Decision-making in Organisations

How do organisations take decisions?

First of all, I want to refer to the “academic” definition, whereby rational decision-making is a process that consists of the following stages (Chi, nd):

1. Verify and define your problem

2. Research and brainstorm possible solutions for your problem

3. Set standards of success and failure for your potential solutions

4. Flesh out the potential results of each solution

5. Choose the best solution and test it

6. Track and analyze the results of your test

7. If the test solves your problem, implement the solution

However, in practical terms, organisational decision-making entails much more than the “problem” scenario typically prescribed to it. Organisations constantly take decisions. Actually, it is not really the organisation that takes the decisions, but the people (and even the programmed systems) operating inside its “borders” (its control) that do.

Decision-making typically entails – Programmed and -- Non-pogrammed decisions.

The difference between the two is to be find in the distinction between decision-making and implementation. Higher levels (strategic dimensions of the hierarchy) in the organisation (such as top management) tend to take non-programmed decisions, while operating levels take mostly programme decisions.

Programmed decisions are prescribed; non-programmed decisions are left to the discretion of the decision-maker. Deciding on the strategic objectives of the organisation, and subsequently the strategies to be applied to achieve those objectives, entails non-programmed decisions. The process to be followed to take those decisions may be prescribed, but not the decision as such. Implementing the decisions of management in a restricted and prescribed context are programmed.

In most organisations, the authority to take decisions emanate from the owners of the business (in the case of government organisations, this is voters and citizens; in the case of public corporations, shareholders; and in the case of start-up business, the owner). The owners delegate decision-making authority to top management, top management to senior managers, senior managers to middle managers, middle managers to supervisors and supervisors to operational workers. As the process of delegation of authority cascade down through the chain of command, the conditions (terms) and scope (extent) became increasingly focused and limited. Ultimately, it will be an experts in a specific area of operations that will take the decisions about that operational area. However, the scope will also became increasingly limiting (e.g. from the CEO that may approve basically any amount of purchases or payments, to the payment clerk that is [although an expert in processing payments] limited to payments not exceeding Cur1,000 [as an example]).

The question is what type of structures, systems and processes do an organisation use take decisions, or assist with the decision-making process? This may vary from giving substantial powers to s single person (e.g. the CEO) to take decisions that may impact substantially on the direction of and controls in the organisation, to regular meetings, strategic planning workshops and even modern transaction processing systems (on-human) that take s strictly programmed decision to place an order for a specific item when stock safety levels are breached.

Organisations want to organise decision-making arrangements in such a manner that decisions can be taken which will allow it to respond pro-actively to the demands from its external environment (including clients and regulators) but without creating risks in the process.

No organisation can take decisions that will add value to its operations and strategic response capacity without updated, reliable information. This information must be obtained through the analysis of its external environment (e.g. action research) but also (vitally important) from internal data-processing and information generating systems. Furthermore, this information must be communicated to the right decision-makers through equally updated and reliable (and, where necessary confidential) modern communication systems (including electronic systems).

References

Chi, C. (nd, Downloaded March 2019). Rational Decision Making: The 7-Step Process for Making Logical Decisions. Retrieved from @BigRedDawg16: https://blog.hubspot.com/marketing/rational-decision-making