Decision: Meaning, Types, Elements and Nature!

Meaning of Decision:

“Decision is a choice whereby a person comes to a conclusion about a situation. It represents a course of behaviour or action about what must or must not be done.”

In other words,—’The decision is the point at which plans, policies and objectives are translated into concrete actions.”

Planning leads to sound decision and implies decision­making i.e., the selection from among alternatives of a course of action. Decision is at the core of planning.

Types of Decision:


Following are important types of decisions :

(i) Routine decisions and important decisions.

(ii) Policy decisions and operating decisions.

(iii) Organisational decisions and personal decisions.


(iv) Departmental decisions and inter-departmental decisions.

(v) Less risky decisions and very risky decisions.

(vi) Major decisions and minor decisions.

(vii) Rare decisions and current decisions.


The above classification of decisions are not exhaustive. But in economics and manage­ment studies the above types of decisions have been considered as important.

Characteristics or Elements of Decision:

The important characteristics or features of a decision are as follows:

1. It is Normally Rational and Based on Reason—A manager/Administrator must have calculation, reasoning and deliberation before he arrives at any final solution or choice to any problem.

2. It is Selective and Involves Selection of the Best—A manager must apply intelligence while selecting the best course from among the available alternative courses.

3. It is Usually Positive and Relates Means to the End—The manager must know that the solution to any problem provides an effective means, the desired end or goal.

4. It is Normally Positive, but We May have even a Negative Decision—It means a decision not to act. For example—A car manufacturing company decided not to change the model and size of the car though the other rival company was planning to introduce a new model every year. Sometimes a negative decision is also important.

Nature of Decisions:

According to P. Drucker there are normally four basic criteria which determine the nature of a decision and the level of authority. They are :

(i) Time Involved in Future—How much time a manager will take in taking decision over a particular problem ?

(ii) The Quantitative Factor’s Entering into a Decision—Among the various factors available at the time of taking decision the manager must study carefully the qualitative factors.


(iii) Rare or Routine and Repetitive Decision—At the time of taking decision the manager must ascertain whether the decision which he is taking is rare or routine or repetitive. And he must act accordingly.

(iv) Impact of the Decision—The manager must keep and think in mind that-whether the impact of the decision is on other functions areas or on the business as a whole. If it is going to affect only one function then it is of the lowest order.