The 8 stages in the company’s decision-making process

To make a decision it is necessary to have all the possible information about each of the alternatives between which it is possible to choose and the consequences that each could entail with respect to the objectives set. With the data collected as raw material, the correct treatment of the information allows us to better discern which action is more convenient to execute.

The results of the chosen action will generate new data that will be integrated into the raw material of information collected to be processed and translated into a new decision in a feedback cycle.

The process of selecting among the different alternatives to carry out actions related to any of the administrative functions can be segmented into eight stages :

1. The identification of a problem : the first step of the decision-making process is to have detected that there is a

difference between the current state of the situation and the desired state. This discrepancy or problem puts pressure on the administrator that forces him to act, whether due to organizational policies, deadlines, financial crises, future performance evaluations, among other examples. For a situation to be considered a problem, the administrator must have the authority, money, information and as many resources as necessary to act. If not, we are facing expectations that are not realistic.

2. The identification of the criteria for decision-making : indicate the guideline or methods that will be relevant to solve the problem. Each individual responsible for making decisions in the company has a range of criteria that guide it in its mission, and it is important to know which ones are taken into account and which are omitted, since the latter will be irrelevant for the decision maker.

3. The assignment of weights to the criteria : prioritize correctly the criteria selected in the previous stage, since not all will have the same relevance in making the final decision. Normally there is a preferential criterion, and the rest can be weighted by comparing them and valuing them in relation to the preferred one.

4. The development of alternatives : is to be able to obtain and present all feasible alternatives that could solve the problem successfully.

5. The analysis of the alternatives : the decision maker in the company must carefully study the alternatives that have been proposed. The strengths and weaknesses of each should be clearly revealed once compared to the criteria selected and ordered in the second and third stages. Although it is true that some evaluations may approach objectivity, it should be clear that most of them are subjective because of their character of value judgment.

6. The selection of an alternative : once all alternatives have been established and presented, and once evaluated by the decision maker according to established and hierarchical criteria, it is time to choose a single alternative: the best one presented according to the established procedure.

7. The implementation of the alternative : once the selection process of the decision to be executed is completed, the application of the same is also vital. The first thing to do to carry out the decision is to communicate it to the affected people and get them to commit to it. It is easier to achieve if the people responsible for executing a decision participate in the process. These decisions are carried out from effective planning, organization and management.

8. The evaluation of the effectiveness of the decision : Lastly, the result achieved as a result of the decision taken and the solution adopted must be evaluated and the problem corrected . If it still persists, you will have to study which of the previous phases was wrong and face a new decision regarding the initial decision: dismiss it completely or retake it differently from any of the previous steps.

To make according to what kind of decisions models can be used to simplify a reality that is too complex. The objective is to highlight the most relevant aspects of reality for the analysis and, thanks to the model, to achieve a better understanding and description of that reality that it represents. The models can be classified into:

  • Objectives and subjective : when events cannot be expressed objectively and there are no formal models for their study, they must be informal and based on subjectivity and intuition.
  • Analytical and simulation : the analytical serve to obtain solutions and must be solved, and the simulation are simplified representations of reality to study in them the effects of the different alternatives.
  • Static and dynamic : the static do not use the time variable, while in the dynamic it is a fundamental parameter.
  • Determinists and probabilists : in the determinists all the data is known with certainty. If not, it is a probabilistic, random or stochastic model.