Made by -

Rahul Achal
Manthan Suraj
Yash Vikas
Raj Abhishek
Shivank Keshav
definition and concept
Meaning of decision making
 Effective decision making Definition and concept organisation are constantly making decisions
at every level. Decision making ranges from strategic decisions through to managerial decisions
and routine operational decisions. Decision making in business is about selecting choices or
compromises in order to meet business objectives.

 However, decision making is not just about selecting the right choices or compromises. ‘Unless a
decision has ‘degenerated into work’, it is not a decision. It is at best a good intention’ [Drucker ,
1967].

 Effective decision making is defined here as the process through which alternatives are selected
and then managed through implementation to achieve business objectives.

 ‘Effective decisions result from a systematic process, with clearly defined elements, that is
handled in a distinct sequence of steps’ [Drucker , 1967]. Management accountants have key
roles to play throughout the effective decision making process.
Key developments in effective decision making
Key developments in effective decision making Over recent years, many leading organisation
have transformed their F&A functions so that they support the business and improve decision
making. These functions have the people, systems, processes and structure to provide timely
and accurate financial and management information in a user friendly format. Their finance
people are business literate as well as financial experts. They operate within a culture that
values their contribution to evidence based decision making.

The first step in a change programme to improve managerial decision making should be
determining a shared vision for the F&A function’s role. This shared vision should be
developed and communicated by the CEO and CFO to the wider business so that it is expected
that finance/business partners will improve decision making. A change agenda should look at
both the efficiency and effectiveness of the F&A’s vision, people, systems, processes and
structure.
Nature of decision making

organisation
ROLE OF DECISION
MAKING
BETTER UTILISATION OF
RESOURSES
 Decision making helps to utilise the available
resources for achieving the objectives of the
organisation. The available resources are the
6Ms,i.e.Men,Money,Materials,Machines,Methods
and markets. The manager has to make correct
decisions for all the 6Ms.This will result in better
utilisation of these resources.
FACING PROBLEMS AND
CHALLENGES
 Decision making helps the organisation to face and
tackle new problems and challenges. Quick and
correct decisions help to solve problems and to
accept new challenges.
BUSINESS GROWTH
 Quick and correct decision making results in better
utilisation of the resources. It also helps to achieve
its objectives.All this results in quick business
growth.However wrong or no decisions can result in
losses.
ACHIEVING OBJECTIVES
 Rational decisions help the organisation to achieve
all its objectives quickly.This is because rational
decisions are made after analysing and evaluating
all the alternatives.
TYPES OF DECISION
Types of decisions

Decisions taken by managers may be classified

under various Categories depending upon the
scope, importance & the impact that create in the
organization. The following are the different types
of decision:
1. Programmed & Non-Programmed.
2. Operational & Strategic.
3. Organizational & Personal.
4.Individual & Group.
1. Programmed & Non- Programmed decisions:

Programmed decisions are made in accordance with the existing policy rules or procedure.
Programmed decisions are normally repetitive in nature.

Non- Programmed decisions are different in that they are non- routine in nature.
Non- Programmed decisions relate to different situations for which there is no easy solutions.

2. Operational & Strategic decisions:

The focus in the operational decision is on the short run.
The primary purpose is to achieve high degree of efficiency in the company’s ongoing operation.

Strategic decisions are important which affect objectives, Organizational goals & important policy.
It requires extensive deliberation & huge resources and are taken by top level managers.
3. Organizational & Personal decisions:
Decisions taken by managers in the ordinary course of business in their capacity as managers relating
to the organizational issues are organizational decisions.

Managers do take some decisions which are purely personal in nature. However, their impact may not
exactly confine to their selves & they may affect the organization also.

4. Individual & Group decisions:

When the decisions is taken by a single individual,it is known as individual decisions. These decisions
are taken where the problem is of routine nature.

Important & strategic decisions which have a bearing on many aspects of the organization are generally
taken by a group. It contribute for better coordination among the people.
Planning is a managerial
function where managers are
required to establish future
goals and state the ways and
means by which these goals are
to be attained.
We can also say that planning
is taken as the foundation for
future activities.
In short, planning is deciding
in advance what is to be done.
Decision making is the process of
identifying a set of feasible
alternatives and choosing a course
of action from them.
Or in other words, decision making
is an intermediate-sized set of
activities which begains with an
identifying problems and ends with
choice making or decision giving.
Decision making is a part of
planning process.
 In decision making process manager identifies a specific situation and finds
the threats and opportunities that it offers.
 Then the manager must find the available alternatives to tackle the situation
 This is the time when planning comes in.
 By planning: managers finds these alternatives by testing and measuring their
effectiveness, they identify te pros and cons of each alternatives.
 after that managers use their decision making skills for selecting one path of
action.
 So we can say that planning and decision making are both interrelated.
Decision can be made without planning but planning cannot be done without
making decision.
Decision-Making Steps
Step 1: Identifying the Problem
 Identification of the real problem before a business enterprise is the first
step in the process of decision-making. It is rightly said that a problem
well-defined is a problem half-solved. Clear distinction should be made
between the problem and the symptoms which may cloud the real issue.
In brief, the manager should search the‘ critical factor' at work. It is the
point at which the choice applies. Similarly, while diagnosing the real
problem the manager should consider causes and find out whether they
are controllable or uncontrollable.
Step2-Analyzing the Problem

 Analyzing the Problem

 : After defining the problem, the next step in the decision-making process
is to analyze the problem in depth.Here, the following four factors should
be kept in mind:1.Futurity of the decision,2.The scope of its
impact,3.Number of qualitative considerations involved, and4.Uniqueness
of the decision
Step 4: Developing Alternatives
 Developing Alternative Solutions:
 After the problem has been defined, diagnosed on the basis of relevant
information, the manager has to determine available alternative courses of
action that could be used to solve the problem at hand. It is equally
important to take into account time and cost constraints and
psychological barriers that will restrict that number of alternatives .group
participation techniques may be used while developing alternative
solutions.
Step-5 selecting best solution
 Selecting the Best Solution
 : After preparing alternative solutions, the next step in the decision-making
process is to select an alternative that seems to be most rational for solving
the problem. The alternative thus selected must be communicated to those
who are likely to be affected by it. Acceptance of the decision by group
members is always desirable and useful for its effective implementation.
Step-6 Converting decision into action
 Converting Decision into Action:
 After the selection of the best decision, the next step is to convert the
selected decision into an effective action. Without such action, the
decision will remain merely a declaration of good intentions. Here, the
manager has to convert 'his decision into 'their decision' through his
leadership. For this, the subordinates should be taken in confidence and
they should be convinced about the correctness of the decision.
Thereafter, the manager has to take follow-up steps for the execution of
decision taken.
Step-7 Ensuring feedback
 Ensuring Feedback
 : Feedback is the last step in the decision-making process. Here, the
manager has to make built-in arrangements to ensure feedback for
continuously testing actual developments against the expectations. It is
like checking the effectiveness of follow-up measures. Feedback is
possible in the form of organised information, reports and personal
observations. Feed back is necessary to decide whether the decision
already taken should be continued or be modified in the light of changed
conditions.
 Meaning Of Decision Making
 The process of deciding about something important, especially in a group of
people or in an organization.
 In decision making it includes all the decisions related to the company
objectives.
 Decision making is the process of identifying and choosing alternatives.
 Decision making is required at all stages of business whether its staffing,
controlling, directing etc.
6 Steps for Effective Problem Solving

 Identifying the Problem

 Defining Goals
 Brainstorming
 Assessing Alternatives
 Choosing the solution and Execution
 Evaluation
Identifying the Problem
 Ask yourself what the problem is. There may be multiple
issues within a single situation. Make a list of these issues
and define why each one is a problem to you. Focus on
behaviors rather than on yourself or a person
 In other words It’s is important to find the main reason of
the problem.It may be inside the organisation or Outside
the organisation. Both Internal and External needs to be
taken in context to find the Problem . It may be related to
employee,Manager or Top level Department.
Defining goals
 Try to define your goals specifically, while making them as realistic and
attainable as possible. An example of a poor or broad goal is "I want to
be happy." First, define what happiness means to you and what you
can do to feel happier overall. Try to form your goals in the sense of
actions you can take to achieve the desired goal.
 In the context of Business .A company needs to setup the goal. Goal is
the most important part of decision making because all the decision
will be taken after analysing the Goal of the An organisation.
Brainstorming
 Take time to brainstorm possible ways to resolve the problem. Do not rush this
process- People often want to prevent and solve problems before they even appear.
Write down all ideas, even the ones that seem absurd. Try to find 6-8 varying
alternatives when resolving a particular Problem.
 In Brainstorming , It’s important to find more than one ways before Solving a problem
,the main benefit of this is that it’s gives you an idea how to deal with with different
tasks during the problem resolving.
Choosing the Solution And Execution
 Carefully weigh all solutions. The best solution is not
necessarily the option with the most pros and/or the least
cons.
 Think about what means more to you, which solution can
highlight the positive effects that matter the most to you.
 After Choosing the Alternatives, the best one is selected .
 Every Alternative is important during decision making
because they were made after predicting many possible
outcomes that can affect the target.
Evaluation
 It's time to evaluate your success. If you were successful, congratulations! If not, no
worries. Maybe you didn't quite choose the right solution or the situation changed.
You have definitely learned something. Take this newfound knowledge, return to the
beginning steps, and try again.
 It is important to do a evaluation of the plan whether it’s implemented and executed
properly or not. It is important that it fullfill all the needs of the company.
 Consists of six (6) steps that keep the decision maker focused on
facts and logic and help guard against inappropriate assumptions
and pitfalls.

Designed to help the manager approach a decision rationally and

logically.
1) Recognizing and defining the
decisionsituation
 a) Need to ‘define’ precisely what the problem is.
 b) Manager must develop a complete understanding of the
problem.
 c)Managermustcarefullyanalyzeandconsiderthe situation.
2) Identifying alternatives
 Managers must realize that their alternatives may be limited
by legal, moral and ethical norms, authority constraints,
available technology, economic considerations and
unofficial social norms.
 3) Evaluating alternatives
 a) Each alternative must pass successfully through three stages before it may be worthy of consideration as a
solution.

 1. Feasibility – Is it financially possible? Is it legally possible? Are there limited human, material and/or
informational resources available?

 2. Satisfactory – Does the alternative satisfy the conditions of the decision situation? [50% increase in sales]
 3. Affordability – How will this alternative affect other parts of the organization? What financial and non-
financial costs are associated?

 b) The manager must put ‘price tags’ on the consequences of each alternative.c) Even an alternative that is both
feasible and satisfactory must be rejected if the consequences are too expensive for the total system.
4) Selecting an alternative
 a) Choosing the best alternative is the real test of decision
making.
 b) Optimization is the goal because a decision is likely to
affect several individuals or departments.
 c) Finding multiple acceptable alternatives may be possible;
selecting one and rejecting the others may not be necessary.
5)Implementing the chosen alternative
 a) Managers must consider people’s resistance to change when
implementing decisions.
 b) For some decisions, implementation is easy; for others, very difficult or
time consuming.
 c) Operational plans are very useful in implementing alternatives.
 d) Managers must also recognize that even when all of the alternatives
and their consequences have been evaluated as precisely as possible,
unanticipated consequences are still likely.
1. NOMINAL GROUPTHINK

A. The NGT is designed to help all team members participate and

express opinions while still building team consensus

B . The nominal group technique is a structured decision making process

in which group members are required to compose a comprehensive
list of their ideas or proposed alternatives in writing

C. NGT is designed to help with group decision making by ensuring that

all members participate fully.
 NGT follows these steps:
7-10 individuals are brought together to participate in a structured exercise
that includes the following steps:

 Team members are presented with a problem, challenge or issue

 Individual team members silently and independently write down their ideas
about how to tackle the problem.

 Each team member (one at a time, in round-robin fashion) presents an idea to

the group.

 Individuals silently and independently vote on each idea.

2. DELPHI TECHNIQUE

Another technique which capitalises group's resources, while avoiding several

possible disadvantages of relying on group decision-making processes

This approach, called the Delphi Technique, is similar to NGT in several

respects, but also differs significantly in that the decision-makers never
actually meet.

Its greatest advantage is that it avoids many of the biases and obstacles
associated with interacting groups (that is, groups where the members meet
face-to-face)
DELPHI follows these steps:

 Select a group of individuals who possess expertise in a given problem area

 Survey the experts for their opinions via a mailed questionnaire.

 Analyse and distil the experts' responses.

 Mail the summarised results of the survey to the experts and request that they respond once again to a
questionnaire.

 If one expert's opinion sharply differs from the rest, he or she may be asked to provide a rationale.

 process is repeated several times, the experts usually achieve a consensus

3. STEPLADDER TECHNIQUE

A problem-solving structure recently proposed as a solution to the problem of unequal

participation in groups.
The technique is intended to improve group decision-making by structuring the entry of
group members into a core group.
Encourages all members to contribute on an individual level before being influenced by
anyone else.
This results in a wider variety of ideas, it prevents people from "hiding" within the group,
and it helps people avoid being "stepped on" or overpowered by stronger, louder group members.
3. STEPLADDER TECHNIQUE

Step 1: Before getting together as a group, present the task or problem to all members. Give everyone
sufficient time to think about what needs to be done

Step 2: Form a core group of two members. Have them discuss the problem.

Step 3: Add a third group member to the core group. The third member presents ideas to the first two
members BEFORE hearing the ideas that have already been discussed.

Step 4: Repeat the same process by adding a fourth member, and so on, to the group. Allow time for
discussion after each additional member has presented his or her ideas.
Step 5: Reach a final decision only after all members have been brought in and presented their
ideas.
CERTAINITY
 There is only one type of event that can take place.
 It is very difficult to find complete certainity in most of the business
decisions.
 In many routine type of decision almost certainity can be noticed.
UNCERTANITY
 The decision maker is not in a position, even to assign the probabilities of
happening of the events.
 In the environment of uncertainty, more than one type of event can take
place and the decision maker is completely in dark regarding the event
that is likely to take place.
 Such situation generally arise in cases where happening of the event is
determined by external factor.
RISK
 Under the condition of risk, there are more than one possible events that
can take place,
 The decision maker has information to assign probability to the
happening or non-happening of each possible event.
 Such information is generally based on the past experience.
 New tools of analysis of such decision making situation are being
developed. These tools include risk analysis, decision trees and preference
theory.
Why Creativity is Important to Decision Making ?
REASONS
1. Creativity Renews Motivation
(Get motivated by going outdoors)
2. Creativity Promotes Clarity
(Take a break by daydreaming)
3. Creativity Strengthens Critical Thinking
(Express your ideas by keeping a journal)
4. Creativity Helps See the Big Picture
(Think bigger through artistic activities)
5. Creativity Cranks Up Productivity
(Produce more by taking a nap)
6. Creativity Promotes Positivity
(Get moving for more positive energy)
7. Creativity Promotes Logical Reasoning
(Think clearly by meditating)
TYPES OF APPROACH TO DECISION MAKING
TYPES
A. The Rational Approach

B. The Behavioral Approach

C. The Practical Approach

D. The Personal Approach