Decision Making in an Organizational Context

Decision making is part of everyone’s life and all of us have to make decisions every moment. Right from choosing what to wear to what to eat to where we live and work and extending to whom we marry, decisions are an integral part of our lives. In an organizational context, it is worthwhile to note that decision making needs the right kind of information, the complete information and the ability to synthesize and make sense of the information. While the first two attributes depend on external sources, the ability to make informed decisions is a personality trait. Hence, successful CEO’s are those who can take into account the different viewpoints and divergent perspectives and arrive at the right decision.

The business landscape of the current times is littered with examples of companies that have made strategic errors and these are mostly to do with lack of proper decisions taken by the CEO’s and managers in these firms. For instance, the failure of Chrysler and Ford (the automobile majors in the United States) to meet the challenge of competition from Japanese auto majors like Toyota was mostly due to the lack of imaginative decisions that would have responded to the threat in a coherent manner. Of course, it is another matter that these companies (Chrysler in particular) under the stewardship of Lee Iacocca were able to successfully meet the competition by the Japanese because of firm decisions taken by him.

The other aspect that relates to decision making in an organizational context is that there must be complete and accurate information made available to the decision maker. In Economics, there is a term called “asymmetries of information” that indicates how incomplete and insufficient information leads to poor decisions and wrong choices. What this concept means is that having partial information or faulty information often leads to “analysis paralysis” which is another term for poor decision making abilities. Finally, even with reliable and accurate information, the decision maker ought to have good problem solving skills and astute decision making abilities to arrive at sound judgments regarding the everyday problems and issues.

The overriding rule in decision making is that the decision maker ought to have legitimacy and authority over the people who he or she is deciding upon.

In other words, decision makers succeed only when their decisions are honored and followed by the people or groups that the decision impacts. The reason for mentioning this towards the end is that in many cases, the fragmented nature of the organizations with different interests represented by factions often undermines the decision making capabilities of the decision maker. Hence, it is worth mentioning that such authority must be vested with the decision maker.

Hence, it is clear that the topic of decision making encompasses several elements (some of which have been briefly discussed in this article). We hope to cover more of these elements in detail in the subsequent articles and this article is thought of as setting the tone for the rest of the module on decision making.

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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.