Decision-making is the act of making a choice among available alternatives. There are innumerable decisions that are taken by human beings in day-to-day life. In business undertakings, decisions are taken at every step. It is also regarded as one of the important function of management. Managerial functions like planning, organizing, staffing, directing, co­ordinating and controlling are carried through decisions. Decision making is possible when there are two or more alternatives to solve a single problem or difficulty. Every decision-making process produces the final choice. 

Every decision-making process produces the final choice. Many problems may arise in an organization while conducting the regular organizational activities. So, the problems must be solved for the smooth operation of organizational activities. It is believed that the management without a decision is a man without a backbone. Therefore, decision making is a problem-solving approach by choosing a specific course of action among various alternatives.

According to George R. Terry, "Decision-making is the selection, based on some criteria from two or more possible alternatives.“ 

According to J. L. Massie, "A decision can be defined as a course of action consciously chosen from available alternatives for the purpose of the desired result"

In conclusion, we can say that decision making is the process of choosing a specific course of action from various alternatives to solve the organizational problems or difficulties.

Any five importance of decision making are as follows:

  • Proper utilization of resources: Organization has various resources like man, money, method, material, machine, market and information. All these resources can be properly utilized with the help of right decision at right time.  As a result, an organization can operate at a minimum cost.
  • Selecting the best alternative: There are many alternatives to solve the problems. All of the alternatives cannot solve the problems. So, the best alternative should be selected. The best alternative can be selected through rational decision making. Therefore, decision making helps to select the best alternative from the various alternative.
  • Evaluation of the managerial performance: Decision making  is essential for evaluating the performance of a manager. The quality of manager largely depends upon the number of right decision that he/she can take for the organizational success. Therefore, decision making is important to judge the performance of top level of management.
  • Employees motivation: Decision making provides an overall framework of operation and guides line to the operating level of staffs. It also provides different types of facilities and benefit on time. Due to this, employees are motivated to their job or work as per the organizational requirement.
  • Indispensable element/ component: Without taking the right decision at right time, nothing can be performed as per the plan. So, decision making is indispensable element/ component for the organizational success.

The further importance of decision making can be discussed under the following points:

  • Proper utilization of resources: Organization has various resources like man, money, method, material, machine, market and information. All these resources can be properly utilized with the help of right decision at right time.  As a result, an organization can operate at a minimum cost.
  • Selecting the best alternative: There are many alternatives to solve the problems. All of the alternatives cannot solve the problems. So, the best alternative should be selected. The best alternative can be selected through rational decision making. Therefore, decision making helps to select the best alternative from the various alternative.
  • Evaluation of the managerial performance: Decision making  is essential for evaluating the performance of a manager. The quality of manager largely depends upon the number of right decision that he/she can take for the organizational success. Therefore, decision making is important to judge the performance of top level of management.
  • Employees motivation: Decision making provides an overall framework of operation and guides line to the operating level of staffs. It also provides different types of facilities and benefit on time. Due to this, employees are motivated to their job or work as per the organizational requirement.
  • Indispensable element/ component: Without taking the right decision at right time, nothing can be performed as per the plan. So, decision making is indispensable element/ component for the organizational success.
  • Achievement of goal/ objectives : Decision making  searches the best alternative, utilize the resources properly and satisfy the employees at the workplace. Due to this the organizational goals/objectives within given time and budget can be achieved. Therefore, the organizational or objectives can be achieved as per the desired result.
  • Pervasive function: Decision-making is a pervasive function of managers aimed at achieving organizational goals. Decisions are to be taken in all managerial functions such as planning, organizing, motivating, directing and controlling and in all functional areas such as production, marketing, finance, personnel and research and development. 

Decision making is not a single activity. It involves a series of activities which are done in a sequence. The following are the steps for effective decision making:

  • Identification of problem: The problem is the difference between standard and the actual work performance. The reason of problems may be internal or external. Decision makers should identify the correct problems before taking any decision. Every decision-making process begins with recognizing and defining the real problem faced by the organization.
  • Analysis of problem: After identification of the correct problem decision maker should analysis the problem. The problems should be analyzed systematically and scientifically in terms of cost, time, legality, organizational resources, and short-term as well as the long-term impact of the problem. While analyzing the problem, he/she may use various financial, accounting and statistical tools or techniques.
  • Developing an alternative course of action: This step involves developing alternatives and finding the various possibilities for courses of action. As we know that a problem has multiple solutions. But all alternatives of solving a problem may not be equally profitable. It needs critical thinking to visualize the possible alternatives. 
  • Evaluating alternative course of action: After developing various possible alternatives, the next step in the decision-making process is to evaluate each alternative courses of action to identify their strong and weak points. In this step he/she should try to search the answers to the following questions:
  1. Whether the alternative is feasible in terms of cost, time, legality and other organizational resources or not?
  2. Whether the alternative is satisfactory to solve the organizational problems or not ?
  3. Whether the features of alternatives are matched with the objectives of the business or not ?
  • Selecting the best alternative: After analyzing the various alternatives, the decision maker has to select the best alternative among the various alternative to solve the problem effectively and efficiently. For this purpose, he/she may use his/her knowledge, skills and experiences. He/she may also concern with other stakeholders for a better decision. 
  • Implementation of decision: After selecting the best alternative, the manager or superior should convert decision into action. All the decisions of the organization are worthless if they are not implemented. For this purpose, he/she should communicate with their subordinate and manage the various additional resources for the implementation of the organizational decision. 
  • Review of decision: The last step of the decision-making process is to get response or feedback from other stakeholders of the organization. If the response is positive then the decision-making process is successfully completed. It the response is negative then he/she must go through the first step to take a new organizational decision.