The process of decision making consists of following eight sequential steps.
- Identification of problems need in to be sorted out or spotting of opportunities for improvement in performance. This is the step in which managers become aware that some action needs to be taken by them and start the process of deciding on what the action needs to be.
- Establishing objectives: This involves developing a clarity on what is to be achieved by the action. Solving the problem or using the opportunity is the obvious objective. But it is possible to make it more specific to improve the effectiveness of decision making. For example, if a machine is broken down on the shop-floor, the objective action could be to ensure that the machine is put back in operation as early as possible so that an urgent job being processed on the machine at the earliest possible. Under a different set of conditions it may be better to concentrate on thoroughness rather than the speedof repair.
- Fact finding: This involves collecting sufficient information related to the situation calling for decision and achievement of the objective set. It will include information directly pertaining to the issues under consideration and under control of the manager. In addition it will also include information on other factors and influences not under control of managers but which can impact the outcome of any decision taken.
- Identify alternative courses of actions or decisions possible.
- Compare the alternatives: this involves consideration of cost and time associated as well as the extent to which contributes to the achievement of objectives set in the step 2. This step enables us to identify the relative merits and demerits of different alternatives.
- Select one of the alternatives: Many times the best alternative will be obvious, from the step 5. But in other cases the decision may not be that clear. Also there could be a tendency to go on evaluating and comparing alternatives rather than make concrete progress towards action. So the manager need to take a clear decision when the step 5 should come to a close and take a explicit decision to pursue one definite course of action.
- Usually, taking an action requires more detailed planning or decision on many smaller details. This activity requires additional cost and time. Doing such complete detailing at the stage of identifying alternatives and evaluating them is wasteful in terms of cost as well as delays. However once an alternative course of action has been selected it must be detailed out to facilitate its implementation.
- Numberizing and assigning resources:This is the final step of decision making or planning or decision making. In this the decision is converted into specific numbers, budgets, schedules and other similar details that can be used to instruct people to do the work. It fixes responsibility of people, and also enables them to draw on necessary resources required in taking the action required.