Decisions are important factors that have a great influence on the growth of organizations. Being decisive is one quality that distinguishes successful managers from unsuccessful managers. Any person who excels in decision making qualifies to be called not only a good manager but also an administrator as well. Most of the corporate managerial decisions involve commitments of huge sums of money and as such are difficult to reverse and can affect an organization's progress in the future. Acceptance and decision quality are the main factors that influence managerial decisions (Nag, Hambrick & Chen, 2007).
Managerial decision making is a multi-stage process with each stage serving different purposes. First, the organization's manager needs to define the challenges or problems facing the organization which call for decision making (Levin & Mark, 2006). In this extremely important stage of decision making, an incisive concept of the problem must be grasped by all the concerned parties. This means that the manger has to an in-depth understanding of the problem at hand before he introduces it to his subordinates.
The next step involves the manager gathering material facts about all the available alternatives that can be used to solve the problem. This involves the manager collecting all relevant facts from which he identifies suitable alternatives of choice. This is critical to evaluating and supporting the decision making process. Fact finding can be effected through research, experimentation or brainstorming. It is very important that during this stage, the manger consults widely 'those who know' and also 'those who matter' (Levin & Mark, 2006).
Finally, having weighed all alternatives, the manger selects and implements the most suitable alternative. In short, managerial decision making a simple but highly complicated process that requires a careful analysis of the situation before taking any action. Much as it may look simple, any managerial decision making process will in one way or the other involve all the three steps as illustrated above (Nag, Hambrick & Chen, 2007).
Being able to make critical managerial decision is essential in exercising superior performance. Such decisions require making critical references data, past records as well as performance indices and analyzing them before making deciding on the best course of action to take. Some organization executives often end up referring to inappropriate sources which lack scientific justification and as such end up making wrong decisions. Just because a particular strategy works well for a certain organization does not mean that the same strategy will equally work well in all other enterprises (Levin & Mark, 2006). Each organization is a unique entity distinct from all other organization and therefore all its problems will only be unique to its setup no matter how similar those problems can be to those in other organizations.
The following are the factors that affect managerial decisions
- Preparation budget: managerial decision making involves making of substantial budgetary allocations. This means that resources have to be allocated to the various aspects of any decision. A budget can be allocated to different factors of production but the allocations have to be within the organization's budget constraints.
- Need for future development; strategic management decisions are usually expected to impact significantly on the organization's future prosperity. This is because, such decision involve long term commitment of the organization's resources. In the absence of long term commitment of resources, the organization cannot achieve its future development plans.
- Orientation; managerial decision making should take into account the level of competition existing in the market. At times, business organizations have to face non-price competitions and this have to be critically considered when undertaking any strategic business plan.
- Environmental factors; managerial decisions are always influenced by the business environment in which an organization operates. There could be external as well as internal factors that influence a business's decision such as buyers, government policies, suppliers et cetra. A business must at all the time react appropriately to changes in its environment and this reaction is usually reflected in the organization's managerial decisions.
- Risk; strategic managerial decisions are mostly faced with the problem of risk. A good managerial decision plan should be able to analyze the level of risk bearing in mind the organization's capacity to bear the risk.
Other actors that influence managerial decision making are
- Nature of the business activities involves
- Size of the organization
- Financial position of the organization
- Urgency of the problem at hand
- Product durability
- Length of production process
- Level of competition in the market and the competitors' credit conditions
- Country's economic position
- Conditions at financial institutions
- Debtor's type of business and financial position
Decision making refers to the process by which a specific course of action is selected to deal with a specific problem in an organization. The success of any organization depends to a great extent the decision of the respective organization's managers. Managerial decision can be explained from the perspective of rational or non-rational models. In rational models of decision making, mangers engage is a rational decision making process and possess and understand all the information and facts that are relevant to their decisions (Nag, Hambrick & Chen, 2007). In contrast, the non-rational models of decision making only make a suggestion on the limitations of information gathering and information processing and thus tend to make it difficult for managers to make optimal decisions.
Managerial decisions can also be classified as vertical managerial decisions or horizontal managerial decisions. Vertical managerial decisions are enacted vertically in an organization that is from the top level of an organization to the bottom level. Here, the organization's top level managers takes a decision and passes it to the middle level mangers who in turn pass it to the bottom level (Vroom & Yetton, 1973). This type of managerial decision making process gives no room for bottom level managers to participate in decision making process as that authority is only vested with top levels. In horizontal, managerial decision making, the top organizational mangers consider the suggestions and ideas from the bottom levels of the organization before taking any decision.
Managerial decisions are also categorized as programmed decisions and non-programmed decisions. Programmed decisions are made to give solutions to simple, common and frequently occurring problems (Levin & Mark, 2006). These decisions give well established and easily understood solutions non-programmed decisions on the other hand involve unusual and often unexpected problems. These decisions are very complicated and wide consultations before they are implemented. This management decision making process is made up of seven basic steps:
- Identifying the problem that necessitates need for managerial decision making
- Identifying resources and constraints material to the problem
- Identifying alternative solutions to the problem
- Evaluating all alternative solutions to determine their suitability to solve the problem.
- Selecting the alternative that best fits the requirements of the problem
- Implementing the decision
- Monitoring and evaluating the progress of the decision which has been implemented.
As has already been highlighted above, all managerial decisions involve some degree of risk and depending on the level of risk involved, every decision making process falls into one of the following categories; certainty, risk and uncertainty (Triantaphyllou, 2000). Under the conditions of certainty, the decision maker knows with high levels of certainty what the possible alternatives are, what conditions are associated with each alternative and what the outcome of each alternative is.
In the condition of risk, the decision maker has little information about the available alternatives and solutions to the problem but has a rough idea about the likelihood of the outcomes of the various alternatives. The condition of uncertainty only exists when the future environment is totally unpredictable and as such everything seems to be in a state of flux (Vroom & Yetton, 1973). The decision maker is not able to identify all available alternatives, the risks associated with the various alternatives or even the consequences of implementing each alternative.
In order to carry out managerial decisions making effectively organization managers at all levels need vital information with speed, precision, brevity and economy. Management information systems can be used to enhance the process of decision making as they provide custom tailored procedures for comprehensive gathering of information, analyzing the information and presenting it (Levin & Mark, 2006). This makes it easier for the management to make quick decision especially when the problem under consideration requires urgent attention or when the business operations are threatened by some external factors.
Measurement of the factors and costs
The costs and factors as outline d above can be measured using a number of ways but will in this project be limited to collection of facts or data using questionnaires. These will be drafted in such a manner that they address all key issues related to managerial decision making process and will be sent to different business organizations to be filled by the respective organization's management executives (Triantaphyllou, 2000). All information obtained will be treated with utmost confidentiality and will be used solely for the purpose of the project's research. Some questionnaires will be sent to middle level managers while others will be sent to top level managers. A total of about twenty top performing and middle level companies will be covered in this project study research.
The collected data will be input into the SPSS (Statistical Programme for Social Sciences). This programme will be used to the various aspects of the data. Both qualitative and quantitative data analysis will be done (Triantaphyllou, 2000). All variables material to the managerial decision making will be analyzed and conclusion will be drawn.
Managerial decision making is one aspect of strategic management and requires setting of goals over tactics. The decision making process in an ongoing process that is intended to evaluate the performance of an organization and control the operations of the organization (Vroom & Yetton, 1973). It requires analytical assessment of each problem with careful consideration of the dimensions of the problem as the business organization is concerned.
The actions of any organization must be consistent with the goals and expectations of the respective organization's management and these are in turn consistent with the situation in the market and also the context in which the business organization undertakes its operations (Triantaphyllou, 2000). Strategic management involves not only the management team but also the board of directors as well as all other stakeholder within and outside the organization who have a bearing on the organization's performance.