Decision–making is an integral part of any management function. The need for decision-making arises at all stages of the management process and is associated with all areas and aspects of management activities. Usually, in the process of any activity, situations arise when a person or group of people is faced with the need to choose one of several possible options for action. The result of this choice will be the solution. Each of us has to choose something dozens of times every day based on our own experience, developing our abilities and acquiring decision–making skills. There are many examples: choosing clothes from an existing wardrobe, choosing a place of work or study.
Management decisions are distinguished from many others that we make in everyday life by certain aspects, firstly, these are goals. The management entity makes decisions based not on its own needs, but in order to solve the problems of a particular organization. Secondly, the consequences. An individual's private choice affects his own life and can affect the few people close to him. The manager chooses the course of action not only for himself, but also for the organization as a whole and its employees, and his decisions can significantly affect the lives of many people. Thirdly, professionalism. In the management of an organization, decision–making is a much more complex, responsible and formalized process that requires professional training. Not every employee of an organization, but only those with certain professional knowledge and skills, is empowered to make certain decisions on their own.
A management decision is a choice of an alternative made by a manager within the framework of his official powers and competence and aimed at achieving the goals of the organization.
Managerial decisions are always associated with changes in the organization, and they are usually initiated by an official or an appropriate body that is fully responsible for the consequences of controlled or implemented decisions. The boundaries of the competence within which he makes decisions are clearly outlined in the requirements of the formal structure. However, the number of persons involved in the preparation of the decision is significantly higher than the number of persons vested with authority. In the process of managing organizations, a huge number of very diverse decisions are made with different characteristics. Nevertheless, there are some common features that allow this set to be classified in a certain way.
According to the degree of repeatability of the problem. Depending on the repeatability of the problem to be solved, all management solutions can be divided into traditional, repeatedly encountered in management practice, when it is only necessary to make a choice from existing alternatives, and atypical, non-standard solutions, when their search is primarily associated with the generation of new alternatives.
By the importance of the goal. Decision-making can pursue its own, independent goal or be a means to contribute to the achievement of a higher-order goal.
Strategic decisions. Such solutions usually address the underlying issues. Strategic goals are goals that involve solving large–scale problems and relate to the company as a whole. Strategic decisions are the most important decisions. They are particularly important for competitiveness and have a high cost of consequences. Such decisions are associated with significant transformations of the organization (change of technology, change of goals, personnel renewal).
Tactical decisions. Such solutions, as a rule, ensure the implementation of strategic objectives. They do not exceed one year in time. Tactical goals are tasks that provide solutions to specific problems, outlined by middle managers and describe the steps required by the strategic villages of the organization.
Operational solutions. Such decisions are related to the implementation of current goals and objectives. In terms of time, they are designed for a period not exceeding a month. Operational goals are tasks that provide solutions to current issues, outlined by lower–level managers and describe the actions necessary to achieve tactical and strategic goals.
By sphere of influence. A decision can be made in order to influence the work of the organization as a whole, i.e. globally. The result of the decision may affect one or more divisions of the organization. In this case, the solution can be considered local. These decisions do not affect the activities of the entire system, however, for the collective of the subsystem in respect of which they are made, they may be general or particular decisions.
By duration of implementation. The solution may take several hours, days, or months to implement. If a relatively short period elapses between the adoption of a decision and the completion of its implementation, the decision is short–term. At the same time, the number and importance of long-term, long-term solutions is increasing, the results of which can be deleted for several years.
According to the predictability of the consequences. Most management decisions in the process of their implementation, one way or another, can be adjusted in order to eliminate any deviations or take into account new factors, i.e. it is correctable. However, there are also solutions, the consequences of which are irreversible.
According to the form of decision-making. The person making the choice from the available alternatives to the final solution may be one person and his decision will be sole, respectively. However, in modern management practice, complex situations and problems are increasingly encountered, the solution of which requires a comprehensive, comprehensive analysis, i.e. the participation of a group of managers and specialists. Such group or collective decisions are called collegial. Increased professionalization and deepening of management specialization lead to a wide spread of collegial forms of decision-making.
By the method of fixing the solution. Written (documented) decisions are the predominant form. This form of solutions makes it possible to introduce that element of stability, order and information fixation, without which management is unthinkable.
Nevertheless, an important place is occupied by oral (undocumented) decisions, which form the most operational part of the management and production staff. Such decisions may relate to important issues and should be supported by responsibility for execution.
By the nature of the information used. Depending on the degree of completeness and reliability of the information available to the manager, managerial decisions can be deterministic or probabilistic.
Deterministic decisions are made in conditions of certainty, when the manager has almost complete and reliable information about the problem being solved, which allows him to accurately know the result of each of the alternative choices. There is only one such result, and the probability of its occurrence is close to one. However, few decisions are made with certainty. Most management decisions are probabilistic.
Probabilistic decisions are those made under conditions of risk or uncertainty. Decisions made under conditions of risk include those whose results are uncertain, but the probability of each result is known. In some cases, however, the organization does not have sufficient information to objectively assess the likelihood of possible events. In such situations, managers are helped by experience, which shows exactly what is most likely to happen. In these cases, the probability estimate is subjective.
On the grounds for making a decision. Intuitive solutions. A purely intuitive decision is a choice made based solely on the feeling that it is the right one. It's just that a person makes a choice. What is called insight or the sixth sense, and there are intuitive solutions.
Judgment-based decisions. Such decisions sometimes seem intuitive, because their logic is not obvious. A judgment—based decision is a choice based on knowledge or accumulated experience. A person uses knowledge of what has happened in similar situations before to predict the outcome of alternative choices in an existing situation. Based on common sense, he chooses an alternative that has brought success in the past. Since the decision based on judgment is made in the head of the head, it has such a significant advantage as the speed and cheapness of its adoption.
Rational decisions. The main difference between rational and judgment-based decisions is that the former does not depend on past experience. A rational decision is justified using an objective analytical process.
By location and functions in the management process. Deciding which information should be considered true is called an information decision. An information solution involves converting information into a form that best suits a specific management task.
An organizational decision is a choice of alternatives that a manager must make in order to fulfill the responsibilities of his position. Its purpose is to ensure progress towards the goals set for the organization. A feature of organizational solutions is their orientation to a relatively wide range of situations.
The most difficult and responsible decisions include those that are called technological or managerial-technological. The class of technological solutions in production organizations includes, in particular: defining the goal, establishing readiness for work and determining their main direction, the distribution of forces, means and method of work, setting tasks for departments. The most important thing is to define the goal, on the basis of which the remaining elements of the solution and the criterion of effectiveness are based.