10 Reasons Why Decision Making is Important in Management

Decision-making is important in almost any situation of your life, we make over 20,000 decisions every day, so this skill is especially important in an organization. However, when it comes to a business or an organization, the essence of it is unmatched. Not only does decision-making help your organization stand tall against your competitors, but it also helps redefine the visions and achieve goals.

The importance of decision-making in management can be realized from the quote of P. F Drucker, which says:

“What­ever a manager does he does through making decisions.”

However, many companies don’t realize the importance of decision-making in their management teams and hence suffer on a lot of fronts. According to a survey done by Mckinsey, about 80% of the professionals claimed their organizations are inefficient in decision-making. 

Moreover, the organizations that did excel in decision-making and turned out on top after the survey had better performances and better financial conditions.

In this article, we’ll look at ten reasons why decision-making is important in management and what roles it has to play in organizations’ success. The reasons are:

  • Saves Time and Money
  • Boosts Productivity
  • Better Use of Resources
  • Efficient Costing
  • Identifying the RIGHT opportunities
  • Helps Establishing Achievable Goals
  • Coming up with new Products and Services
  • Hiring the Best People
  • Better Marketing Strategies
  • Conflict Prevention

However, before we dive into the ten reasons above, you need to have a firm grip on what decision-making is all about.

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What is Decision Making in Business?

Decision making in business is a series of processes that management teams go through when making a certain business choice. It often involves keeping in view complex scenarios being faced by the business and evaluating the long-term effects of choices.

An important thing to note here; decision-making is a lot different than problem-solving. 

A)    Decision-Making vs. Problem-Solving

While problem-solving is all about being reactive and figuring out solutions when things go off the plan, decision-making follows a somewhat proactive approach and is entirely based upon the specific organization, keeping its goals, missions, cultures, and other norms in mind.

Why is Decision Making Important in Management?

Coming to the real question, why is decision-making important in management? How does it play such a pivotal role?

Well, there are certainly a whole lot of reasons for that. If it weren’t for decision-making, organizations could never jump onto manufacturing new products, open new franchises, make a subsidiary, and so forth.

An organization moves forward on the back of decision-making, and there’s nothing that plays a more important part in it. It acts as the backbone of a company and allows it to expand and excel at the services it offers.

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After you go through the 10 reasons why decision making is important in management, please scroll back up here and watch this great TED Talk on the Power of Decisions by Benedikt Ahlfeld. He goes into how we can make better decisions, what he learned from top decision-makers.

10 Reasons Why Decision Making is Important in Management

We already have an idea of how vital decision-making is in management. But there’s more to it. So, hold tight, as we’re going to traverse ten reasons why you can never ignore working on the betterment of decision-making.

1.     Saves Your Time & Money

Saving the organization’s time is one of the foremost reasons why top-notch decision-making is important for management. Inefficient decision-making not only gets you a lot of time wasted, but it also drains the motivation of the individuals away. 

The quicker you make decisions, the more time you save. And when it’s an organization we’re talking about, time means money. So, time being wasted is no less than losing your money.

2.     Productivity Boost

If the management excels at decision-making and comes up with good decisions, it’ll boost your workforce’s productivity in more than one way. 

For one, the employees will be motivated since they know where the company is heading towards. They will work knowing that their efforts won’t go in vain. Second, there’s no time being wasted since the management doesn’t have a grain of doubt, and they’re crystal clear that the decisions they’re making will end up putting their business in the right direction.

3.     Make the Best Use of Resources

When it comes to huge organizations having large pools of resources, the management needs to put them to the right use. Not only does it help your company achieve its potential by not letting the resources go scarce, but it also minimalizes the waste of resources. 

Realizing the need for resources in the right places and redirecting them from places they aren’t needed is a product of top-tier decision-making.

4.     Efficient Costing

Putting your products at a reasonable cost determines the future of your company in the long-run. It determines where your company is headed and what market segment you’re targeting. Hence, if the management fails to deliver the right decision and misses the right cost-plans even by slight margins, there will be a lot at stake.

5.     Identify Opportunities

There are opportunities everywhere, but the real deal is for you to identify them so you can grasp onto them one day. However, poor decision-making not only lets opportunities slip through your hands, but it often makes them appear non-existent. 

For example, if there’s a high need for a product in the market and your company is capable of delivering it, the poor or delayed decision-making might not be able to steer your company in that way and let you put your focus over there.

6.     Establish Achievable Goals

Establishing achievable short-term and long-term goals are sometimes more important than acting on them. Because if you fail in marking achievable goals, there’s no way you’re going to accomplish them no matter how hard you work on them. Instead, you’ll be wasting your time, money, and resources. 

So, sound management with exceptional decision-making skills will help you analyze your organization and define realistic goals while keeping the vision in mind. This will ensure you’re going in the right direction and the places you’re heading to aren’t just dead-ends.

7.     Come Up with New Products/Services

It’s never easy for a company to enlarge its pool of products or services. A lot of manpower and resources are needed, and there are a lot of risk factors involved. It could result in either a huge profit or an equally huge loss. Hence, the management needs to have commendable decision-making skills to pull this off.

8.     Employee Hiring

Being a part of the management, you’ll often need to hire fresh employees. The newcomer not only needs to have the required technical skills, but there are many more aspects that you’d need to look for as well. 

From soft-skills and background checks, countless things require thorough analysis. So, decision-making is what plays a huge role here. Hiring the right candidate is of the essence, and quality decision-making is the necessary ingredient in it.

9.     Better Marketing Strategies

Marketing strategies are what put your organization out in the open. If you cannot market your brand well to your customer base, your company will never be able to reach its full potential, no matter how excellent your products or services are. 

There are certain important decisions involved in deploying successful marketing plans as they are more mere promotions. And to come up with the strategies and make them stand out from the rest, decision-making undoubtedly plays the biggest role.

10.  Conflict Prevention

Failing to employ strong and fair decisions at the management level can often lead to conflicts in the lower tiers. Employees can result in disagreements if the decisions are left blurry or aren’t taken at all by the managers. So, to avoid reaching this situation, the management needs to take strong and quick decisions.

Wrapping Up

Decision-making is regarded as one of the hottest qualities found in managers. Poor decision-making by the management could result in a loss of synchronization in the lower-level staff and cloud the organization’s goals. 

Throughout the article, we have seen a handful of reasons why decision-making skills are a huge asset to a management team and why they should make it their top priority to work on them. After going through the article, I’m sure you’ll never be able to ignore the role decision-making plays in management.

Emidio Amadebai

As an IT Engineer, who is passionate about learning and sharing. I have worked and learned quite a bit from Data Engineers, Data Analysts, Business Analysts, and Key Decision Makers almost for the past 5 years. Interested in learning more about Data Science and How to leverage it for better decision-making in my business and hopefully help you do the same in yours.

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