Decision-making is a process of Intelligence, Design and choice activities and "is a central part of the management process". Decisions are hard to make but once decided, there should be no second take.

The following steps are involved in the process of Decision-making.

  1. Recognising the problem
  2. Deciding priorities among problems
  3. Diagnosing the problem
  4. Developing alternative courses of action
  5. Evaluating alternatives
  6. Selecting the best alternative
  7. Effective implementation and follow-up action. 

Recognising the Problem: Herbet A Simon calls this step as an "intelligent activity". It is important to find out whether there is any deviation from the past experience. For e.g. Sales might decrease, expense might decrease, sometimes there might be deviations from the plan, sales budget, and competitors may outperform by improved systems.

Deciding priorities among the problems: A manager would face many problems at the same time. He should not be bogged down with small and unimportant problems. Some problems can be easily solved by the sub-ordinates. Some may not be important. A manager must see that - he selects carefully the most important problem. Peter Drucker says that "once the right problem is perceived then half of the problem is solved". A manager must diagnose carefully by asking the following questions.

  1. What is the real problem?
  2. What are the causes and effects of the problem?
  3. Is this problem very important?
  4. Can they be solved by sub-ordinates?
  5. Which is the right and most important problem to be solved?

Diagnosing the Problem: After choosing the right problem the manager must now start diagnosing the problem. There is no simple answer to the question of how to diagnose the problem, because every individual differs in his or her own way of diagnosing the problem depending on the different background orientations and training. A manager must systematically analyse the problem for identifying the alternative causes of action.

Developing Alternative Courses of Action: This step is a creative and innovative activity where a manager thinks in all directions innovatively. Sometimes a manager can also use a technique called "brainstorming" where a few individuals discuss at length the various possible available alternatives.

First of all, a manager must be thoroughly familiar with the problem. This is called saturation. Later, he must think about the problem from several view-points which is called deliberation. Sometimes the manager may not get into the crux of the problem, i.e. there may not be any fruitful result of deliberation, and then the manager might temporarily switch off his conscious search and relax. This process of realisation is called incubation. Then after sometime, a flash of light may occur, and the manager may get some insights and ideas. This stage is called illumination. In the last stage, which is called accommodation, the manager resynthesise his ideas into a usable proposal.