Decision Making Process

Decision making is essential in our day-to-day activity. The process of decision making is not only beneficial to an individual but also to big institutions. The most competitive businesses are managed by individuals who are able to evaluate different options and chose the most suitable alternative.  There are many tools, perceptions, and techniques which may be applied in the process of decision making. The process is not natural particularly world since different people have different ideas, opinions, experiences, and perceptions. Scholars have developed theories explaining how different people make decisions and factors which influence the process either in the present or in the future. The process is influenced by such factor as; past experience, age, and individual differences, cognitive biases, escalation of commitment etc. This paper will focus on the first three factors highlighted.

Decision-making process

The process involves seven steps; first, one has to identify the purpose of the decision.  A critical analysis of the problem is done at this stage.  One end to answer the following questions; what is the problem? Why should we solve the problem? Which parties are affected more by the problem? And finally, does the problem have a deadline? Answering those questions will offer a clear picture of the actual problem. Secondly, one should gather information from various stakeholders. Involving stakeholders in gathering information would help to outline the factors contributing to the occurrence of the problem. The third step involves judging alternatives. During this step, one has to set up some criteria for judging the various options while considering the organizational culture and objectives. For example, the key objective of an enterprise is to maximize profit. The firm should, therefore, make decisions which would help the company realize the goals.

The fourth step involves brainstorming and analyses of the various choices. During this phase, all the best ideas are listed down, and the best option is chosen. One should also understand the cause of the problem before concluding on which option fit the organization. While brainstorming, it is recommendable to apply cause-and-effect diagram while helps to identify the possible source of the problem and Pareto chart which aids in the selection of the cause with the most significant effects. The next step involves evaluation of alternatives. The alternatives are keenly evaluated based on their pros and cons. During this step, people in the socioeconomic status are likely to come up with the best alternative since this stage relies greatly on experience.

Having evaluated the various alternatives, one has to select the best alternative which best fit the situation of the firm. After selection, execution of the decision has to follow. The decision is converted into a plan. One may execute the plan alone or with the help of the support staffs. Finally, one has to assess the consequences of the decision.  During the evaluation process, one is in a position to identify the various mistakes he/she did in the decision making process thus helping him/her to avoid repeating the same mistake in the future.

Factors Influencing Decision Making

Future and present decisions are influenced by past experiences. According to people are likely to make a similar decision when faced by a comparable situation in case a decision made in the past was successful. Decision makers are also expected to highly avoid past mistakes. However, future decisions based on experience may not be the best. For instance, in the financial sector, decision-making decision based on the past sunk outcome may lead to heavy loss which may affect the entire business. Notably, consumer tastes and preferences change over time; therefore, investment decision should be based on the needs of the present consumers. The approach of past experience conflicts with people’s expectations.

Sunken outcome and escalation of commitment are also key factors which influence decision making is an institution. These two factors refer to unrecoverable costs which an organization has already incurred. People tend to count on the amount of money and time invested in decision making and fear to disappoint the progress. They, therefore, tend to commit themselves in the same situation regardless of whether the decision is beneficial or not. These factors hinder investors of organizational management to validate new strategies.

Cognitive biases refer patterns of thought which may influence decision making.  Such thoughts are based on past observations and generalization. Cognitive biases may lead to poor decisions in an organization since generalization may lead to faulty logic, memory errors and inaccuratejudgment.  The process includes;

  1. Belief bias; people heavily rely on previous knowledge in making decisions. They are not ready to gain new information which may help them to make more informed decisions. People tend to stick to traditional decisions thus failing to appreciate that change in the system has occurred. Changes are inevitable and therefore decision-making process is also affected.
  2. Hindsight bias; under this situation, individuals tend to explain an event as inevitable once it has already happened. For instance, making the wrong decision before investment would lead to a loss in business. The management would, therefore, tend to explain that the loss incurred in that particular financial year was inevitable due to various factors which could not even be the cause of the injury. Hindsight bias is therefore involved high risk and uncertainties.
  • Omission bias; normally, individuals have a tendency to omit information allegedto be risky. Investors tend to be optimistic about their investment plan. For example an omission bias, an individual is selling his second-hand vehicle. The vehicle’s engine is defective hence the seller has three options first, tell the buyer that the engine is faulty, secondly, lie to the buyer on the condition of the engine and lastly, to remain silent about the engine’s health. The first option is the best. But, suppose the seller opts to remain silent? In such a situation you are equally as good as one who opts the second optionsince you decide to omit crucial information.
  1. Confirmation bias; is a situation where an individual observe only what they presume in an observation.

The decision-making process can also be influenced by; socioeconomic status, cognitive abilities, and age of an individual. According tocognitive functions declines with age thus affect decision making.The elderly are overconfident on their capacity to make decisions and therefore, they do not embrace new strategies. Researchers have also found that old people have fewer choices compared to young people.People with lower socioeconomic status have less access to education and therefore subject to making unreliable decisions.

Theories of decision making

Self-regulation theory

This theory is based on the self-discipline of an individual. The argument for this theory is that whatever people want does not favor them.The model postulates that people should expend effort to control what they believe in and what they say. People should remain committed to their actions and believes in the present time and the future. According to this theory, an individual should try as much as possible not to do what is not expected of them. For example in business, transparency, honesty and accountability are paramount virtues which have to be adhered to.The management should not be involved in corruption. The employees should also not be included in the action which may ruin the future progress of the firm.

The theory is grounded on four components which include; standards, which indicate desirable behaviors secondly, motivation; individuals are motivated to meet the criteria. Third,part involves monitoring of thoughts and situations which precede standard breaking. The last aspect indicates the willpowerwhich serves as the internal strength to control urges.Generally, this theory states that what you want to do and what ought to be done are not the same and therefore one has to make a decision. The decision one makes at that particular situation have an impact on the welfare of other people. For instance, in case of a conflict in the workplace, the way an individual react does not only affect him but also the colleagues.

Elaboration likelihood model

The theory states that there are two ways in which make decisions and as a result they get motivated. First, when one is motivated and able to pay attention, they take conscious thinking and a logical central route in the decision-making process. Arguably, this helps to change a person’s attitude and adopt the speaker’s argument. Secondly, an individual may take a peripheral route where one does not assume any form of persuasion.  In such a case one makes his decision based on whether he/she like the speaker or not.

In the central route technique, the listener is able to way both arguments for an argument against and then derives the best option. When people are comfortable in their situation and their fear to adopt new changes which may affect them in the long run or fear to experience a great loss perhaps based on their past experience will tend to embrace the peripheral route.

Cognitive dissonance

Cognitive dissonance refers to the feeling of uncomfortable strain which arises from holding two contradictory thoughts in the thoughts at the same time. Dissonance is influenced by three factors which include; the significance of the subject, how severe the conflict is in the discordant thoughts and the inability to justify the conflict. Researchers have found that dissonance increases when one does something contrary to his or her beliefs. For example, if one feels that he is a winner and happen to lose, then the person will not be comfortable at all due to cognitive dissonance. It has also been found that cognitive dissonance is a strong motivator which allows people to change their beliefs.

When an event has already occurred and cannot be undone, individuals are forced to change their strong philosophies and attitude. Such people are then forced to make the right decisions in order to be successful.  The same is applicable in organizational decision making where one has conflicting ideas from his beliefs. Staffs may feel that other people’s reactions are wrong and should be scrap away. However, such an individual turn out to be more successful; thus one has to change and adopt such behaviors.

Critical analysis

Decision making can be influenced by different factors such as age and individual beliefs. However, one has to understand the market demand while making decisions. When a business relies on decisions which were made for instance in the 50s may be less successful in the current business situation. The level of technology in the 50s is different from the current technology, skills by early investors are different from the present investors due to the changes which have occurred since then. The model of cognitive dissonance states that one has to change the behaviors and beliefs to make informed decisions.Sticking to the traditional beliefs may act as a barrier to penetrate new markets due to low market information and low quality of products.

According to the elaborative likelihood model, people who are less skilled and experienced can be easily persuaded thus adopting the central route decision making process. Notably, this may affect the outcomes of the decision. For example, a young investor is attracted by an advert on television and convinced to invest in a sector he/she does not understand are likely to incur substantial losses. Remarkably, this may occur as a result of inadequate market information, lack of understanding of the legal requirements thus incurring heavy penalties form the government etc. Therefore, the elderly and experienced persons are less likely to fall under such a trap.

Cognitive biasmay hinder the success of an organization since individuals tend to generalize things without taking into consideration of the current market situation. The production process is very sensitive since the deliverables produced have to meet consumer expectations. Production firms should therefore heavily rely on the current data and avoid data which was collected many years down the line. The Self-regulation theory states that an individual should highly stick to the code of ethics. Misleading information would lead to poor reputation, employee turnover rate, and reduced consumer loyalty.

The decision-making process involves five key steps which help one to arrive at the best option. The decision making procedure ensure that an individual is able to select an alternative which best suits the current market situation. People who hold past experience are not likely to befit from the procedure since they are not willing to change their views.Such individual suffers from hindsight bias, that is, they explain their failure as inevitable and tend to repeat the same mistake in the future.

Escalating commitment is a factor which may reduce competitive capacity of a firm. The process is expensive since the firm is not able to recover the amount of money already incurred in the decision-making process. However, the changing demand in the market requires the company to adopt new technological skills. Notably, this will help in improving the quality of a brand, address consumer demand and also improve consumer loyalty. Sunken outcome and escalating commitment may hider data interpretation within an organization since the decision maker are guided by the desire to commit to the previous decision.

Generally, the decision-making process is essential in the progress of an organization. Poor decisions making leads to poor performance of a firm and therefore ant organization should depend on the current market information. The firm’s competitive capacity depends on its ability to interpret data thus making an informed decision. Decision makers should also understand the cause of the problem facing the firm before choosing the best alternative to address the problem.

Data interpretation helps any given firm to make the right decision.Consumer loyalty for a given firm increases when consumer utility is achieved.Dependence on updated data also helpsa company to improve the quality of a given commodity.  Employee turnover rate may also decrease when the management team makes informed decisions. Reliance on traditional decisions may lead to poor choices which adversely affect the welfare of the employees. In the current market, staff training is crucial since it helps to make critical decisions thus increasing efficiency in the production process.


During our day-to-day activities, we are expected to make different decisions which may impact on our future lives. Different choices require different efforts depending on their seriousness and their potential outcome to the company and the society in large.In decision making an individual should weigh both the positive and negative impacts of the business and adopt one with positive outcomes. Indeed, this will help to overcome losses within an enterprise. Hence the firm will remain competitive within the economy. There are times when one opts not to make decisions particularly when a lot of hostilities faces one after making harsh decisions. However, one should make healthy decisions and accept their outcomes in order to remain in control of the company life.

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