Marginal Theory of Decision-Making
Decision-making too should be based on marginal analysis. According to economists marginal analysis of a problem is based on Law of Diminishing Returns. With extra unit of labour and capital put in production, the production increase but it increases at a proportionately reduced rate. From every extra unit of labour and capital the production diminishes and a time comes when the increase in production stops with ‘zero’ as the production of the last unit used therein.
At this stage further production is discounted. A decision is taken to the effect that no additional unit of labour and capital now is required to be introduced in the production. Production of the last unit is marginal one where – after further introduction of extra unit becomes uneconomical or non-yielding.
Psychological Theory
Manager’s aspirations, personality, habits, temperament, political leanings and social and organisational status, domestic life, technological skill and bent of mind play a very important role in decision making. They do help in decision-making. Decision-making is a mental process and the psychology of those who are deliberating and of the person who take the final decision has a definite say in decision-making.
Principle of Participation
This makes all of them feel that they are very much part of the decision. The Japanese debate a proposed decision throughout its length and breadth of the organisation until there is an agreement. A few may disagree with Japanese method of decision-making because they may agree that it is not suited to our conditions. Those who are to carry out the decisions must be actively associated with their decision-making also.
Secondly, this principle asks for debating and deliberating by more and more people so as to know the mind of all and to assess the possible reaction of a particular decision which the manager has in mind.
According to Stanley Vance decision-making consists of the following six steps
Consciousness gives tilt to the decision-making process. The executive first perceives and then moves on to choose one of the alternatives and thus takes a decision. Perception is, therefore, an important and first step without which decisions relating to any of the problems of the organization cannot be taken. The investigation provides an equipment with the help of which the manager tries to go ahead with a debate either in his mind independently or with his co-workers.
This needs investigation with which the manager should be armed. The manager may either weigh the relative merits and demerits and the following consequences in his own mind or share his mental exercise with others to equip himself better. The deliberations remove bias and equip the manager with different ideas and alternatives and help him in arriving at a decision which may safely be ascribed as good decision. Selection is an act of the choice which in management terminology is known as decision.
Perception, conception, investigation, deliberation and lastly selection will carry weight only when selected – the chosen alternative, that is, the decision – is properly and timely communicated to all those who are concerned and for whom the decision is meant.
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