Decisions are an integral part of all managerial activities, but they are perhaps most central to the planning process. Decision making is the act of choosing one alternative from among a set of alternatives. The decision-making process includes recognizing and defining the nature of a decision situation, identifying alternatives, choosing the best alternative, and putting it into practice. Two common types of decisions are programmed and nonprogrammed. Decisions may be made under states of certainty, risk, or uncertainty.

Rational perspectives on decision making rest on the classical model. This model assumes that managers have complete information and that they will behave rationally. The primary steps in rational decision making are (1) recognizing and defining the situation, (2) identifying alternatives, (3) evaluating alternatives, (4) selecting the best alternative, (5) implementing the chosen alternative, and (6) following up and evaluating the effectiveness of the alternative after it is implemented.

Behavioral aspects of decision making rely on the administrative model. This model recognizes that managers will have incomplete information and that they will not always behave rationally. The administrative model also recognizes the concepts of bounded rationality and satisficing. Political activities by coalitions, managerial intuition, and the tendency to become increasingly committed to a chosen course of action are all important. Risk propensity is also an important behavioral perspective on decision making. Finally, ethics also affect how managers make decisions.

To help enhance decision-making effectiveness, managers often use interacting, Delphi, or nominal groups or teams. Group and team decision making in general has several advantages as well as disadvantages relative to individual decision making. Managers can adopt a number of strategies to help groups and teams make better decisions.