The process of making a managerial decision: influencing factors, stages, essence and content

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Decision Management (DM) is a set of processes for optimizing actions. Its goal is to improve the method of management, using all available information to improve accuracy, consistency and efficiency. To implement it, tools such as business rules, business intelligence (BI), continuous improvement (Kaizen), artificial intelligence (AI) and predictive analytics are used. To successfully manage a company, you need to know everything about the factors that influence the process of making managerial decisions.

Decision system

It is the basis of managerial action. It is a continuous cycle of functioning of an important component of the holistic process of leadership. To decide means to come to a certain conclusion for the correct choice from a set of alternatives.

The accepted variant of the team's actions is necessary for organizational and planned management, monitoring and recruitment. Study of the factors influencing the processmaking managerial decisions is an obligatory stage of managing.

Senior management is responsible for all strategic milestones such as business objectives, capital expenditures, operational events, staff training and other controls. Without such SD, no action can be taken, and the spent resources will become unproductive. Decisions must be as accurate as possible. In today's business space, they require a scientific approach.

Oxford terminology and modernity

In the Oxford Dictionary, the term "decision-making" is defined as "action for realization or realizations". It means choosing two or more alternative courses. For any business problem, there are alternative paths with their own factors that influence the process of making managerial decisions.

Managers consider these alternatives and choose the best option. For actual implementation, managers should consider the available business environment and select a promising alternative plan. When making a decision, it is necessary to critically consider various options and choose from the best. An alternative may or may not be right, but will be judged in the future based on the actual results obtained from its implementation.

Stages of the leader's work

Decision making consists of a series of logically chosen steps. It's a rational processwhich is time consuming and provides some rules and guidelines on how to take them, including many organized activities.

Peter Drucker pioneered the scientific approach in his world-famous book The Practice of Management, published in 1955. In it, he clearly outlined all the factors influencing the process of making a managerial decision, and recommended the scientific method using the following steps:

1. Define the real business problem. Information relevant to it should be collected in such a way that its critical analysis is possible. A clear distinction must be made between problems and symptoms that may obscure the real cause. The manager must look for the critical factor, consider all failures and find out whether they are controllable or not.
2. Analysis of the situation. This parameter is classified in order to determine the circle of decision-makers and persons for whom mandatory information is required. Factors in the process of making managerial decisions taken into account in the analysis: the future stage, the amount of influence, the number of arguments involved and their uniqueness.
3. Collection of data about the problem. In the business world there is a powerful information flow provided by the latest developments in the field of information technology. All available profile information is fully used to analyze the problem, which allows you to explain all aspects of it.
4. Developing alternatives. The manager is obliged to determine the available alternatives that can be used to resolve this problem. In the processmaking and implementing managerial decisions, it is necessary to consider only realistic alternatives. It is equally important to consider time and cost constraints, as well as the psychological barriers that slow them down.
5. The optimal choice of solution is the most rational option. The alternative thus chosen is brought to the attention of those who can influence the implementation.
6. Transforming a decision into action. Without this, it will remain only a declaration of good intentions. The team must implement it fully, according to the plan approved by the management, obtained taking into account all factors of the management decision-making process.
7. Give feedback. The manager must take steps to provide feedback using continuous testing of real developments in order to meet the expectations from the implementation of the action plan. Feedback is possible in the form of organized information, reports and personal observations. It is necessary to decide whether to continue the already adopted plan or adjust it in the light of changed circumstances.

Multilevel factors

Decision making is an important aspect of modern management as it determines the organizational actions of a company. This is the main function of management. It can be defined as a course of action that is consciously chosen from a set of alternatives to achieve a desired outcome.

Some factors are more important at higher levels of administration, others at lower levels. There are variousdecision types:

• programmed;
• non-programmable;
• input data;
• prejudice;
• cognitive limitations.

Programmable are determined in the process of making and implementing managerial decisions under assumed conditions, when managers have clear parameters and criteria, when problems are well structured, and alternatives are clearly defined. Difficulties must be resolved through established guidelines and procedures.

The non-programmable are the result of unique circumstances, and the results are often unpredictable. Managers are faced with poorly structured problems that require a user-mode response. They are usually handled by senior management.

Input data is important because it is necessary to have adequate and accurate information about the situation in order to make a decision, otherwise its quality will suffer.

Prejudices and prejudices arise when making managerial decisions. In the process of management, due to the peculiarities of the perception of the world by a person, inefficient options can be chosen. Since perception is selective, the manager receives information from the outside world through the filtering of his feelings. In addition, subjective attitudes distort the data according to pre-established beliefs, attitudes, and values.

Cognitive limitations also affect problem solving. The human brain, which is the source of thinking and creativity, is limited in its ability to accept a complex option from numerousdisconnected structural elements for several reasons. For example, human memory is short-lived, capable of storing only a few ideas, words, and symbols at a time. That is why it is difficult to simultaneously compare all possible alternatives and make a choice when making managerial decisions.

Management process and risks

Decisions are formed in a person through certain personal qualities and organizational characteristics. The risk ratio is influenced by the following variables:

1. The mind of a developer. A higher level of intelligence usually leads to very conservative views, such individuals make low-level decisions.
2. Waiting for success. People with high expectations tend to be very optimistic and willing to jump to conclusions even with less information. Managers who take action with low-level success will need more information in the management decision-making process of the organization.
3. Time limit. In the modern world, there are situations when, due to a number of personal reasons (family, household, he alth reasons), the performer needs more time to make a rational decision. However, there is a category of workers who work better in less time and can come up with ideas quickly.
4. Heuristic approach. Most people in the absence of time rely on this approach based on satisfactory rather than optimal options. Such actions limit the search for additionalinformation, consider fewer alternatives, not focusing on the reasons for deviations. This approach can also be used when the cost of collecting information and estimating it is too high.

Personal habits and social influence

Personal habits of managers are formed as a result of social influences of the environment and the processes of personal perception, occupy an important place in the main processes of managerial decision-making. They need to be studied in order to provide for a personal leadership style.

Some people only stick to their opinion, even if it is not optimal for the production situation. Others cannot admit that they were wrong and continue to act, ignoring clear evidence that points to the need for change. There are managers who attribute failure to external factors rather than their own mistakes. These personal habits have a big impact on organizational operations and efficiency.

Social and group norms also have a significant impact on decision-making style. Specialists define a social norm as a rating scale and indicate the acceptable and undesirable breadth for behavioral activity, events, beliefs, or any object that excites members of a social group.

In other words, the social norm is the standard and accepted way of making judgments. Similarly, cultural education and its various aspects have a profound influence onleadership style. For example, in the Japanese organizational system, a person makes decisions in consultation with other participants. This style is culture oriented and makes it much easier to implement as every member of the team is involved in the process.

Analysis of the management decision-making process

This is an important step and perhaps the most difficult. Managers must determine the advantages and disadvantages of each alternative and weigh them in light of different situations before making a final plan.

Methods for developing alternatives:

1. Brainstorming where the team works together to generate ideas and alternative solutions.
2. The Nominal Group Technique is a method that involves the use of a highly structured meeting with an agenda. This model limits discussion or interpersonal communication in the process.
3. Delphi technique where participants do not meet, but the team leader uses written methods in the process of making management decisions and evaluating alternatives.

Alternatives can be evaluated in various ways:

1. Qualitative and quantitative measurements.
2. Analysis of costs and benefits for each alternative.
3. Margin analysis.

Once the alternatives have been analyzed and evaluated, the manager must choose the best option that gives the highest preference in fulfilling all the required criteria. Sometimes the choice is simple with obvious benefits, but usuallythe best solution is a combination of several alternatives. In cases where the best alternative may not be obvious, the manager uses probabilities, research and analysis based on his experience and judgment.

The work of managers does not end with making decisions. Managers are accountable for obtaining positive results from the implemented plan, the effectiveness of which is checked using evaluation systems that provide feedback to monitor the quality of improvements.

Main group of factors

A number of factors can influence the definition of managerial decision making.

They are divided into three main groups:

1. Problems of perception. This can be described as the way participants interpret their environment. A person's perception can influence how they solve problems. For example, when information about a problem needs to be gathered, that feeling influences where information is sought.
2. Organizational policy concerns the behavior of individuals and groups that will influence other executors of the company's plans.
3. Environmental issues. They are external factors affecting the organization. Types of external factors - this is the market in which the company operates, the economy, government legislation, the reaction of customers to the products and services of the organization.

Leader Style

The development of the managerial decision-making process largely depends on the individual andproblem solving approach. Each leader or manager has his own individual style, complemented by experience and personal abilities. There are several styles of behavior of managerial personnel:

1. Legitimate or autocratic action. Managers who adhere to this style evaluate several alternatives using limited information. They do not consider it important to consult with others, to seek more complete and reliable information.
2. Analytical action. Managers who use this style would like to get more information and consider a number of alternatives before finalizing decisions. They search for relevant information from their sources, find and study it in detail, using all possible resources. These managers are cautious people who are able to adapt and handle unique situations.
3. Behavioral decision-making process. Leaders who adhere to this model believe in co-management, take into account the opinion and experience of subordinates, and always listen to them.
4. Conceptual decision making. Managers who use this style are intuitive in their thinking and tolerant of uncertainty. They are exploring many alternatives and are solely focused on the long term.

Technology

The sequence of the managerial decision-making process includes various technological types. Information technology provides support for DSS business solutions and AI. The combination of these systems helps to create a database through onlineOLAP analytical process to facilitate a procedure that requires a lot of effort and analysis, which simplifies the management decision-making process.

The level of technology in the enterprise ensures the formation of a plan for the implementation of the selected option:

1. The power of data processing is increasing with the introduction of technologies that help to make quick business decisions, providing the ability to process huge amounts of information using data mining tools.
2. Providing the speed of management decision-making process technology, processing huge arrays and complex processing models, helps to create useful information.
3. Technology supports group decision making, a team of employees can use the group support system for a fast process.
4. GDSS Decision Support System is a type of system that facilitates group problem formulation, team plan adoption through integration, teamwork, DSS capabilities and telecommunications. The more complex and less structured the decision a team must make, the more GDSS can help.

Flexible interactive systems

In order to make quick and important decisions in an organization, modern technology is used:

1. Decision Support Systems DSS is a highly flexible and interactive IT system designed to support the process when a problem is not structured.
2. Groupdecision support GDSS is a system that facilitates the formulation of group problems.
3. Geographic Information Systems (GIS) are systems specifically designed for spatial information.
4. Artificial Intelligence (AI) is the science of creating machines that mimic human thinking and behavior.
5. Expert systems are artificial intelligence systems that use the power of logic to draw conclusions.
6. A neural network is an intelligent system that can learn to discern patterns.
7. Genetic Algorithm is an artificial intelligence system that mimics the evolutionary process of survival of the fittest in order to develop better solutions.

Pros of strategic consensus

The adoption of plans is the main function of management. It begins only when management takes strategic directions for development. Without this action, the stages of the management decision-making process cannot be completed, and resources will not be used. Thus, the adoption of a strategy is the main function of management and facilitates the whole process by providing a proper background for the first management activity called "planning".

It gives concrete form to the broad business goal decisions made by the top manager. This process is with continuous control function. Managers at all levels make decisions within their job responsibilities. Continuity of process is a must for all managers and managementstaff.

No further action is possible unless decisions are made. They need to be formed on a regular basis as new problems, complexities and failures develop in the business. This may be due to changes in the environment. New products may enter the market, competitors may enter, and government policies may change. All this leads to changes in the environment around the business structure.

This is a delicate and responsible job. Leaders must make quick and correct decisions in carrying out their duties. In fact, they are paid for their maturity and ability to be responsible. Management activity is possible only if appropriate plans are adopted. The right actions provide opportunities for growth, while the wrong ones lead to losses and instability for the company.

Common management mistakes

Many factors that influence the decision-making process can lead to errors. A group leader who is promptly and fully aware of all possible types of errors and their causes of errors is in a better position. Some common mistakes and their types in the process of making managerial decisions:

1. Departure from the personal template. Each person has their own unique set of strengths or biases that lead to a particular leadership style. The best way to deal with this problem is to try to be open to information within the management system.
2. Excessive trust in other people's information. Leaders often rely on other people's opinions. However, if they are not directly involvedin a problematic situation, they may not have the necessary level of awareness to make decisions.
3. Ignoring information received from members of the collective. This problem can easily arise in a team situation. In many cases, the employees of the company are the people who are most closely connected to the problem. If their opinion is not heeded, there is a general team failure. The best way to resolve this problem is to ensure that all members of the organization are involved in the process.
4. Ignoring intuition. In many cases, people act correctly on a subconscious level. Unfortunately, they often tend to ignore their intuition and then do the wrong thing.

Advice to top managers

There are strategies you can use to avoid common mistakes and hone your managerial skills. Making better and faster decisions will help the team seize business opportunities and avoid pitfalls:

1. Rethink the problem. When a team encounters an obstacle in an activity, it is necessary to examine its full context and see the problem from the greatest possible point of view. This will help to ignore one aspect or neglect others. You need to find at least 3 different ways of looking at the problem.
2. Make informed decisions. The goal of management is to use scientific evidence in making plans, not just rely on intuition.
3. Apply performance data to supportsolutions.
4. Get the most up-to-date and complete information from the business environment.
5. Challenge your inner feelings and find objective evidence to support them.
6. Listen to the opinions of others.
7. Be open-minded.
8. Find ways to encourage communication within the company.
9. Be open to conversation and create an environment in which people can be direct even when the truth comes out.
10. Develop a sense of risk.
11. Forget past mistakes. People tend to make choices that justify past experience, even if the previous decision didn't work. They also tend to spend time and money fixing past problems when it would have been more beneficial to admit a mistake and move on.
12. Be honest with yourself.
13. Be decisive.

Thus, it is clear that decision making is an important aspect of modern management and is best done professionally.