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Organizational Decision Making


Decision making is often portrayed as a coherent process in which different perspectives and interests are considered in systematic and orderly manner, with the view to select optimal alternative which may lead to achieve the desired results (Miller and Ireland, 2004). In simple words, decision making is the course under which various alternatives are evaluated on the basis of their consequences in order to chose a particular set of action.  Thus, it is the consultative and collective process that supports day-to-day operations in turn leading the organization’s long term growth. Top level makes the strategic decisions to order to direct the future growth and success of the company, while the middle level of organization makes tactical decisions assisting their department and associated employees to perform effectively so that preferred organizational objectives are achieved (Garvin, 2006). On the other hand, employees at the lower level also make decisions regarding the conduct of their job or assigned tasks within specified time limit, improving their quality of work etc. Attributing to this fact, it can be said that decision making is the crucial aspect of every business which makes possible to sustain in highly competitive market and build the path to achieve the competitive success.  Making effectual decisions is the prime ingredient in enhancing an organization’s effectiveness. Some eminent authors are of the view that decision making is fundamental activity of management having a close link with all functions such as planning, organizing, directing and controlling (Hartel, 2008).

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Rationality Approach to Decision making

The most popular approach to decision making is rational model which lays emphasis on organization’s stability, effectiveness as well as the accomplishment of goals. This theory assumes that each individual acts rationally, in order to achieve the desired goals . He is able to analyze the situation in order to make the optimal choice from the set of alternatives based on evaluation of the related consequences (Turpin and Marais, 2004). Thus, it comprises of four basic steps:

  • Knowledge of available set of alternatives;
  • Identifying the consequences of each alternative;
  • Ordered preferences on the basis of which consequences will be evaluated;
  • And lastly, rules through which specific alternative will be selected.

However, this model has some limitations  of assuming that preferences are consistent and stable while in reality they change with time. Moreover, it also presumes that the decision maker is aware of all possible outcomes of a particular action, while in reality individual’s ability to find and process information is limited by available resources as well as his cognitive abilities and skills. Thus, it will be right to say that rational view is just a part of decision making process but not a whole process (Tierney, 2008).

Contingency approach

This model states that an organization is operating in the environment which is ever-changing and it involves interaction of various factors that in turn influence business operations. So, organization continually adapts and interacts with the dynamic environment. Further, this theory assumes that there exists a cause-effect relationship between decisions made and its consequences (Starbuck and Hodgkinson, 2008). Organization’s rules and policies are appropriate under different situations which in turn helps in decision making.

Bounded Rationality

Bounded rationality assumes that the decision maker does not always have perfect and complete information and is thus bounded by their values and unconscious habits, reflexes and skills. This model is characterized by Bounded rationality of two different activities i.e. Satisficing and Searching. Under this, firstly the alternatives are searched and then sequentially evaluated. If the alternatives that have been selected satisfy the minimum criteria, then it is said to be satisfice and the further searching is terminated (Morcol, 2006).

Intuitive decision making approach

While making certain decisions, individual faces many challenges such as time constraints, uncertainty, ever-changing conditions etc due to which one does not have enough time to apply rational model. Thus, in such circumstances, they use intuitive model of decision making i.e individual follows his intuition to decide rather than any conscious or logical reasoning (Turpin and Marais, 2004).

Importance of decision making in organization

In the present highly competitive and dynamic environment, it has become critical for organizations to survive and sustain.  A business enterprise is required to make decisions that will help in supporting the organization to not only survive, but also to attain competitive success. Decision making is the essential activity for enhancing the organizational effectiveness in terms of its operations as well as management (Lunenburg, 2011). From commencing the business to the end of it, decision plays a key role in each and every operations and activities. It also helps in formulating the policies and procedures on which the organization will operate providing the framework on which all business activities will be based with the aim to attain the goals. Thus, it is rightly said that decision making is the complex process that flows into every function of organization whether it is planning the process, organizing the operations and activities, directing the human resources or monitoring and controlling the entire organization process (Miller and Ireland, 2004).

Decisions are basically classified into programmed and non-programmed. Former decisions are routine or repetitive that affects the daily operations of the organization. While the latter decisions are non-recurring that are often made under the specific business situation. These decisions do not rely on particular rules or policies and require a deep understanding of the situation and critical thinking to overcome such situations. In an organization, decision making is the pervasive process that takes place at every level of management. Effective decision helps an organization to avail the potential opportunities before competitors and thus to attain the competitive advantage (Philip, 2012). It also provides strategic direction to firm that in turn leading to accomplishment to desired goals. In the crises situation, when certain business issue arises that affects the functioning of organization, optimal decision making helps in exploring the better solution to the problem and therefore helps in offsetting it. In sum, it can be said that decisions when effectively made helps in gaining the long term survival and prosperity of the organization (Eikenberry, 2012).


Books and Journals

  • Daft, R.L., 2009. Organization Theory and Design. Cengage Learning.
  • Garvin, D.A., 2006.  All the wrong moves. Harvard Business Review. 84.  pp.18–23.
  • Glassman, A.M. and et.al., 2007. Strategic management in turbulent times: The short and glorious history of accelerated decision making at Hewlett-Packard. Organizational Dynamics. 36.  pp.93–104.
  • Hartel, E.J., 2008. Emotions, Ethics and Decision-Making. Emerald Group Askanasy.
  • Koontz, H. and Weihrich, H., 2006. Essentials of Management. Tata McGraw-Hill Education..
  • Lunenburg, F.C., 2011. Decision Making in organizations. International Journal of Management, Business and Administration.. 15.
  • Miller, C.C. and Ireland, R.D., 2004. Decision making and firm success. Academy of Management Executive. 18. pp. 8–12.
  • Morcol, G., 2006. Handbook of Decision making. CRC Press.

Online Journals

  • Eikenberry, K., 2012. The big Key to organizational Decision Making. [Online]. Available through: < http://blog.kevineikenberry.com/leadership/the-big-key-to-organizational-decision-making/>. [Accessed on 25th March 2013].
  • Philip, A., 2012. The importance of Decision making in managing an organization. [Online]. Available through: < http://www.sooperarticles.com/business-articles/entrepreneurship-articles/importance-decision-making-managing-organization-811921.html>. [Accessed on 25th March 2013].
  • Rahim, M., 2007. How important Decision Making in an Organization?. [Online]. Available through: < http://www.blurtit.com/q573135.html>. [Accessed on 25th March 2013].

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