans.

6. Optimum utilization of resources/efficiency of operations: Organizations work with limited

resources. Planning allocates these resources over different objectives and functional areas

(production, personnel.finance and marketing) in the order of priority. This results in

optimum utilization of scarce organizational resources (men, material, and money etc. ) and

effective conversion into productive outputs.

7. Development of managers:Planning involves imagination, thought and creativity by

managers. While planning, managers develop their conceptual and analytical skills to

coordinate organizational activities with the external environment.

8. Promotes innovation/creativity:Planning involves forecasting. Managers foresee the future.

analyze the strengths of their competitors and think of new and innovative ways of promoting

their products. Planning promotes new ideas, new products, new relationships and thus,

promotes innovation and creativity.

9. Basis for control:Planning frames standards of performance and control ensures

achievement of standards. Controlling involves measurement of actual performance, its

comparisons to make better plans for the future. Unless there are plans, there will be no

control. Planning is, thus, the basis for control.

10. Reduction of risk:Risk is a situation where moderately reliable information is available

about the future but it is incomplete. Uncertainty, on the other hand, is a situation where no

information is available about the future. Changes in government’s policies are a situation of

uncertainty while entry of competitors in the market with better technology represents a

situation of risk. Planning helps to reduce risk through techniques of forecasting.

11. Morale boost up:If organizational plans succeed and goals are achieved, managers and

employees feel satisfied and morally boost up to further concentrate on organizational

activities. Successful planning, thus, promotes success of the organization.

Nature of Planning

The nature of planning can be understood by examining its four major

aspects. They are;
 1. It is a contribution to objectives,
2. It is primacy among the manager’s tasks.
3. It is pervasiveness, and
4. The efficiency of resulting plans.

4 Types of Plan

There are main 4 types of plan;

4 Hierarchical Plans:
These plans are drawn at three major hierarchical levels, namely,
the institutional, the managerial and the technical core. The
plans for these three levels are;

○ Strategic plan.
○ Administrative or Intermediate plan.
○ Operational plans can also be categorized according to
frequency or repetitiveness of use.

2. Standing Plans:
Standing plans are drawn to cover issues that managers face repeatedly.
Such a standing plan may be called a standard operating procedure (SOP).
Generally, five types of standing plans are used;

○ Mission or purpose
○ Strategy
○ Policies
○ Rules
○ Procedures
 3. Single-use Plans:
Single-use plans are prepared for single or unique situations or
problems and are normally discarded or replaced after one use.
Generally, four types of single-use plans are used. These are;

○ Objectives or Goals
○ Programs
○ Projects
○ Budgets

4. Contingency Plans:
Contingency plans are made to deal with situations that might crop up if
these assumptions turn out to be wrong. Thus contingency planning is
the development of alternative courses of action to be taken if events
disrupt a planned course of action.

Stages involved in Planning -

The planning function of management is one of the most crucial ones.

It involves setting the goals of the company and then managing the
resources to achieve such goals. As you can imagine it is a systematic
process involving eight well thought out steps. Let us take a look at
the planning process.

1] Recognizing Need for Action

An important part of the planning process is to be aware of the

business opportunities in the firm’s external environment as well as
within the firm. Once such opportunities get recognized the managers
can recognize the actions that need to be taken to realize them. A
realistic look must be taken at the prospect of these new opportunities
and SWOT analysis should be done.Say for example the government
plans on promoting cottage industries in semi-urban areas. A firm can
look to explore this opportunity.

2] Setting Objectives

This is the second and perhaps the most important step of the planning
process. Here we establish the objectives for the whole organization
and also individual departments. Organizational objectives provide a
general direction, objectives of departments will be more planned and
detailed.

Objectives can be long term and short term as well. They indicate the
end result the company wishes to achieve. So objectives will percolate
down from the managers and will also guide and push the employees
in the correct direction.

3] Developing Premises

Planning is always done keeping the future in mind, however, the

future is always uncertain. So in the function of management certain
assumptions will have to be made. These assumptions are the
premises. Such assumptions are made in the form of forecasts,
existing plans, past policies, etc.

These planning premises are also of two types – internal and external.
External assumptions deal with factors such as political environment,
social environment, the advancement of technology, competition,
government policies, etc. Internal assumptions deal with policies,
availability of resources, quality of management, etc.

These assumptions being made should be uniform across the

organization. All managers should be aware of these premises and
should agree with them.

4] Identifying Alternatives

The fourth step of the planning process is to identify the alternatives

available to the managers. There is no one way to achieve the
objectives of the firm, there are a multitude of choices. All of these
alternative courses should be identified. There must be options
available to the manager.

Maybe he chooses an innovative alternative hoping for more efficient

results. If he does not want to experiment he will stick to the more
routine course of action. The problem with this step is not finding the
alternatives but narrowing them down to a reasonable amount of
choices so all of them can be thoroughly evaluated.

5] Examining Alternate Course of Action

The next step of the planning process is to evaluate and closely

examine each of the alternative plans. Every option will go through an
examination where all their pros and cons will be weighed. The
alternative plans need to be evaluated in light of the organizational
objectives.

For example, if it is a financial plan. Then in that case its risk-return

evaluation will be done. Detailed calculation and analysis are done to
ensure that the plan is capable of achieving the objectives in the best
and most efficient manner possible.

6] Selecting the Alternative

Finally, we reach the decision making stage of the planning process.

Now the best and most feasible plan will be chosen to be
implemented. The ideal plan is the most profitable one with the least
amount of negative consequences and is also adaptable to dynamic
situations.

The choice is obviously based on scientific analysis and mathematical

equations. But a manager's intuition and experience should also play a
big part in this decision. Sometimes a few different aspects of
different plans are combined to come up with the one ideal plan.

7] Formulating Supporting Plan

Once you have chosen the plan to be implemented, managers will

have to come up with one or more supporting plans. These secondary
plans help with the implementation of the main plan. For example
plans to hire more people, train personnel, expand the office etc are
supporting plans for the main plan of launching a new product. So all
these secondary plans are in fact part of the main plan.

8] Implementation of the Plan

And finally, we come to the last step of the planning process,

implementation of the plan. This is when all the other functions of
management come into play and the plan is put into action to achieve
the objectives of the organization. The tools required for such
implementation involve the types of plans- procedures, policies,
budgets, rules, standards etc.

What are the characteristics of

a good plan?
The managers are involved in the process of planning with a view to achieve the goals of
the organization. A plan can be considered as a good plan if it is capable of helping the
managers in achieving the organizational goals. Therefore, there are certain
characteristics that should be a part of any good plan:

1. Clear objective: the first requirement of a good plan is that it should be based on the
objectives that have been clearly defined. As mentioned above, the process of planning is
used for achieving the goals of the organization. But if these goals have not been defined
clearly, it may result in chaos and confusion. Therefore it is very important that the
organizational objectives should be defined clearly and they should be accurate, concise
and definite.

2. Proper understanding: A plan can only be implemented effectively if the persons who
have the responsibility of executing the plan have a proper understanding of the plan.
On the other hand if these persons are not capable of following the plan properly or if
they do not really understand the ways in which the plan has to be undertaken, it is very
difficult for these programs to effectively implement the plan. Therefore, it is very
important that the plan should be conveyed to all the persons properly and at the same
time, clarifications should also be given if needed. Therefore, another characteristic of a
good plan is that it should be properly understood by all the persons who have the
responsibility to implement such a plan.

3. Comprehensive: another characteristic of a good plan is that it should be able to cover

all the aspects of the business so that the objectives can be achieved properly. The
different parts of the plan should fit together and the purpose as well as the timing of the
plan should be arranged in such a way so that the necessary coordination can be
achieved.
4. Flexibility: a good plan is also required to be flexible so that it can deal with any
changes that may arise in the future. It is not possible to predict the future with accuracy
and therefore there are always chances that such changes may take place in future that
may have an influence on the effectiveness of the plan. Therefore, a flexible plan is
capable of dealing with these changes and makes adjustments accordingly. It is very
important that the plan is broad enough to accommodate any changes that may arise in
the future without compromising the main objectives of the plan. Therefore the
managers should never consider a plan as rigid. They should always be ready to make
the changes that may be required as a result of the change in situation.

5. Economical: Another characteristic of a good plan is that it should be economical and

the cost that has been incurred by the organization in making and executing the plan
needs to be considered for this purpose. It is very important that a good plan is as
economical as possible, keeping in view the resources that are available with the
organization.

Importance of Planning
Following are the various importance of a sound planning:
1. Planning provides direction: Planning is involved in deciding the
future course of action. Fixing goals and objectives is the priority of any
organization. By stating the objective in advance, planning provides
unity of direction. Proper planning makes goals clear and specific. It
helps the manager to focus on the purpose for which various activities
are to be undertaken. It means planning reduces aimless activity and
makes actions more meaningful.
2. Planning reduces the risk of uncertainty: Every business enterprise
has to operate in an uncertain environment. Planning helps a firm to
survive in this uncertain environment by eliminating unnecessary action.
It also helps to anticipate the future, and prepare for the risk by making
necessary provisions.
3. Planning reduces overlapping and wasteful activity: Plans are
formulated after keeping in mind the objective of the organization. An
 effective plan integrates the activity of all the departments. In this way,
planning reduces overlapping and wasteful activities.
4. Planning promotes creativity and innovative ideas: Planning
encourages creativity, and helps the organization in various ways.
Managers develop new ideas and apply the same to create new
products and services leading to overall growth and expansion of the
business. Therefore, it is rightly said that a good planning process will
promote more individual participation by throwing up various new ideas
and encouraging managers to think differently.
5. Planning facilitates decision-making: Decision-making means
searching for various alternatives and selecting the best one. Planning
helps the manager to look into the future, and choose among various
alternative forces of action. Planning provides guidelines for sound and
effective decision-making.
6. Planning establishes a standard for controlling: Planning lays down
the standards against which actual performance can be evaluated and
measured. Comparison between the actual performance and
predetermined standards help to point out the deviation, and take
corrective actions to ensure that events confront plans.

Limitations of Planning
Following are the limitations of planning:

1. Rigidity: Planning brings rigidity to work as employees are required to

strictly follow predetermined policies. There is a tendency that by strictly
following these predetermined policies, people become more
 concerned about complying with these plans rather than achieving the
goals. Sometimes planning discourages individual initiative and
creativity. It restricts their freedom and new opportunities are ignored.
2. Planning may not work in a dynamic environment: Planning has to
operate in an external environment, such as government policies,
technology, etc., which is beyond the control of the organization. In any
situation, changes in the environment make the plan inoperative and
ineffective. So planning does not provide a positive result when such
changes are not accurately forecasted.
3. Planning reduces creativity: Planning involves the determination of
policies and procedures in advance. Employees are required to strictly
follow them, and deviations are considered to be highly undesirable. As
a result, employees do not show their skills, and it reduces their
initiative and creativity.
4. Planning involves huge costs: Planning is an expensive process
because a lot of money is spent on gathering and analyzing
information. It also involves the cost of experts, as experts are paid for
planning. Efforts should be made to benefit from the analysis and
ensure that benefits derived from planning should be more than their
cost. If the cost of planning does not justify the benefit, then planning
should be avoided.
5. Planning is time-consuming: It takes a lot of time in collecting,
analyzing, and interpreting information relevant to planning. This
causes a delay in decision making. Therefore during crises and
emergencies, which call for an immediate decision, planning does not
work. Sometimes, advance planning may lead to a delay in actions
making, which may result in the loss of profitable opportunities.
 6. Planning does not guarantee success: Planning may create a false
sense of security in the organization. Managers tend to adopt
previously tested plans, but it is not necessary that a plan which has
worked before will work again in this competitive environment. So, we
cannot say that planning guarantees success.
7. Resistance to change: The employee becomes familiar with the
method of doing work. So they resist change and do not want to adopt
a new method of doing work. Such unwillingness may lead to the failure
of the plan.

How to make planning effective?

In the words of J.L. Massie and Douglas, “an effective plan demands upon relating
commitments among human, financial and physical resources sufficient to make the
accomplishment feasible”.
As pointed out by Duncan, the characteristics of effective plans are that such plans
should be action oriented, consistent and flexible and they should provide motivation
and coordination. We shall now discuss some of the important points that are essential
for the effective implementation of plans.

Characteristics of Planning
1. Managerial function: Planning is a first and foremost managerial
function that provides the base for other functions of the management,
i.e. organizing, staffing, directing and controlling, as they are performed
within the periphery of the plans made.
2. Goal oriented: It focuses on defining the goals of the organization,
identifying alternative courses of action and deciding the appropriate
action plan, which is to be undertaken for reaching the goals.
3. Pervasive: It is pervasive in the sense that it is present in all the
segments and is required at all the levels of the organization. Although
the scope of planning varies at different levels and departments.
4. Continuous Process: Plans are made for a specific term, say for a
month, quarter, year and so on. Once that period is over, new plans are
drawn, considering the organization’s present and future requirements
and conditions. Therefore, it is an ongoing process, as the plans are
framed, executed and followed by another plan.
5. Intellectual Process: It is a mental exercise that involves the application
of mind, to think, forecast, imagine intelligently and innovate etc.
6. Futuristic: In the process of planning we take a sneak peek of the future.
It encompasses looking into the future, to analyze and predict it so that
the organization can face future challenges effectively.
7. Decision making: Decisions are made regarding the choice of
alternative courses of action that can be undertaken to reach the goal.
The alternative chosen should be best among all, with the least number
of the negative and highest number of positive outcomes.
Planning is concerned with setting objectives, targets, and formulating plan to
accomplish them. The activity helps managers analyze the present condition
to identify the ways of attaining the desired position in future. It is both the
need of the organization and the responsibility of managers.

Importance of Planning

● It helps managers to improve future performance, by establishing

objectives and selecting a course of action, for the benefit of the
organization.
● It minimizes risk and uncertainty, by looking ahead into the future.
● It facilitates the coordination of activities. Thus, reduces overlapping
among activities and eliminates unproductive work.
● It states in advance what should be done in future, so it provides
direction for action.
● It uncovers and identifies future opportunities and threats.
● It sets out standards for controlling. It compares actual performance with
the standard performance and efforts are made to correct the same.

Steps involved in making planning effective

1. Forecasting future events: Management has to make predictions while preparing

plans for the future. Thus, a proper system for accurately forecasting future events
should be developed and followed.

2. Good Environment: There should be a proper climate in the organization for the
effective implementation of plans. People at all levels of management should extend-
their cooperation willingly to make the plan successful.
3. Initiative & Involvement: The effective implementation of the plans depends very
much upon the initiative on the part of the upper level management as well as the
involvement in the work on the part of the lower level management.

4. Motivation: Plan must provide motivation if it is to become successful. Plan should

be clear and specific with regard to its objective so that human behavior can be
motivated.

5. Effective communication: Plans should be communicated to all the persons

concerned. All managers should be well informed as to its objectives, strategies,
premises and policies. Managers should interpret and explain policies and plans to their
subordinates who are to implement them.

6. Flexibility in planning: Planning should have flexibility because the future is

uncertain. In other words, it should have the feature of adapting itself for changing its
direction when forced by unexpected events. If plans are flexible, losses on account of
unexpected events could be minimized.

Strategic planning in Indian Industry.

Any organization either at the start-up stage, entering in a new market or otherwise
always needs to develop a tool to enable it to reach its desired goals.

It must reflect the thoughts, feelings, ideas, and wants of the leadership and mold them
along with the organization's purpose, mission, and regulations into an integrated
document.

A strategic plan must be flexible and practical and yet serve as a guide to
implementation and execution, along with tools for evaluating how the plans are working
out and making adjustments when necessary.
Strategy India enables organizations to plan their business strategy at every stage of
the business. This broadly includes:

● Research & Evaluation – In direct selling, a business strategy requires an in-

depth understanding of the market practice, competition from other channels of
retail, the customer and their habit, product acceptance and many other relevant
information which may influence the acceptance and success of the business.
Research is essential whether a new start-up, looking to expand, or seeking new
product opportunities. We help to identify the probable key parameters, conduct
a research and evaluate the possibilities, before defining a strategy.
Strategy India provides means and measures for evaluation of strategies of direct
selling companies already established in the region and taking corrective steps
whenever or wherever needed.
● Business Strategy Development – Based on the research or -from
understanding of the direct selling business and market/consumer habit, Strategy
India enables its clients to draw an appropriate business strategy with long term
and short term delivery objectives.
● Financial Planning – No business strategy is complete without financial
planning. Strategy India helps and guides the organization to draw a financial
road map with projections in terms of revenue, profitability and complete financial
structure.

Business Strategy Planning

Strategy planning is a regular task undertaken by every organization. Strategic planning usually involves
fundamental choices about:

● The mission, goals, or vision the organization will pursue

● Whom the organization will serve
● The organization' role in the community
● The kinds of programming, services or products the organization will offer
● The resources it would need to succeed - people, money, expertise, relationships, facilities, and
so forth
● How you can they best combine these resources, programming and relationships to accomplish
the organization's mission
Companies have developed sophisticated methods to consider different parameters while strategizing short
or long term goals. But studies have shown that 8 out of 10 times the strategy doesn't work the way it is
intended to. The reasons behind the non-performance of strategy are many but if a structured thinking is
applied, the reasons can be grouped into one or the other few main parameters that affect strategy planning.
At BMGI, we have analyzed and partnered with many companies in their strategy planning process to
generate meaningful patterns behind a successful strategy. It is now clearly known that rejection of any
crucial parameter in strategy planning will only yield an unrealistic strategic plan. It is found that while many
companies use past performance data to predict the future, they miss out on assessing current market
dynamics that can change the existing conditions drastically. Even if few companies do take market dynamics
into account, they follow what all others are doing and lose the opportunity to leverage innovation. Even if a
company takes the daunting task of innovation, rarely it succeeds since it does not take into account different
scenarios which may arise as a result of the innovative strategy employed. And in the rarest of occasions if a
company prepares itself by assessing various scenarios it fails because of not taking measures to mitigate
risks that arise as a result of various scenarios. In short the essential of strategy planning must cover:

● Past and present data analysis

● Insightful analysis of market dynamics
● Following a unique approach to planning
● Scenario analysis based on relevant inputs
● Risk mitigation measures to minimize loss

Intricately embedded in the above statements is the consideration of short as well as long term strategy
which connects the dots as the organization grows.

Concept of Decision making

Decision-making is the act of making a choice among available alternatives. There are

innumerable decisions that are taken by human beings in day-to-day life. In business

undertakings, decisions are taken at every step. It is also regarded as one of the

important functions of management. Managerial functions like planning, organizing,

staffing, directing, coordinating and controlling are carried through decisions. Decision

making is possible when there are two or more alternatives to solve a single problem
or difficulty. If there is only one alternative then there is no question of decision

making. It is believed that management without a decision is a man without a

backbone. Therefore, decision making is a problem-solving approach by choosing a

specific course of action among various alternatives.

"Decision-making is the selection, based on some criteria from two or more possible

alternatives."- George R.Terry

"A decision can be defined as a course of action consciously chosen from available

alternatives for the purpose of the desired result." - J.L. Massie

In conclusion, we can say that decision making is the process of choosing a specific

course of action from various alternatives to solve organizational problems or

difficulties.

Importance of Decision-Making

Decision making is considered as the backbone for the business management because

without taking the right decision at the right time, nothing can be performed. The

further importance of decision making can be discussed under the following points:

1. Achievement of Goal/Objectives:

Decision making is important to achieve the organizational goals/objectives

within a given time and budget. It searches for the best alternative, utilizes the
 resources properly and satisfies the employees at the workplace. As a result,

organizational goals or objectives can be achieved as per the desired result.

2. Employees Motivation:

Decision making is important to motivate the employees within an organization.

It provides an overall framework of operation and guidelines to the operating

level of staff. It also provides different types of facilities and benefits on time. As

a result, employees are motivated to do their job or work as per the

organizational requirement.

3. Proper Utilization of Resources:

An organization has various resources like man, money, method, material,

machine, market and information. All these resources are properly utilized

without any leakage and wastage with the help of the right decision at the right

time. As a result, an organization can operate at a minimum cost.

4. Selecting the Best Alternative:

As we know that the problem has multiple solutions. Decision making is

important to select the best alternative among various alternatives by analyzing

them one by one using various financial, statistical, and accounting

tools/techniques.

5. Evaluation of the Managerial Performance:

Decision making is not only important to select the best alternative but also

essential for evaluating the performance of a manager. The quality/success of

the manager largely depends upon the number of right decisions that he/she
 can take for organizational success. Therefore, decision making is important to

judge the performance of the top level of management.

6. Indispensable Element/ Component:

Decision making is an indispensable element/ component for organizational

success because without taking the right decision at the right time, nothing can

be performed as per the plan.

7. Pervasive Function:

Decision-making is a pervasive function of managers aimed at achieving

organizational goals. Decisions are to be taken in all managerial functions such

as planning, organizing, motivating, directing and controlling and in all

functional areas such as production, marketing, finance, personnel, and research

and development. It indicates that the decision-making is spread over many

areas of the organization.

Steps of Decision-Making Process

For the rationality, reliability, and enforceability of decisions, managers should follow a

sequential set of steps. It is said that a decision is rational if appropriate means are

chosen to reach desired ends. In this regard, various management authorities have

recognized and described different steps in the process of decision-making. Ricky W.

Griffin has suggested six steps in the process of decision making. Accordingly, the

steps are :

1. Implementation of Decision:
After selecting the best alternative, the manager or superior should convert the
decision into action. For this purpose, he/she should communicate with their
 subordinates and manage the various additional resources for the
implementation of the organizational decision.

2. Developing an Alternative Course of Action:

As we know that a problem has multiple solutions. Therefore, the decision-
maker should develop the various possible alternatives for a better decision.
While developing the alternative course of action he/she may use their own
knowledge, skills, experiences and technical support from the professional
planner and experts as well.

3. Identification of Problem:
The initial stage of the decision-making process is to identify the exact problem.
The problem may occur due to the gap between thinking and do the process.
The reason for problems may be internal or external. Decision-makers should
identify the correct problems before taking any decision. It is not an easy job or
task. Therefore, he/she may use his own knowledge, skills, experience and
collect information from internal and external sources. It is believed that the
identification of the correct problem is almost half part of the decision-making
process.

4. Analysis of Problem:
After identifying the correct problem, the decision-maker should analyze the
problem systematically and scientifically in terms of cost, time, legality,
organizational resources, and short-term as well as the long-term impact of the
problem. While analyzing the problem he/she may use various financial,
accounting and statistical tools or techniques.

5. Selecting the Best Alternative:

After analyzing the various alternatives, the decision-maker has to select the
best alternative among the various alternative by considering the short-term as
well as long-term impact. For this purpose, he/she may use his/her knowledge,
skills, and experiences. He/she may also concern with other stakeholders for a
better decision.

6. Review of Decision:
The last step of the decision-making process is to get responses or feedback
from other stakeholders of the organization. If the response is positive then the
decision-making process is successfully completed. It the response is negative
then he/she must go through the first step to take a new organizational decision.
 7. Evaluating Alternative Course of Action:
After developing various possible alternatives, the decision-maker should
evaluate all alternatives one by one for a better decision. In this step, he/she
should try to search for the answers to the following questions.

Characteristics of Decision Making

The characteristics of decision making are discussed as under

● Selective: It is a selective process in which the optimal alternative is

opted, among the various alternatives. The selection of the alternative is
done, only after evaluating all the alternatives against the objectives.
● Cognitive: As the decision making encompasses the application of
intellectual abilities, such as analysis, knowledge, experience,
awareness and forecasting, it is a cognitive process.
● Dynamic: It is a dynamic activity in the sense that a particular problem
may have different solutions, depending upon the time and
circumstances.
● Positive or Negative: A decision is not always positive, sometimes even
after analyzing all the points a decision may turn out as a negative one.
● Ongoing process: We all know that a company has perpetual
succession and various decisions are taken daily by different levels of
management to keep the firm going. These decisions are taken,
keeping in mind the objectives of the organization.
● Evaluative: Evaluation of the possible alternatives using critical
appraisal methods, is a part of the decision-making process.
 Types of Decisions

A decision is a process that is consciously chosen from among a set of

desired options to achieve the result.

● Types of Decision Making

The managers or non-managers have to make decisions at some point to

get their organizational goals done. These decisions are categorized
further. The types of decision making in an organization are as follows:

1. Programmed And Non-Programmed Decisions:Programmed decisions

are routine and repetitive in nature. These decisions deal with common and
frequently occurring problems in an organization such as buying behavior of
consumers, sanctioning of different types of leave to employees, purchasing
decisions, salary increment, etc. Non-programmed decisions are not routine or
common in nature. These are related to exceptional situations in which
guidelines or routine management is not set. For example, problems arising from
a decline in market share, increasing competition in the business environment.
The majority of the decisions taken by managers do fall in this non programmed
category.

2. Operational and Strategic Decisions:

Operational decisions are just the normal functioning of the organization. These
decisions do not require much time and take a shorter time as compared to other
decisions taken. Ample responsibilities are delegated to subordinates. The main
decision is to create harmony in an organization and to see whether the
management is proper or not.
Strategic decisions include all present issues and problems. The main idea is to
achieve better working conditions, better equipment, and efficient use of existing
equipment, etc. These all fall under this category. Usually, strategic decisions are
taken by top-level management.

3. Organizational and Personal Decisions:

If the decision is taken collectively keeping in mind the organizational goal, it is

known as the organization goal, and if the manager takes any decision in the
personal capacity (affecting his/her life). It is known as personal decisions. These
decisions may sometimes affect the functioning of the organization as well. For
example, if the employee has decided to leave the organization, it may affect the
organization. The authority of taking personal decisions cannot be delegated and
is dependent on the individual itself.
4. Major and Minor Decisions:

These are classified as the type of decision-making in management where

decision-related to purchase of new premises is a major decision. These are
taken by top management whereas the purchase of stationery is a minor
decision. Minor decisions can be taken by the superintendent.

5. Individual and Group Decisions:

When the decision is taken by an individual, it is categorized as an individual

decision. Usually, routine decisions are taken by individuals within the policy
framework of the organization.
Group decisions are taken by a group of individuals in the form of a standing
committee. Generally, important types of decisions in management are shifted to
this committee. The main aim of a group decision is to involve the maximum
number of individuals in the process of decision making.

6. Tactical and Operational Decisions:

Decisions that are pertaining to various policy matters in the organization are
known as policy decisions. These are taken by top management and do have a
long-term impact on the organization. For example, decisions regarding the
location of the plant or volume of production. These are tactical decisions.
 Methods of decision making -

● Command

The Command method is when decisions are made without involving others. This can
also be called authoritative and is, of course, the fastest option because you aren’t
delayed by other people offering their opinions or discussing other solutions.
Emergencies justify the command method, but most other decisions require buy-in from
others. The most common person to make Command Decisions in the workplace are
those in an executive or leadership role, as well as decisions in their personal life.
These are also often the riskiest because alternatives often aren’t considered.

● Consult

The Consult method is when a person invites input from others but ultimately one
person makes the decision. This option takes more time than Command because other
opinions are considered and alternatives can be proposed, making it less risky. It is the
most passive way to involve others and can be used to make people feel like they were
included in the decision (even though they ultimately don’t have a say in the final
decision). In the workplace, these are common across colleagues at the same level and
can be used for political gain. In your personal life, this is a very effective way to gut-
check with those who know you best to ensure you’re making the right decision.

● Vote
The Vote method is when options are discussed across the group and then a vote is
called, where the most favorable option to the most people is chosen. This can be
called democratic as well because each person’s opinion is included in the final
decision. Everyone who takes part in a vote assumes the responsibility of the decision
equally, further reducing your risk of a bad decision. Vote is a great option for things that
need to be upheld and executed by the group, which is why it is most common for
boards of directors or senior leadership to use this method. As for time management,
voting is effective because there is a finite time set for when the vote is over and the
decision is made, preventing it from dragging out.

● Consensus

The Consensus method is when the group discusses the options and recommendations
until everyone agrees to one course of action. As you can imagine, this is the hardest
and most time consuming method because it requires different people with different
motives to all agree on one. Time can often drag on due to a lack of agreement among
stakeholders, a continuous discussion trying to persuade others to follow a specific
option, and no set timeframe for when the decision will be made. Of course, once
everyone is in agreement, the risk of the decision is significantly lower than one person
making it. This method should be used sparingly solely based on the time implications
of getting agreement across the group. It is also vital that communication that the
decision has been made and agreed upon is blatantly obvious to those involved. Ask
something like, “are we all in agreement that this is the best course of action and we will
begin executing on it today?” to ensure everyone knows the decision is final and no one
is misunderstood.

How to Choose Which Method of Decision

Making to Use

1. Who cares?
Determine who genuinely wants to be involved in the decision along with those who will
be affected. It’s not worth it to involve people who won't be impacted by the end
decision. The Valify Marketplace is a decision accelerator for buyers and sellers in
health care, and there are several ways it supports these methods at the appropriate
times. Using the Valify Marketplace, healthcare providers are able to invite contributors
to your vendor selection project for collaboration and asynchronous work. Whether
you’re a project manager, analyst, or even a part of the executive steering committee,
it’s key to think about who all the stakeholders in a project might be.

2. Who knows?
Identify who has the expertise you need to make the best decision and encourage those
people to weigh in. These individuals that hold the experience and information should
be surveyed to identify the major pain points that your decision is impacting. The Valify
Marketplace encourages users to interview those who would be impacted by the
decisions to make sure you’re solving for the right thing. Requirements gathering is
done by asking vendors to respond to how they can address those must-haves and
lines up responses to be compared and evaluated side-by-side. All of the vendor
communication happens across the platform, which saves you from having to email
everyone individually and aggregate the responses yourself.

3. Who must agree?

Think of those whose cooperation you need to influence in any decisions you might
make. It’s better to involve these people early than to surprise them later and suffer their
resistance. The saying, “Don’t ask for permission, ask for forgiveness,” doesn’t apply
here. Getting buy-in early matters. These key stakeholders are able to be brought in to
score vendor responses to the questions you asked of your end users. These
supporters can have a meaningful impact on the decision by rating vendor responses in
platform.

4. How many people is it worth involving?

Your goal should be to involve the fewest number of people possible - while still
ensuring a quality decision and support from that group. Ask, “Do we have enough
people to make a good choice? Will others have to be involved to gain their
commitment?” Once you can answer those questions, you’ve found your team. Think
too, about when your team may need to be temporarily augmented. For example, you
may have your core group of stakeholders involved have the final say, but you may
need clinical subject matter experts to weigh in on project definition or vendor
requirements in their area of expertise. In the Valify Marketplace, this is easily done by
building question sets per group of stakeholders, allowing them to score the areas they
care about impacting and ignoring what isn’t pertinent.
 Decision-making committees
A committee is a group of people who deal with a specific task. The actual
task of the committee is usually derived from its name. A decision-making
body makes decisions.

A decision-making body should therefore

■ consist of an uneven number of persons, so that a majority can be reached in

decisions

■ be reached in decisions

■ be represented by people with different values and perspectives, so that all

sides can be taken into account in a decision.

■ Convene regular meetings in order to be able to react faster to decisions.

■ determine where and how the members meet.

■ clarify what happens to the right to vote in the event of an impediment.

he Positives of Business Decisions by Committee

Not all committee decisions are wrong-headed. There are some excellent reasons to encourage the
decision by the committee.

Avoiding extremes is often a benefit of decision by committee. As the stakeholders discuss

options, the voices of reason discard the most extreme positions. Too risky. Too sketchy. Too many
variables. Too much or too little something.
Decision by committee delivers numerous opinions from many different points of view. A committee
can put on the brakes if it looks like a critical decision is going to take the company over the cliff.
Moderate voices become louder and more influential as the risks of change are discussed and
analyzed.

Decision by committee encourages input. Sure, you own the company, or manage it. You’re the
boss, the decision-maker. However, you may not be the best one to make a specific decision,
especially one that involves something highly technical. It’s usually best to get feedback from people
in your company who are most familiar with the issue and/or will be most affected by it.

Example? “Should we invest $50,000 in proprietary software designed for our company?” The
employees who’ll feel the impact of the new software are likely to be the most vocal. Get all the input
you need and make the decision based on your team’s expertise. Chances are, you’ll take a
moderate course forward and avoid unforeseen mistakes before they’re even made.

The key is to control participation, to set the rules for discussion, to direct the conversation to avoid
going off on a tangent. The boss will usually make the final decision based on the expert advice from
the staff.

The Negatives of Decision by Committee

There are a lot of them.

First, employees are more likely to suggest outrageous, reckless solutions because the responsibility
for the decision is spread across the entire committee. This dilution of individual responsibility can
generate some very bad decisions without fear of retribution.

Missing the best advice. If opinions are flying around the conference table, you and the team may
miss the one suggestion that makes absolute, unqualified sense, lost in the discussion babble.
Often, there will be a lone voice of reason willing to stand up and say what should be done. If the
other 15 attendees disagree, that suggestion dries up and blows away.

Decision by committee can be a waste of time. It’s easy to get bogged down when committee
factions take opposing views and attempt to convince the other side of the table of the wisdom of
their position. This can suck up time like a vacuum cleaner if you don’t manage committee meetings.
Peer pressure comes into play quite frequently. At least some members of the decision committee
are likely to go along with the consensus to avoid standing out, or worse, looking like a trouble
maker.

Competing positions may lead to disharmony. There’s a tendency for committee members to
take positions and hold on to those decisions and defend them no matter how bad that decision is.
Getting these hard-liners to budge can waste time and create ill-will. You hear both sides, make your
choice, and annoy the heck out of the committee members who felt the other “way” was better.