Managerial Decision Making
Decisions are very important factors that determine the growth of organizations. Decisiveness is a quality which distinguishes very good managers from very bad managers. A person who is not good in decision making is not fit to be called a manager but an administrator. Corporate investment decisions often involve substantial amounts of money. Many investment decisions are also difficult to reverse and can affect the company's business far into the future. (“Corporate Finance,” 2009). There are different theories on managerial decision making. One of such which effectively summarizes this is Vroom and Yetton’s normative model of decision making. According to Vroom and Yetton (1973), each decision is influenced by two major factors: decision quality, and acceptance. But in most cases, managerial decision making usually involves three major stages, each of which are enumerated below:
Firstly, the manager needs to define the problem or challenges facing him which calls for the decision making. In getting any work or job done, it is best to start from the beginning. In this extremely important step, a good context of the problem must be grasped. This means that he has to get a good understanding of the problem to be solved.
Next, the manager gathers data, lists and enumerates the alternatives before him. He collects all relevant facts and figures, from which he identifies all the various alternatives of choice. This is needed to facilitate and support the decision making process. Information collection can be done through research, brainstorming or experimentation. It is important during the information gathering phase to also consult “people who know” and “people who matter”.
Finally, after weighing all the alternatives, he chooses and implements the best alternative. In this step, he ponders over the issues peacefully without distractions, and then decides on the best choice or best courses of action.
In conclusion, managerial decision making may just involve a “Yes” or “No” decision. In which case, the solution is simple. But in cases where the issues are of serious nature, even making a “Yes” or “No” decision may involve all the different steps enumerated above.
List of References: Corporate Finance. Microsoft Encarta 2009 [DVD]. Redmond, WA: Microsoft Corporation. Vroom, V.H., & Yetton, P.W. (1973). Leadership and decision-making. Pittsburgh: University of Pittsburgh Press.
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