Decision-making is a complex managerial activity. Decisions can never be made in a vacuum by relying on the personal resources and complex models, which do not take into consideration the situation. Analysis of the variables of the problem in the context in which it occurs is mediated by the personality of the manager. A situation based decision-making activity encompasses not only the specific problem faced by the organization but also extends to the environment. Decision-making is defined as the process of choosing a particular alternative from a number of alternatives. It is an activity that follows after proper evaluation of all the alternatives. Problem recognition, problem evaluation and selection are the three steps of the general process of decision-making. The first stage of problem recognition involves identifying the specific problem that the individual or the group faces in its activity sequence. A problem exists when there is a perceptible gap between the present state and the future state. The difference that exists constitutes the problem which has to be solved by suitable decision-making activity. The second stage of decision-making activity centers around evaluating the problem along with the entire possible alternatives. Each alternative is carefully evaluated for its merit. Following the consideration of the different alternatives open, the decision maker finally selects the best alternative and this completes the decision-making process. The recognition or the existence of a problem leads to a decision-making activity. It is the selection of the most favorable alternative within the constraints imposed by the problem, the context and the individual factors.

Managerial decision-making begins with a recognition or awareness of problems, interpretation of the problem, attention to problems and courses of action (Hellriegel Slocum and Woodman, 1992). Following the identification of the problem, the decision maker searches for relevant information and develops alternative solutions to the problem. Once the evaluation of the alternatives is completed, the decision maker can choose the best solution.

This model is derived from the classical economic model which adopts the view that the decision maker is perfectly and completely rational in every way. In decision-making activities the following conditions are assumed. Rationality is the ground rule of all the decisions. The decision maker has the time and the opportunity to evaluate each and every alternative in the means-ends sense. Many of today's managers equate sound management decision-making with this approach. Adherence to this approach may be dangerous and may be a leading cause of many of today's problems (Luthans, 1995).