Importance of Decision Making in Business

“The ability of making a decision and sticking to it is the foundation of good leadership skills.”

Decision making is defined as an on-going process in any business, either at micro or macro level. Good leadership and decision making skills enable you to find out the root problem and come up with solution for it. It is beneficial for employees and the organization as a whole. Decision making is the process of choosing the best action-plan from among various alternatives. It is helpful for fruitful operation of the activities carried out in the organization. All the administrative functions that include arranging, planning, sorting out, coordinating and controlling are dictated by decision making process. Decision making can be at three levels, i.e., organization, individual and corporate.

Decisions are always taken in the interests and benefits of the organization. In any issue or matter, e.g., strategic, human resource or business activities, the processes of making decisions are always unpredictable, and this includes experts of various genres. While the organizations operating at the micro level includes all levels of managers, macro level organizations mostly rely upon a group of experts specially prepared to make all kinds of decisions. It is important to remember that these groups cannot turn out final decisions or conclusions. The main point of focus is to aggregate the consultative process of decision making. All in all, the process of decision making bears its advantages and disadvantages, and radiates outcomes and results of the organizations’ overall development.

The other point of view identifies that decision making in organizational context needs to have complete and precise information for the decision maker. In Economics, there is a term called "asymmetries of information" that shows how fragmented information leads to wrong decision making. This means that having incomplete information often leads to "analysis paralysis” which is considered as poor decision making process ability. At last, even with solid and exact information, the decision maker should have good critical thinking aptitudes and abilities in order to arrive at sound judgments with regard to ordinary issues and problems.

The individuals tend to think and question before performing any assigned task. This is productive in forecasting and analysis of a person's behavior. Individual’s decision making process has certain benefits like; individuals have the ability of making prompt decisions, whereas group is overwhelmed by different individuals due to which decision making process is time consuming. Furthermore, assembling the group takes a lot of time. Individuals don't escape from obligations. They are responsible for their performance and activities, whereas in group it is difficult to consider any one individual for being responsible for making wrong decisions. Decisions made by the individuals save time, cost as well as energy as they make coherent decisions, whereas group decision making includes time, extra cost as well as energy.

Corporate decision making occurs at different levels in an organization and could be top down or bottom up. The distinction between the two decision making styles is that the top down decision making is carried out at the top level of hierarchy and the decisions are passed down the corporate ladder in order to be executed. In contrast, the top down decision making is carried out by giving the authority to the supervisors and line administrators to take the decisions in light of the conditions prevailing in their groups. It should be remembered that middle management is often termed "sandwich" layer since they have to execute the decisions made by the higher authorities and meantime, they need to sort out how to run the groups and convey them to the lower levels as well.

Decision making is a part of everybody's life and every one of us has to make some decisions every minute. It is taking place in every phase of life ranging from what to wear to what to eat and where to live to where to work. In an organizational context, it is beneficial to note that decision making requires the authentic information and ability to integrate and understand the information. However, the initial two attributes mainly rely upon external sources, the capacity to make informed decisions is identity characteristic. Subsequently, effective CEOs are the individuals who consider the distinctive perspectives and divergent viewpoints, and reach at the right decision making process.