Decision-Making in Management: Importance, Types and Steps

Updated June 24, 2022

It's common for management to make important decisions that are in the best interest of their workplace. Effective decision-making may improve workflows and create an environment that cultivates innovation. If you're a member of your company's management team, learning the proper steps in the decision-making process may help you make informed choices. In this article, we discuss why decision-making in management is important, explore the different types of decision-making and list the steps that you can take to make the right decisions for your workplace.

Why is decision-making in management important?

Decision-making in management is important because you may encounter situations where you have several options that may impact the workplace in different ways. They may affect employees, other members of management or the company's reputation. Here are some other reasons why decision-making in management is important:

Ensuring the company keeps growing: You might make critical decisions that ensure your workplace continues growing, like making financial decisions.
Choosing business partners: Management may decide on valuable business partners, like suppliers or stakeholders, that your workplace may partner with to bring in a higher amount of profit.
Choosing effective operations and strategies: You can decide on effective strategies and operations to optimize efficiency and reach workplace goals.

Types of decision-making in management

Here are the three types of decision-making that you may encounter in management:

Avoiding

The avoiding decision-making style allows members of management to not make a choice, rather than choosing from the present options. You may choose this style of decision-making if you don't have enough information to make an informed decision. Instead, you may decide to wait for more alternative choices to present themselves before making coming to a decision.

It's important to have your workplace's best interest in mind while determining the right choice, so you may also keep from making a decision if the potential outcomes may cause more harm to your organization than good. Lastly, you may choose not to make a decision if there is not an urgent need for change. For example, if you're deciding on a new attendance policy for employees, you might decide to stick with the existing policy if employee attendance isn't a pressing issue in your workplace.

Problem-seeking

Problem-seeking involves making decisions based on estimations or possible future events. Management may use this style of decision-making when finding proactive ways to keep potential issues from happening. When doing so, you might make decisions based on the outcomes of previous challenges in your workplace.

Problem-solving

A problem-solving decision-making style allows for management to create solutions to issues that exist within the workplace. This is a common style of decision-making, since a key role of management involves resolving workplace issues to improve workflow and create a positive environment for team members. You might make problem-solving decisions when an employee comes to you with an issue, or when an obstacle arises that lowers productivity.

Decision-making steps

Here are the steps in the decision-making process to help you identify your available choices and make an informed choice as a manager:

1. Recognize the issue

The first step in the decision-making process involves recognizing an issue or opportunity for change. Consider what elements of your workplace where you can implement changes that lead to improvement. If addressing an issue, determine the cause of the issue so that you may understand how it can affect your workplace in the future. If you're looking for opportunities for improved operations or workflow, consider speaking with your team members to understand their ideas for improvement.

2. Gather relevant information

The second step involves gathering information to help you make a well-informed decision. Try to gather facts and data that include numbers, so that you may compare statistics. For example, if deciding on new sales processes, you may review the sales numbers from previous quarters to see which strategies generated the most profit. Communicate with your team members that may provide valuable information about the decision.

3. Create a list of options

Next, create a list of options that can benefit your workplace. Try to develop a wide range of options so that you have many alternatives from which to choose. Consider consulting with team members for decision-related suggestions. Be sure to write the list on a document so that you may save it and refer back to it as you continue through the decision-making process. When creating your list, include the following information:

A description of the option: Describe each option, including which staff members the decision may affect, and what materials, budget or resources your workplace may require to make the decision happen.
Potential outcomes: Describe the potential outcomes for each option, including the benefits and challenges.
Second options: Consider including information about a second option that you may pursue if the first decision doesn't have the desired outcome.

4. Consider your options carefully

After creating your list of options, consider each carefully before making your decision. Here are some elements that you may consider while evaluating your choices:

Feasibility: This determines if a decision is convenient and practical for the workplace. If a decision is feasible, then you may make the changes easily and the transition may go smoothly.
Acceptability: This measures how well staff members may accept the decision and adapt to the change. To better understand acceptability, you might consult with team members to understand their opinions on each option.
Sustainability: This refers to the long-term effects that the decision's outcome may have on your workplace, and if the company is able to sustain the change for an extended period of time.

5. Make your decision

After reviewing all available options, it's time to make the decision that is a good choice for your workplace. Make the decision that best matches your workplace's needs. Then, you can create a plan to implement the changes into your workplace. To do so, be sure to inform staff members of the change and explain how it may impact them. Address any concerns or questions that they may have.

6. Review your choice

After making your decision and implementing the necessary changes, take time to review the impact of your choice. Determine how it impacted employees and other members of management. You might request employees to provide you with feedback on the decision, or you may review data for a period of time after making the decision. This may help you better understand the outcome of your choice. For example, if you decided to change your company's marketing strategies to lower expenses, you might review your workplace's budget to better understand the money that it saved because of your decision.

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Tips for making effective decisions in management

Here are some tips to help you make effective decisions in your management role:

Identify your goals

Try to identify the goals that you want your team to achieve. When making decisions, you may review your goals to see if any of the available options may impact your objectives. For example, if you have a goal of growing your team to contain 25 people, then you might make a decision to hire new employees until you achieve your goal.

Align your decisions with your workplace's values

You might make decisions that correspond to your workplace's values so that the company's reputation remains positive, rather than making a decision that may make the company seem withdrawn from its core values. As a member of management, try to consider which option may best align the company's values and beliefs. For example, if your workplace values teamwork, you might focus on making decisions that result in improved collaboration or team-building.

Be flexible

You may encounter a decision that doesn't have the desired outcome. As a leader in your workplace, it's important to adapt to the change and have a second option available if the first option doesn't work out as you planned it. Try to be flexible and set a positive example to your team members by using problem-solving skills to choose an alternative option.