[Commerce Class Notes] on Principles in Decision Making Pdf for Exam

Decisions form an integral part of organization and management. Decision making is the process of making choices among various courses of actions and inactions. It involves using the correct and complete information while making a decision. In every organization, the manager has to make several decisions to sustain the business’s effective functioning. It helps in achieving the goals and objectives of an organization. An effective decision always has two main aspects – the reason behind making the decision and the situation. A bold and logical decision leads to the proper utilization of the company’s resources and thus, helps in its growth.

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Major Principles of Decision Making

Principles can play a very important role while making a good decision. They help in understanding the problem and looking for better alternatives. The following are a few principles that can help a manager in the process of decision making:

1. Organizational Structure

The structure of an organization plays a very important role in its decision-making strategies. Rational decision making is a pervasive process. An effective organizational structure involves different organizational departments that make their own decisions.

If the structure is centralized and rigid, all the decisions are taken by the top management level. It can lead to delays and confusion in the decisions. On the contrary, an organizational structure with decentralized authority provides scope for equal delegation. It is a flexible structure and involves more acceptable and effective decisions.

2. Objectives and Policies of the Business

It is very important to analyze the objectives and policies of a business organization before making any decision. These objectives guide the ethical decision-making process. Business policies connect their goals with actions. They are statements that guide the company’s thinking, behaviours and actions.

3. Proper Communication

A decision is a selection from multiple choices. Communication plays a very important role in the effective working of an organization. Proper communication of information helps in making decisions that are beneficial for the organization. It helps in identifying the complexity in the decision-making process and reduces employee resistance. Communication is very important for a company’s success.

4. Subject Matter of the Decision

The subject matter plays a vital role in problem-solving and decision making. Decisional matters are of two types- programmed and non-programmed. Programmed problems are of a routine and repetitive nature. They require easy and simple solutions. Non-programming problems are of a novel and non-routine nature. They require special attention and analysis based on their features and circumstances.

5. Proper Analysis of the Alternatives

It is very important to properly analyze and evaluate all the alternatives to make the correct decision. A manager must study in detail the merits and demerits of all the choices available. This analysis can involve a single step or multiple steps. It includes refining alternatives to conclude.

6. Time

Taking an effective decision requires sufficient time. It is important to think about all the factors and then make a decision. There are numerous possible solutions to a problem. Thinking about all the ideas and possibilities can help in identifying and evaluating the problem.

7. Evaluating the Decision

Decisions are taken to carry out the objectives of an organization. The most important aspect of any decision-making process is evaluating the decision after it has been taken.

Structuring the in-progress reviews can help in analyzing whether the after-effects of the decision. It helps in understanding what is working for the company and what is not.

8. Flexibility

A decision taken cannot satisfy everyone. Rigidity while making decisions can affect the decision-making process. The decision-maker needs to have a flexible mental disposition. It will help win the cooperation of all the diversified groups in an organization. Flexibility in different types of decisions helps in maintaining peace and harmony in an organization.

9. Consider the Chain of Actions

In any organization, there exists a chain relationship between different activities. A decision taken to change one work can affect the other works also. Thus, it is very important to consider the chain relation between various activities of an organization.

10. Participation by the Decision Maker

Equal involvement by the decision-maker in implementing his decisions is very important. He must only observe others but perform himself. This will help him in understanding the practicality of his decisions and guide his future decisions.

Therefore, it can be understood that the growth of a business organization depends on its managers’ decision-making skills. This article includes all the main principles in decision making that can help in its smooth working.