Importance of Decision Making


Decision making is a process of selecting the best course of action or plan from different alternatives available. In the wider process of problem-solving, decision- making involves choosing between possible solutions to a problem. It is a means through which managers takes action for solving the problem. Decisions can be made through either an intuitive or reasoned process, or a combination of the two. This is an integral part of the management system of the company which aims at improving efficiency. Decision making is the one through which managers are able to take right decisions at right time.

Taking decisions is the core part of every organization management team. If any wrong decision is taken then it would be having negative consequences on the organisation. It may affect its overall functioning making it difficult for organisations to attain their goals. Decision-making process makes it possible to choose the right action among different alternatives at the right time. The selection of the right decision makes it easy to properly manage all business affairs and easily attain objectives.

Importance of decision making

  1. Selection of Best Alternative: Decision making has an important role in the selection of the best course of action timely. There are different solutions available to tackle any problem. Selection of best action involves proper analysis of the situation by decision-maker using various accounting, financial and statistical tools. Proper decision making enables the decision- maker to properly analyse all aspects and choose the most appropriate action.
  2. Ensures Continuity of Business: Every business is required to take different decisions routinely for the successful operation of its activities. Taking the right decision timely is important for every business and any wrong decision would lead to negative consequences. Business is required to decide various courses of action related to its production, marketing, sales and various expansion programmes. In today’s high competition, market business can only exist if takes appropriate decisions. Decision-making process helps businesses in facing this competition by taking the right decisions.
  3. Fuller Utilization of Resources: Efficient utilisation of all resources of an organisation is a must for achievement of its goals and objectives. Every organisation has the following main resources: men, money, material, machine, method, market and information. All these resources should be properly utilised without any wastage. Managers through efficient decision making are able to take corrective actions regarding using these resources. It helps in ensuring that all resources are fully utilised thereby improving productivity.
  4. Formulation of Plans and Policies: Decision making process has direct relation with the establishment of plans and policies. Every organisation operates to achieve certain goals. For the achievement of these goals, framing proper plans and policies is a must. Plan and policies are the initial part of decision making process. Proper decision making enables the managers in proper implementation of these policies to achieve the desired goals.
  5. Achievement Of Objectives: Proper Decision making helps in achievement of goals and objectives of the organisation. All organisations strive hard to attain their objectives. These objectives are termed as guiding factors for all operations of the business. Taking of proper actions at a proper time helps in the achievement of these objectives. Decision making process helps the managers in properly analysing the situation and selecting the most appropriate action.
  6. Facilitates Innovation: Innovation is something which is required to be adopted by every business as per market changes. Proper decision making facilitates innovation. Innovation brings new products, new process and new ideas in every organisation. Implementing these changes require proper planning and decision making. Rational decisions taken by management help in adopting these innovative ideas easily.
  7. Helps In Business Growth: Quick and rational decision taking helps in improving the productivity and efficiency of business. It helps in fuller and efficient utilisation of resources. Better decision making helps the business in easily facing the challenges and problems of the market. All these eventually lead to the achievement of business goals and also help in business growth.
  8. Evaluates Managerial Performance: Decision making is primary function performed by every management team. Number of right decisions taken by managers determines the quality of management. Effectiveness of decisions clearly tells how far the managers are delivering their roles and duties. Wrong decisions taking clearly depict the failures of management in performing their function. This way decision making helps in evaluating the performance of management team.
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