Decision Making Tools in Business Essay

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According to Laanti et al. (2007), the rapid change in the global business environment at the time had a strong impact on the internalization processes of companies all over the world. Some researchers argued that one of the biggest challenges to Born Globals seems to be the lack of adequate managerial resources to handle the decision making processes in various departments, such as finance, marketing, or operations. Therefore, the rapid growth of businesses and the massive change in the business environment have led to the need for a deeper understanding and more effective practice of decision-making methodologies. From the researcher's point of view, the tools and techniques of the decision-making process can contribute to addressing business problems and finding optimal business solutions.

The main purpose of this report is to argue the need to have an understanding of the decision-making concepts in the business environment by using relevant academic sources, such as journals, books, websites, and articles. Moreover, the report focuses on presenting the main techniques that can facilitate the decision-making process, together with their advantages and limitations. Therefore, the report will critically analyze and discuss the importance of understanding the tools surrounding the business decision-making process.

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I.1. What is the decision-making process?

The decision-making process was defined by the Oxford Dictionary (2020) as being the process of deciding about something important, especially in a group of people or in an organization. In addition, Harrison (1996) stated that the decision-making process refers to the making of a judgment regarding what one ought to do in a certain situation after having deliberated on some alternative course of action. Moreover, decision-making is the most significant process engaged in by managers in all types of organizations. It is the activity that characterizes the behavior of managers, and the one that clearly distinguishes managers from other people in the organization.

I. Decision-making and human cognition

This section of the report will present what is understood by human cognition in the decision-making process. The literature around decision-making and human cognition has drawn some interesting aspects which will be discussed further. First of all, Hollnagel (2007) argued that research into decision-making has mainly focused on how people choose between alternatives and specifically on how they make the right decision. More exactly, the origins of the decision-making process can be related to the early history of thinking, beginning with the evolution of logic. Therefore, a decision can be seen as the result of rational reasoning, which is exactly what logic is about. For example, a rational decision-maker is informed which means that he is aware of all the alternatives and outcomes of any action. In addition, decision-making is a basic cognitive process by which a preferred option is chosen from among a set of alternatives based on certain criteria.

Furthermore, decision-making is one of the fundamental cognitive processes of human beings and it is used mostly in determining rational, heuristic, and intuitive selections in complex scientific, engineering, economic, and management situations, but also in almost every situation of daily life. Since decision-making is a basic mental process, it occurs every few seconds in the thinking courses of the human mind consciously or subconsciously (Wang and Ruhe, 2007). Decision-making was viewed as a matter of estimating which of the different alternative actions would bring the most positive consequences. Decision makers were assumed to evaluate the potential consequences of their decisions objectively and to choose actions that maximized the utility of those consequences. Once chosen, it was assumed that the utility-maximizing course of action would be implemented automatically (Loewenstein and Lerner, 2003).

From the researcher's point of view, cognition can facilitate the decision-making process because the decision-makers can use their previous personal experience to evaluate the options and choose the right one. Also, as cognition refers to the awareness of options around decision makers, the decision-making process can be more based rationally, thus without emotional engagement.

II. Decision-making and role of leaders

Schwarber (2005) highlighted that the minds of leaders naturally go from objectives to alternatives to risks, gathering and processing the relevant information in the right order. However, one of the most important roles of a leader in an organization is to train the successors. That means coaching and mentoring subordinates in every essential management skill, including decision-making. Beshears and Gino (2015) found another approach of leaders in the decision-making process. More exactly, alter the environment in which decisions are made so that people are more likely to make choices that lead to good outcomes. Leaders can do this by acting as architects. The goal of choice architecture is to improve people’s decisions by carefully structuring how information and options are presented to them. In this way, companies can push employees in a certain direction without taking away their freedom to make their own decisions. Adjustments to the choice environment can drive big improvements. They include simply varying the order in which options are presented, altering the wording used to describe them, adjusting the process by which they are selected, and carefully choosing defaults.

However, other researchers stated that businesses need better leadership. Many organizations are looking for more or better leadership to serve as a solution to different business problems. The hope is that by turning managers into leaders, leadership will transform problems into opportunities and make full use of the right decisions ( Meyer, 1998). The research conducted around the role of leaders in making accurate decisions highlighted that leaders can have a positive impact on the decision-making process. Particularly, it was found that some of the leadership behaviors, including supportiveness, task emphasis, technological skill, and participation, had a positive relationship with creative performance in research and development firms. Indeed, leaders impact creative decisions in many ways. For example, leaders provide support to build the confidence of their subordinates which stimulates the generation of more ideas and opinions which can facilitate the decision-making process. Also, engaged leaders in supportive behavior help their subordinates to feel good about their work, thus the subordinates’ positive affect then leads to enhanced creativity and better performance. Organizational leaders are in a unique position to have the opportunity to engage in specific cognitions and behaviors that will cultivate different perspectives of decisions (Stenmark, 2011).

Useem (2005) observed that good decision-making is one of the core components of leadership. Organizational leaders communicate in public but decide in private, thus the decision-making process is not easy. All organizations have a deep interest in ensuring that their managers make optimal decisions, especially when they have leadership roles. However, the improvement of the decision-making process remains a desirable organizational objective and leaders should ensure they make effective choices that can stimulate the well-being of the businesses.

III. Ethical decision making

According to Ford and Richardson (1994), ethical decision-making is a topic of great interest in the literature of business ethics. Moreover, Husted and Allen (2008) highlighted that one of the most recent challenges of management research is to help managers understand business ethics across different cultures when they are making organizational decisions. Unfortunately, people rarely make ethical decisions. Additionally, individuals perceive problems and make judgments that affect collective behavior. Ethical decision-making is impacted by individualism and collectivism which concerns the way people resolve conflicts in human interests and optimize mutual benefits. More exactly, individualism and collectivism affect the way people think, judge, and behave during the decision-making process. However, the ethics are not always easy to be applied in business. For instance, Ferrell and Gresham (1985) noticed that many people agree that a set of moral principles should govern the actions of marketing decision markers, and most decision-makers agree that their decisions should be by ethical values. Because of the lack of agreement regarding ethical standards, it is difficult to find incidents of unethical behavior. Therefore, the absence of a clear consensus about what moral conduct for marketing managers may result in unfavorable results for the business.


To sum up, the report has highlighted the importance of tools and techniques which can contribute to the decision-making process. The relevant sources of academic literature prove that the decision-making concept is a complex process that requires deep attention and research to be effective in the business environment. Also, managers need to make optimal use of tools in the decision-making process, which means that they need to understand the cognitive and ethical parts of the process together with the leadership attributes.

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