The Psychology of Decision-Making in Management

Management is formed by a specific as well as a particular activity which acts as an independent act. Management psychology is the branch of social science that studies an individual’s spiritual development and inner world. During the period when novel problems were discussed, it was figured out that the manager and the subordinate have a formal relationship between them called interpersonal relations which is mainly comprised of the psychological characteristics of the two, personality traits of the employee and the manager, and these altogether define the effectiveness of psychology in management.
Under the manager’s and the employee’s personality traits, functions, responsibilities, rights and duties are redistributed. From this perspective, it is important to consider managing the characteristics of an employee. In our daily life, everyone has to take decisions. Finding solutions mainly categorises into either solution or decision. Solutions are found to be for oneself, while decisions are for others. Decision-making in management is the main hub in the management system. And all the activities in the management system consist of two factors: the preparation and the execution of the solution.

Four important points which characterise the decision-making process in management are –

  • Presence of Choice or Variability – In this, the decision-makers must have some options for solutions.
  • Awareness – In this, the decision is preceded by meditation, and the choice of a single option should also be conscious.
  • Focus – The decision or choice to be taken must focus on one or more than one goal.
  • The presence of action – The choice and the decision to choose a solution should end with the action.

The decision in the management is referred to the solution to the emergency of an issue or problem. The situation of a problem is a type of paradox that exists between the actual, the proper and the possible. The decision process is referred to the decision made during a particular process. This process includes several successive stages. These are the formulation of the problem or diagnosis, identification of the problem, alternative analysis and evaluation, choosing proper alternatives and its correction and implementation. The psychology in decision-making consists of two factors, i.e., external and internal factors. The external factors involve the activities of the managers under the conditions of the social and physical environment: the tasks nature, quality and volume of information and data shared, technical equipment and the competencies of staff. These characteristics develop the stereotypical action in the leader: deciding the informations source or the performers choice and more. While the internal factors involve the qualities and properties of the leaders personality: the characteristics of the nervous activity of an individual, the system of knowledge, skill, habit and experience of the activities. There exist several more traits of personality which impact the process of decision-making.

Managerial decisions are that instrument in management which defines that the organisation’s goal is set before the subordinates, and the manner and the execution process are indicated. And thus, the decision process has a central, important and hierarchical place in the management structure. Also, it is represented in management activities and is involved in every stage of the implementation process, every circumstance and level. And lastly, the decision-making process consists of complexities to a high degree, maximum positioning, taking specific measures and various forms of responsibility.

The psychological characteristics of the decision-making process in management

The decision-making process in management is referred to as the stage of a voluntary act, which leads to the creation of the organisation’s goal and the means to attain the desired goal. This process is executed depending on the mental processes which are traditionally allocated, like volitional, cognitive, motivational and emotional. It carries out the same function in the psyches structure and the process of forming, planning and forecasting goals. The manager goes through the process of psychological operations constantly while making a decision. This includes thinking to implement alternative solutions, drafting the decisions on paper and communicating and interacting with the decisions to the performers or the employees.

Several psychological aspects of the process of decision-making in management are given below-

  • Decisions are made as a procedure from ignorance to acquiring knowledge.
  • Solutions for personal profiles refer to the set of characteristics possessed by the head.
  • The decision-making process involves communication and interaction among people, like those who prepare and plan the decision or those who get affected by it, or those who perform it.
  • The intellect of the decision made by the performer must be understandable and psychologically sound.
  • Performers program.

Any decision made in the management not only helps in organising individuals but also aids in forming the performers psychology. The decision-making process exhibits the business and companies and the heads personal qualities. The process of deciding management identifies the weaknesses and strengths of the personality of the head. So, the head must possess all the qualities to implement the decision process. Researchers determine the psychological factors that help contribute to the development of the implementation process of the decision. Firstly, the situation forecasts the problems to resolve and their correlation with the execution of the real situations. Additionally, collecting the important terms describing the information is essential to making a decision, and the capability to handle and manage with appropriate knowledge utilising intuition and professional experience. Secondly, associate the specialist to develop the solution and the existence of voluntary training to control the motives struggle while favouring the decision.

Strategies used in the decision-making process

Determining the strategies used by the leader in internal and external decision-making. These strategies are differentiated depending on the self-assessment nature of the head. A manager involving the strategies of internal decision-making believes that his decision quality is based on intelligence, will, abilities and competence. The manager stays active while searching for more information, acts constructively in difficult situations and is more impervious to pressure of the opinion of others. Managers making decisions by applying external strategy believe and are convinced that the failure or success of their performance is based on the circumstances of external factors. These managers believe that searching for more information is a waste of time, and they are under pressure from outside, desert their position in the organisation, and try to ignore the responsibilities and the risks. Preparing for the psychological decision-making process helps the manager avoid the difficulties in which both strategies work. The decision-making process also accompanies the different types of errors, both psychological and objective. Several errors are an overabundance of the made decisions, decision duplicity, novel inconsistent decisions made by the former, unrealistic due dates, and so on.

Several characteristics of the leader that are also associated with psychological errors are –

  • The habit of making decisions based on the inactiveness of thoughts and patterns Exaggerating the solutions success
  • Risks undervaluation
  • Appealing ones own experience The urge to prove ones case
  • The pressure of being failed
  • Making decisions based on the wants of the subjects

The transfer for implementing the decision-making process in management consists of several key methods which help the employees decide whether to implement decisions or not.

These methods are given below –

  • Promptings depend on the stimulation psychology of the individuals as well as their respect and trust.
  • Compulsion depends on the official instructions and recommendations made.
  • Exhortations depend on the promise, persuasion and request made.
  • Coercion depends on the power order, order and unconditional demands made.
  • Convictions depend on the goodwill, clarification and explanation of the assignment.

Choosing one or any other method is based on how it explains that the demands and the manager’s trust are associated with the subordinate. The more the demand, the more definite appeal will be of the head. Contrary to that, the more trust, the less definite appeal will be of the head.


As the decision-making process is a significant element of the controlling and managing system, it also exists with a psychological content identified as complex from the psychological perspective. These points of the decisions under management are based on the management’s utilisation of strategy. The decision-making process can be controlled and managed when the mechanism for organisational-psychological for launching and implementing a decision is thought further.

Author Bio: Mark Edmonds is a psychologist and organizational consultant with over 20 years of experience analyzing business decision-making. As a writer for Academic Assignments, Mark provides expert MBA assignment help to students looking to understand the psychology behind management choices. His research focuses on how cognitive biases, emotions, and group influences affect organisational choices. When he’s not writing management content, Mark enjoys lecturing at local universities, playing chess, and spending time with his wife and two kids. With decades of real-world experience dissecting business decisions, Mark brings unique psychological insights to help MBA students grasp this critical facet of organizational behaviour.