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Home » Management » Decision Making: Definition, Types, Importance and Factors

Decision Making: Definition, Types, Importance and Factors

July 24, 2023 | By Hitesh Bhasin | Filed Under: Management

Decision making is a process of identifying and choosing the best option from a set of available alternatives. It is a cognitive process that involves evaluating options and making choices based on certain criteria.

The decision-making process for businesses is a step-by-step method that allows experts to examine the evidence, consider alternatives, and pick a course of action from there.

Table of Contents

  • What is Decision Making?
  • Importance of Decision Making Skills
  • Types of Decision Making
    • 1. Rational Decision Making
    • 2. Intuitive Decision Making
    • 3. Group Decision Making
    • 4. Routine and Basic Decision Making
    • 5. Personal and Organizational Decision Making
    • 6. Individual and Group Decision Making
    • 7. Policy and Operating Decision Making
    • 8. Programmed and Non-Programmed Decision Making
    • 9. Planned and Unplanned Decision Making
    • 10. Structured and Unstructured Decision Making
    • 11. Tactical and Strategic Decision Making
    • 12. Formal and Informal Decision Making
    • 13. Organizational, Departmental, and Interdepartmental Decisions Making
  • Factors Affecting Decision Making
    • 1. The type of Decision Making
    • 2. The amount of information available
    • 3. The time available
    • 4. The number of options
    • 5. The complexity of the situation
    • 6. The type of problem
    • 7. The stakes involved
  • 7 Steps of Decision Making Process
    • 1. Identifying the decision
    • 2. Gathering relevant information
    • 3. Analyzing the options or Identifying the alternatives
    • 4. Weighing the evidence
    • 5. Selecting the best option
    • 6. Implementing the decision
    • 7. Evaluating the results
  • GOFER Decision Making Technique
    • 1. Goals clarification
    • 2. Options generation
    • 3. Facts-finding
    • 4. Effects Consideration
    • 5. Review and implementation
  • DECIDE Decision Making Technique
    • D – Define the problem or opportunity
    • E – Establish objectives and goals
    • C – Consider alternatives
    • I – Identify the best alternative
    • D – Develop a plan of action
    • E – Execute and evaluate the plan
  • Role of Intuition & Reasoning in Decision Making
    • What Can Prevent Effective Decision-Making?
    • 1. Overconfidence
    • 2. Group thinking
    • 3. Emotional Decision-Making
    • 4. Not Enough Information or Having too much Information
    • 5. Lack of Creativity
    • 6. Vested Interests
    • 7. No Emotional Attachment
  • How to Make a good decision?
    • 1. Take your time
    • 2. Consider all of the options
    • 3. Be aware of your biases
    • 4. Seek outside perspectives
    • 5. Use Decision Making techniques
    • 6. Be prepared to change your mind
    • 7. Be comfortable with uncertainty
  • Decision Making Tools
    • 1. Decision Trees
    • 2. SWOT Analysis
    • 3. Cost-Benefit Analysis
    • 4. Six Sigma
    • 5. Decision Matrix
    • 6. Nominal Group Technique
    • 7. Brainstorming
    • 8. Delphi Method
    • 9. Pros & Cons List
    • Conclusion!

What is Decision Making?

A decision making is a cognitive process that results in the selection of a course of action among several alternatives. The process of making a decision is defined as the cognitive procedure through which an individual chooses a belief or a course of action among several alternative possibilities.

It might be either logical or illogical. The decision-making process is guided by the decision-makers assumptions about values, preferences, and beliefs. Every choice made in the context of a decision-making strategy results in an end selection that may or may not result in action.

Decision making is the process of making choices based on cognitive biases and complex processes. Such decisions are made by individuals or groups and can be either simple or complex. Decision making is a key part of any organization and can be either formal or informal. A decision-maker must take into account many factors when making decisions to make the decision process result-driven.

Importance of Decision Making Skills

Importance of Decision Making Skills

Decision making is a critical process because it determines the success of an organization or individual. The ability to make decisions quickly and effectively is a key skill for any manager or leader.

There are four main reasons why Decision Making is important:

First, Decision Making allows businesses to take advantage of opportunities. If a company can identify an opportunity and make a decision quickly, they are more likely to be successful than its competitors.

Second, Decision Making helps businesses avoid risks. By making decisions, businesses can avoid potential risks and problems.

Third, Decision Making improves efficiency. The ability to make decisions quickly and effectively can help businesses save time and resources.

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Fourth, Decision Making can improve the quality of decisions. By making decisions, businesses can improve the quality of their products and services.

Types of Decision Making

There are different types of decision making, and the most common ones are

1. Rational Decision Making

This type of decision making is based on logic and reasoning. It involves analyzing all the options and choosing the one that is most rational or advantageous.

2. Intuitive Decision Making

This type of decision making is based on gut feeling or intuition. It is usually used when there is not enough time to analyze all the options or when the situation is too complex to analyze.

3. Group Decision Making

This type of decision making is made by a group of people rather than an individual. It is usually used in organizations to make complex decisions.

4. Routine and Basic Decision Making

This type of decision making is made on a daily basis and does not require much thought or analysis. It is usually used for simple decisions such as what to eat for lunch.

5. Personal and Organizational Decision Making

This type of decision making is made on a personal level or on behalf of an organization. It is usually used for important decisions that will have a significant impact on an individual or organization.

6. Individual and Group Decision Making

This type of decision making can be made by either an individual or group members. It is usually used for decisions that will affect both an individual and a group.

7. Policy and Operating Decision Making

It is usually used for making decisions about the policies and operations of an organization.

8. Programmed and Non-Programmed Decision Making

It helps in making decisions about the programs and non-programs of an organization.

9. Planned and Unplanned Decision Making

It is used for making decisions about the planned and unplanned activities of an organization.

10. Structured and Unstructured Decision Making

It helps in making decisions about the structured and unstructured problems of an organization.

11. Tactical and Strategic Decision Making

Such types of Decision Making are done at the time of war or any other critical situation.

12. Formal and Informal Decision Making

Formal Decision Making is done by the top management of an organization while Informal Decision Making is done by the lower-level management or employees.

13. Organizational, Departmental, and Interdepartmental Decisions Making

It helps in making decisions about the organizational, departmental, and interdepartmental problems of an organization.

Factors Affecting Decision Making

Factors Affecting Decision Making

The decision making process is affected by a number of factors, and some of the most common ones are:

1. The type of Decision Making

The type of Decision Making can affect the outcome of the decision. For example, if a company uses a rational Decision Making process, they are more likely to make sound decisions. However, if a company uses an intuitive Decision Making process, it may make decisions that are not based on logic or reasoning.

2. The amount of information available

The amount of information available can also affect the Decision Making Process. If there is too much information, it can be difficult to make a decision. However, if there is not enough information, it may lead to making an uninformed decision.

3. The time available

The time available can also affect the Decision Making Process. If there is not enough time to make a decision, it may lead to making a rushed decision.

4. The number of options

The number of options can also affect the Decision Making Process. If there are too many options, it can be difficult to choose the best option. However, if there are too few options, it may lead to choosing an option that is not the best.

5. The complexity of the situation

The complexity of the situation can also affect the Decision Making Process. If the situation is too complex, it may lead to making a wrong decision.

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6. The type of problem

The type of problem can also affect the Decision Making Process. If the problem is simple, it may be easier to make a decision. However, if the problem is complex, it may be difficult to make a decision.

7. The stakes involved

The stakes involved can also affect the Decision Making Process. If the stakes are high, it may lead to making a risky decision. However, if the stakes are low, it may lead to making a safe decision.

In addition to these, preferences, experience, knowledge, biases, emotions, etc also play a crucial role in the decision making process.

7 Steps of Decision Making Process

Making decisions is a crucial part of life. Unfortunately, not everyone is good at making decisions. Some people make poor decisions that have negative consequences. Others have a hard time examining alternatives and possible solutions. But with practice, everyone can get better at decision making. Seven steps that can help you do better decision making and solve problems effectively are-

1. Identifying the decision

The first step is to identify the decision that needs to be made. This can be done by brainstorming with the team or by looking at the options.

2. Gathering relevant information

The second step is to gather information about the options. This can be done by research or by consultation.

3. Analyzing the options or Identifying the alternatives

The third step is to analyze the options or identify the alternatives. This can be done by using Decision Making tools or by using Decision Making techniques.

4. Weighing the evidence

The fourth step is to weigh the evidence. This can be done by using Decision Making tools or by using Decision Making techniques.

5. Selecting the best option

The fifth step is to select the best option. This can be done by using Decision Making tools or by using Decision Making techniques.

6. Implementing the decision

The sixth step is to implement the decision. This can be done by setting up a plan or by taking action.

7. Evaluating the results

The seventh step is to evaluate the results. This can be done by monitoring the progress or by evaluating the outcomes.

GOFER Decision Making Technique

Making decisions can be difficult, especially when there are many factors to consider. It’s important to weigh all the options and make the best choice possible. Unfortunately, sometimes we make wrong decisions. This can happen for a variety of reasons, such as confirmation bias or groupthink.

The GOFER Decision Making Technique is a Decision Making tool that can be used to make sound decisions. The GOFER Decision Making Technique is based on the following key points:

1. Goals clarification

The first step is to clarify the goals. This can be done by identifying the main goal and the sub-goals.

2. Options generation

The second step is to generate options. This can be done by brainstorming with the team or by looking at the options.

3. Facts-finding

The third step is to find facts. This can be done by research or by consultation.

4. Effects Consideration

The fourth step is to consider the effects. This can be done by using Decision Making tools or by using Decision Making techniques.

5. Review and implementation

The fifth step is to review and implement the decision. This can be done by setting up a plan or by taking action.

DECIDE Decision Making Technique

The DECIDE Decision Making Technique is based on the following site

D – Define the problem or opportunity

The first step is to define the problem or opportunity. This can be done by brainstorming with the team or by looking at the options.

E – Establish objectives and goals

The second step is to establish objectives and goals. This can be done by identifying the main goal and the sub-goals.

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C – Consider alternatives

The third step is to consider alternatives. This can be done by brainstorming with the team or by looking at the options.

I – Identify the best alternative

The fourth step is to identify the best alternative. This can be done by using Decision Making tools or by using Decision Making techniques.

D – Develop a plan of action

The fifth step is to develop a plan of action. This can be done by setting up a plan or by taking action.

E – Execute and evaluate the plan

The sixth step is to execute and evaluate the plan. This can be done by monitoring the progress or by evaluating the outcomes.

Role of Intuition & Reasoning in Decision Making

Intuition is defined as the ability to understand something immediately, without the need for conscious reasoning. Intuition is often considered to be a “gut feeling” or “sixth sense.” The reasoning is defined as the ability to think logically and make sound decisions. The reasoning is often considered to be the “rational” or “logical” way of thinking. Decision making is the process of making choices based on logical reasoning and intuition.

Both intuition and reasoning play an important role in decision making. Intuition can provide a “gut feeling” about a situation, while reasoning can provide a more “rational” view of a situation. Decision making is often a balance between intuition and reasoning. Intuition can provide insights that reasoning may not be able to see, while reasoning can provide a more objective view of a situation. Decision making is often a matter of weighing the pros and cons of each option and choosing the best option based on both intuition and reasoning.

There are many different Decision Making techniques that can be used to make sound decisions. Some Decision Making techniques are based on logic and reasoning, while others are based on intuition and “gut feeling.” It is often helpful to use a combination of Decision Making techniques to make the best decision possible.

What Can Prevent Effective Decision-Making?

There are a number of factors that can prevent effective decision-making. Some of the most common factors are:

1. Overconfidence

Overconfidence is often the result of not considering all of the options or not fully understanding the situation. Overconfidence can lead to poor decision-making.

2. Group thinking

It is often the result of pressure from others to make a certain decision. Too many people can also lead to poor decision-making.

3. Emotional Decision-Making

Emotional Decision-Making is often the result of making decisions based on emotions instead of logic. Emotional Decision-Making can lead to poor decision-making.

4. Not Enough Information or Having too much Information

Not having enough information can lead to making poorly informed decisions. Having too much information can lead to information overload and make it difficult to make a decision.

5. Lack of Creativity

Decision-Making often requires creativity to come up with new ideas or solutions. A lack of creativity can lead to poor decision-making.

6. Vested Interests

Vested interests are often the result of someone having a personal or professional stake in the decision. Vested interests can lead to bias and poor decision-making.

7. No Emotional Attachment

Not having any emotional attachment can also lead to poor decision-making. Decision-Making often requires some emotional investment in order to be successful.

How to Make a good decision?

Some of the tips to make good decisions are

1. Take your time

Rushing into a decision can often lead to poor decision-making. It is important to take the time to consider all of the options and fully understand the situation before making a decision.

2. Consider all of the options

Decision-making is often about choosing the best option from a set of options. It is important to consider all of the options before making a decision.

3. Be aware of your biases

We all have biases that can influence our Decision-Making. It is important to be aware of our own personal biases and how they might influence our decisions.

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4. Seek outside perspectives

It can be helpful to seek out the perspectives of others when making a decision. Others can provide insights and ideas that we might not have considered.

5. Use Decision Making techniques

There are many different Decision Making techniques that can be used to make sound decisions. Some Decision Making techniques are based on logic and reasoning, while others are based on intuition and “gut feeling.” It is often helpful to use a combination of Decision Making techniques to make the best decision possible.

6. Be prepared to change your mind

We often think of Decision Making as a one-time event. However, decisions are often made over time as new information becomes available. It is important to be prepared to change our minds and revise our decisions as new information arises.

7. Be comfortable with uncertainty

Decision-Making often requires us to make decisions in the face of uncertainty. We may not have all of the information that we would like or we may not be sure of the outcome of our decision. It is important to be comfortable with uncertainty and understand that there is always some risk involved in Decision-Making.

Decision Making Tools

There are many different Decision Making Tools available to help us make better decisions. Some Decision Making Tools are based on logic and reasoning, while others are based on intuition and “gut feeling.” It is often helpful to use a combination of Decision Making Tools to make the best decision possible.

Some of the most popular Decision Making Tools are

1. Decision Trees

Decision Trees are a visual representation of the different options and outcomes of a decision. Decision Trees can be used to compare the different options and choose the best option.

2. SWOT Analysis

SWOT Analysis is a tool that is used to identify the Strengths, Weaknesses, Opportunities, and Threats of a decision. SWOT Analysis can be used to evaluate the risks and rewards of a decision.

3. Cost-Benefit Analysis

Cost-Benefit Analysis is a tool that is used to compare the costs and benefits of a decision. Cost-Benefit Analysis can be used to determine if a decision is worth the investment.

4. Six Sigma

Six Sigma is a methodology that is used to improve business processes. Six Sigma can be used to make better decisions by improving the quality of data and information.

5. Decision Matrix

A Decision Matrix is a table that is used to compare the different options and choose the best option. Decision Matrices can be used to evaluate the risks and rewards of a decision.

6. Nominal Group Technique

The Nominal Group Technique is a tool that is used to generate ideas from a group of people. The Nominal Group Technique can be used to gather different perspectives on a decision.

7. Brainstorming

Brainstorming is a technique that is used to generate ideas from a group of people. Brainstorming can be used to generate different options for a decision.

8. Delphi Method

The Delphi Method is a tool that is used to gather information from experts. The Delphi Method can be used to gather different perspectives on a decision.

9. Pros & Cons List

A Pros & Cons List is a list of the positive and negative aspects of a decision. Pros & Cons Lists can be used to evaluate the risks and rewards of a decision.

Conclusion!

On the final note, it is clear that Decision Making is a complex process. Decision making involves many different factors and there is no one right way to make a decision. However, by using Decision Making techniques and tools, we can improve our chances of making a sound decision.

What are your thoughts on Decision Making? What Decision Making techniques and tools do you use? Please share your thoughts and experiences in the comments section below.

Liked this post? Check out the complete series on Management

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  6. Decision Matrix: Meaning, Examples, and How to use a Decision Matrix?
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About Hitesh Bhasin

Hitesh Bhasin is the Founder of Marketing91 and has over a decade of experience in the marketing field. He is an accomplished author of thousands of insightful articles, including in-depth analyses of brands and companies. Holding an MBA in Marketing, Hitesh manages several offline ventures, where he applies all the concepts of Marketing that he writes about.

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