Decision making may be classified under various categories based on the scope, importance and the impact. Decisions have been classified by various authorities in various ways.
Some of the types of decision making are:-
1. Programmed Decisions 2. Non-Programmed Decisions 3. Operational Decisions 4. Organizational Decisions 5. Personal Decisions 6. Routine Decisions 7. Strategic Decisions
8. Policy Decisions 9. Operating Decisions 10. Organisational Decisions 11. Personal Decisions 12. Individual Decisions 13. Group Decisions 14. Major Decisions 15. Minor Decisions and a Few Others.
Types and Classification of Decision Making: Programmed, Organizational, Decision Handling, Policy, Individual and Others..
Types of Decision Making – 4 Types of Decisions that are Usually Taken by Managers in the Organization: Programmed, Non-Programmed, Operational, Strategic and a Few Others
Decision may be classified under various categories based on the scope, importance and the impact.
The following are the different types of decisions that are usually taken by managers in the organization:
1. Programmed and Non-Programmed Decisions:
Programmed decisions are repetitive in nature. Such decisions deal with simple, common, frequently occurring problems that have established procedures. These decisions are taken based on the existing policy, rule or procedure of the organization. For example: making purchase orders, sanctioning of different types of leave, increments in salary, etc. Managers in dealing with such issues of routine nature, follow the established procedures.
Non-programmed decisions are not routine in nature. They are related to exceptional situations for which there are no established procedure. For example- Issues relating to declining market share, increasing competition, etc. fall in this category. These problems have to be handled in a different way. Many of the decisions that managers at top levels make are non-programmed decisions.
2. Operational and Strategic Decisions:
Operational or tactical decisions relate to the present issues or problems. The main purpose is to achieve high degree of efficiency. Better working conditions, effective supervision, prudent use of existing resources, better maintenance of the equipment, etc. fall in this category.
While, expanding the scale of operations, entering new markets, changing the product mix, shifting the manufacturing facility, striking alliances with other companies, etc. are strategic in nature.
Usually, routine decisions are taken by managers at the lower levels, while strategic decisions are taken by top level managers. The focus in the operational decisions is on the short-run or immediate present, while it is on the long- rum in the case of strategic decisions.
3. Organizational and Personal Decisions:
Decisions taken by managers in the ordinary course of business in their capacity as managers are organizational decisions. For example: decisions regarding introducing a new incentive system, transferring an employee, reallocation or redeployment of employees etc. are taken by managers to achieve certain objectives.
On the other hand, managers do take some decisions which are purely personal in nature. However, their impact may affect the organization also. For example: the manager’s decision to quit the organization, though personal in nature, may create some problems for the organization.
4. Individual and Group Decisions:
Individual decisions are taken where the problem is of routine nature, whereas important and strategic decisions which have a bearing on many aspects of the organization are generally taken by a group. Group decision making is preferred these days because it contributes for better coordination among the people concerned with the implementation the decision.
Types of Decision Making – Routine, Strategic, Policy, Operating, Organisational, Personal, Programmed, Non-Programmed, Individual and Group Decisions
Decisions may be classified according to different bases which are discussed below:
Type # 1. Routine and Strategic Decisions:
Tactical or routine decisions are made repetitively following certain established rules, procedures and policies. They neither require collection of new data nor conferring with people. Thus, they can be taken without much deliberation. They may be complicated but are always one-dimensional. They do not require any special effort by the manager.
Such decisions are generally taken by the managers at the middle and lower management level. Strategic or basic decisions, on the other hand, are more important and so they are taken generally by the top management and middle management. The higher the level of a manager, the more strategic decisions he is required to take.
The strategic decisions relate to policy matters and so require a thorough fact finding and analysis of the possible alternatives. Finding the correct problem in such decisions assumes great importance. The managers are more serious about such decisions as they influence decision-making at the lower levels.
Type # 2. Policy and Operating Decisions:
Policy decisions are of vital importance and are taken by the top management. They affect the entire enterprise. But operating decisions are taken by the lower management in order to put into action the policy decisions. For instance, the bonus issue is a policy matter which is to be decided by the top management, and calculation of bonus is an operating decision which is taken at the lower levels to execute the policy decision.
Type # 3. Organisational and Personal Decisions:
Organisational decisions are those which a manager takes in his official capacity. Such decisions can be delegated. But personal decisions, which relate to the manager as an individual and not as a member of the organisation, cannot be delegated.
Type # 4. Programmed and Non-Programmed Decisions:
The programmed decisions are of a routine and repetitive nature which are to be dealt with according to specific procedures. But the non-programmed decisions arise because of unstructured problems. There is no standard procedure for handling such problems. For instance, if an employee absents himself from his work for a long time without any intimation, the supervisor need not refer this matter to the chief executive. He can deal with such an employee according to the standard procedure which may include charge sheet, suspension, etc.
But if a large number of employees absent themselves from work without any intimation, such a problem cannot be dealt in a routine manner. It has to be dealt with an unstructured problem and the decision should be taken by the chief executive. Non-programmed decisions require thorough study of the problem and scientific analysis of the situational factors. There has to be adequate probing and analysis of various alternatives before taking such decisions.
Type # 5. Individual and Group Decisions:
When a decision is taken by an individual in the organisation, it is known as individual decision. Such decisions are generally taken in small organisations and in those organisations where autocratic style of management prevails. Groups or collective decisions refer to the decisions which are taken by a group of organisational members, say Board of Directors or a Committee.
Types of Decision Making – 17 Important Types of Decisions
Some of the decisions are discussed below:
1. Programmed Decisions:
They are otherwise called routine decisions or structured decisions. The reason is that these types of decisions are taken frequently and they are repetitive in nature. This decision is taken within the purview of the policy of the organisation. Only lower level management takes programmed decision and has short-term impact.
Granting over time work, placing purchase order (for materials) etc., are some of the examples of programmed decisions. There is a clear cut procedure to take programmed decisions. The decision-maker need not ask anything from the Personnel Manager or Board of Directors while taking programmed decisions.
2. Non-Programmed Decision:
They are otherwise called strategic decisions or basic decisions or policy decisions or unstructured decisions. This decision is taken by top management people whenever the need arises. A careful analysis is made by the management before taking a policy decision.
The management may publish its policy in small book which is known as policy manual. Policy decision involves heavy expenditure to management. Starting a new business, whether to export or not, acquisition of a business etc., are some of the examples of non-programmed decisions. This decision has a long-term impact on business. A slight mistake in the policy decision is bound to injure the entire organisation.
3. Major Decision:
Major decision relates to the purchase of fixed assets with more value. The purchase of land and building is an example of major decision. This decision is taken by the top management.
4. Minor Decision:
Minor decision relates to the purchase of current assets with less value. Purchase of pencil, pen, ink, etc., are some of the examples of minor decision. This decision is taken by lower level management people.
5. Operative Decision:
A decision which relates to day-to-day operation of an organisation is known as operative decision. This type of decision is taken by middle level management people normally. The reason is that they are working at supervisory level and have a good knowledge of the operations. The time of payment of overtime wages is fixed by middle level management people. It is an example of operative decision.
6. Organisational Decision:
The decision-maker takes a decision and implements it for effective functioning of organisation and it is called organisational decision. He takes this decision on his authority and capacity.
7. Personal Decision:
The decision-maker takes a decision for his personal life which is known as personal decision. He implements this decision in his home and sets right his personal life. This decision does not reflect the functioning of an organisation. The decision maker is not a member of an organisation while taking a personal decision.
8. Individual Decision:
Confusion exists regarding the difference between individual decision and personal decision. They are not one and the same. The decision-maker is a member of an organisation while taking an individual decision. He can implement it in the organisation. He is delegated with authority to take individual decision. He considers the policy and situation prevailing in an organisation while taking individual decision.
9. Group Decision:
A committee is formed by the top management for specific purposes. Here, the top management feels that no individual can take effective decision to solve a problem. The top management fixes the time within which the committee is expected to submit its report with concrete decisions.
10. Departmental Decision:
Here, the decision-maker is department head or department manager. He takes a decision to run the department. Department decision has no impact on other departments. This decision is implemented within the concerned department itself.
11. Non-Economic Decision:
Non-economic decision refers to a decision which does not incur any expenses. These types of decisions are taken at all levels of management. A decision which relates to setting right the morale behaviour of workers is termed as non- economic decision.
12. Crisis Decision:
A decision is taken to meet unexpected situations. There is no possibility and time for the decision-maker for getting through investigation while taking a crisis decision. It may be otherwise called spot decision. The reason is that whenever a need arises, the decision maker has to take a decision without wasting a second.
13. Research Decision:
A decision is taken after analysing the pros and cons of a particular matter. There is no pressure on the decision-maker to take such a decision. Research decision requires a lot of information. The quality of research decision is fully depending upon the availability of reliable information.
14. Problem Decision:
A decision is taken to solve a problem. The problem may be an expected one or unexpected one. Besides, the arrived decision does not create any more problems to the organisation.
15. Opportunity Decision:
This pertains to a decision taken to make use of the advantages available to the company or organisation. The advantages may be increasing the turnover, introducing a new product, building of another similar unit to avoid competition etc.
16. Certainty Decision:
Here, the term certainty refers to accurate knowledge of the outcome from each choice. For example, ascertaining how much profit will be maximised by introducing a new product or increasing the selling price and the like. There is only one outcome for each choice. The decision-maker himself knows the outcome and consequences of choice.
17. Uncertainty Decision:
The outcome is not accurate or several outcomes are possible whenever a decision is taken. The reason is that the decision-maker has incomplete knowledge and he does not know the consequences. For example, while marketing a new product, the decision (amount of profits) depends upon the prosperity period of that product. If the prosperity period is long, the amount of profit is high and vice versa.
Management people take a number of decisions every day. These decisions are aimed at solving the existing problems. No decision creates any new problem to the management. There should be justice in taking a decision.
Types of Decision Making – 10 Types of Decisions
Type # 1. Organisational and Personal Decision:
Decisions in any organisation are taken by persons working in it. All the decisions are related either to organisation or to individual. Whenever a person assuming the charge of a manager takes any decision it is a decision of the manager and not the person. Such decisions are related to organisational matters and taken by a person as a manager.
These decisions are known as organisational decisions. Capital formation, new methods or techniques of production, new production line, closing any unit, rules, methodology of working etc. fall in the preview of organisational decisions. Such decisions directly affect the organisation.
On the other hand, if the same person decides to go on leave, retire, or resign, such decisions are his personal decisions. They directly affect him though they may have indirect effect on the organisation. Organisational decisions are to be implemented throughout the organisation and they are binding on all concerned people.
Whereas personal decisions have nothing to do with the organisation. They may have some indirect effect on the organisation as they are directly related to his individual personality and not his personality as a manager.
Type # 2. Basic (Strategic and Routine) Operational Decisions:
Organisational decisions may be related to either strategies or operational methodology and allied matters. Strategic decisions are known as “Basic decisions” also. These are generally based on original plans and relate to formulate policy to implement the plans. Such decisions are mostly one time decisions and are in implementation for a pretty long period. These decisions provide guidelines for attainment of organisational goals.
Once the strategies and guidelines are decided, all the lower level managers have to work according to the strategies and within the preview of guidelines. But methodology or the operational ethics are needed to be prepared. Decisions in this regard are known as operational or routine decisions. These decisions are required to be altered according to the prevailing situations. Naturally they are of repetitive nature. Such decisions are taken for routine work therefore they are at times, known as day- to-day decisions.
Type # 3. Structural (Programmed) and Unstructured (Un-programmed) Decisions:
As seen above strategies are decided for a pretty long period along with guidelines for the implements i.e. lower level managers. In order to facilitate day-to-day working the lower level managers have to take some decisions to set right the operational machinery for better performance.
For example – assignment of work to employee, grant of short leave to the worker, method of utilising resources etc. Such decisions are known as structured or programmed decisions. These have a very short impact and are changeable from time to time.
But if a new unit is to be started or any of the existing units is to be closed, or change in product line or change in the wage or salary structure is to be made, decisions are required to be taken by the top level management. Such decisions have a long term impact on the organisation. These decisions are known as unstructured or un-programmed decisions.
Type # 4. Major and Minor Decisions:
Basic and unstructured decisions are major decisions. They are taken by top management. Operational and structured decisions are of minor nature and are taken by lower level managers. Major decisions may bring a major change in policy and strategy that affects the total organisation. These are independent decisions of the policy makers. Minor decisions are aimed at fulfilment of major decisions. Such minor decisions are to be kept in the sphere of major decisions. Minor decisions are generally taken by lower level managers.
Type # 5. Crisis and Intuitive and Research Decision:
Whatever decisions are taken in crisis situation like stress, surprise, unusual circumstances, emergencies are called as crisis or intuitive decisions. Crisis decisions are often based on experience, detailed analysis and confidence. These decisions are generally made under pressure. On the other hand research decision can be made under a minimum time-pressure.
Type # 6. Referred Decisions:
Lower level managers have to face situations arising during the course of working. They have to overcome such situations by taking immediate decisions, but some mangers (Lower level) are unambitious, inactive and incapable of taking decisions. At time they are afraid about the correctness of the decision which they may take for lack of confidence. They refer the matter to their superiors and request for their decision. Such decisions are called referred decisions.
Type # 7. Problem Solving and Opportunity Decisions:
Top level management is required to pay attention to problems that are existing and that may crop up in future. Capable top management can foresee future problems, the same way good managers can imagine and foresee future situations and probable opportunities.
Naturally top level management remains in readiness with problem solutions and with utilisation plan of future situations and probable opportunities. Proper decisions are thus taken by them in present period i.e. in advance. Such decisions are known as problem solving and opportunity decisions.
Type # 8. Individual and Group Decision:
If a decision is taken by an individual person it is known as individual decision. On the other hand when a number of persons collectively take the decisions they are known as group decisions. Individual decisions are, often, taken in small organisation of small sized top level management. On the other hand big size organisations like companies, are managed not by an individual but by group of individuals like board of directors. Naturally strategic decisions are taken by the group.
Type # 9. Short-Term and Long-Term Decisions:
Short-term decisions are taken for short span of period. Such decisions generally involve less uncertainty and risk. On the other hand long term decisions are taken for a longer duration. Therefore there is more risk and uncertainty. Most of the times short term decisions are taken by subordinates and long term decisions are taken by the top management.
Type # 10. Economic and Non-Economic Decisions:
Economic decisions are related with financial matters and non-economic decisions are related with, social values, ethical values, moral values, social, cultural, religious, educational, political psychological factors.
Types of Decision Making – Classified by Various Authorities: Basic and Routine Decisions, Policy and Operative Decisions, Individual and Group Decisions and a Few Others
Decisions have been classified by various authorities in various ways.
The main types of decisions are as follows:
1. Programmed and Non-Programmed Decisions:
Professor Herbert Simon has classified all managerial decisions as programmed and non-programmed decisions. He has utilized computer terminology in classifying decisions. The programmed decisions are the routine and repetitive decisions for which the organization has developed specific processes. Thus, they involve no extraordinary judgement, analysis and authority. They are basically devised so that the problem may not be treated as a unique case each time it arises.
On the other hand, the non-programmed decisions are the one-shot, ill-structured, novel policy decisions that are handled by general problem-solving processes. Thus, they are of extraordinary nature and require a thorough study of the problem, its in-depth analysis and the solving the problem. They are basically non-repetitive in nature and may be called as strategic decisions.
2. Basic and Routine Decisions:
Professor George Katona has made a distinction between basic decision and routine decisions. Routine decisions are of repetitive nature and they involve the application of familiar principles to a situation. Basic or genuine decisions are those which require a good deal of deliberation on new principles through conscious thought process, plant location, distribution are some examples of basic decisions.
3. Policy and Operative Decisions:
Policy decisions are important decisions and they involve a change in the procedure, planning or strategy of the organization. Thus, they are of a fundamental character affecting the whole business. Such decisions are taken by the top management. On the contrary, operating decisions are those which are taken by lower levels of management for the purpose of executing policy decisions. They are generally concerned with the routine type of work, hence unimportant for the top management.
They mostly relate to the decision-makers own work and behaviour while policy decision influences the work and behaviour of subordinates.
4. Individual and Group Decisions:
Individual decisions are those decisions which are made by one individual-whether owner of the business or by a top executive. On the other hand, group decisions are the decisions taken by a group of managers-board, team, committee or a subcommittee.
In India, individual decision-making is still very common because a large number of businesses are small and owned by a single individual. But in joint stock Company’s group decisions are common. There are both merits and demerits of each type of decision.
Types of Decision Making – On the Basis of Procedures, Beneficiary, Activity, Nature, Responsibility and Number of Persons
1. Decision on Basis of Procedures:
a. Taken by lower level management.
b. Solution to routine problems.
c. Taken within policy framework of organization.
d. Risk free decisions.
e. Decisions rules and procedures already established to save time.
(a) Granting casual leave, applying medical leave, etc.
(b) Applying for earned leave surrender.
(c) Inviting tender.
(d) Placing order.
(e) Admission of patient in a hospital.
a. Taken for non-repetitive problems.
b. Requires high degree of executive judgement and recalibration.
c. Taken by top management.
d. Made at high risk.
e. Made in uncertain condition.
(a) Location of plant.
(b) Introduction of new product.
(c) Purchase of new machinery.
(d) Product diversification.
(e) Entering new geography for expanding the business.
a. Decision taken on a day to day basis.
b. Taken by middle and lower level managers who have a thorough knowledge of the problem.
c. Decisions taken in the light of guidelines, rules, procedures.
(a) Fixing delivery schedule.
(b) Cutting wastage.
(c) Employing contract labour.
(d) Checking working condition of tools.
a. It is a major choice of action concerning allocation of resource and contribution to the achievement of organizational objective.
b. It is a major decision affecting the whole or part of the organization.
c. Contributes directly to the attainment of organizational objective.
d. It is a non-programmed decision which is made under conditions of uncertainty.
e. It contains three elements namely action element meaning means to decision, result element meaning final objective, commitment element denoting allocation of physical and human resources.
f. Most of the strategic decisions are of irreversible nature.
(a) Introduction of new product
(b) Location of new plant.
(c) Direct distribution of product.
(d) Advertisement media decision.
(e) Pricing decision.
(f) Sales promotion decision, expansion and modernization decision.
v. Tactical Decisions:
It denotes the decisions relating to day to day operations of business.
a. Decisions relating to day to day operations and born out of strategic decisions.
b. It is mostly a programmed one. It is programmed through policies, rules and procedures.
c. Outcome of tactical decision is short tenured and affects a part of the organization i.e., domain related or function related.
d. These decisions are of delegatable nature.
(a) Purchase of raw materials.
(b) Deciding entitlement to overtime.
(c) Production of goods with low cost.
2. Decision on the Basis of Beneficiary:
a. Organizational Decisions:
These are decisions made to promote the interests of the organization. They are made by managers in their official capacities. They fall into any of the aforesaid category like strategic, operational, tactical, programmed and so on. These decisions are taken in terms of personal experience and rational judgement. They may or may not be delegated given its type. They influence the functioning of an organization.
b. Personal Decisions:
These are decisions taken by a manager in his personal capacity. It has nothing to do with the organization. For example, decision to come by his own conveyance, decision not to marry, not to accept bribe, decline promotion, not to use organizational resource for personal requirements, retire early, over stay and so on. These decisions have a bearing on his personal life. Certain personal decisions may affect the organization directly or indirectly. For example, decision to take VRS, decision to come by one’s own conveyance, etc.
3. Decisions Based on Activity:
a. Entrepreneurial Decisions:
These are decisions involving starting or initiating something new. For example, starting operation in a new location, abandonment of old product, product diversification, adding new channels of distribution, finding new uses for existing product, etc.
b. Disturbance Handling Decisions:
Decisions made to address disturbances like strike, lock out, go slow, labour unrest, work place accident, machinery break down, stoppage of supply of raw materials, etc. In short, decisions made to address the crisis come under this type.
c. Resource Allocation Decisions:
Allocation of resources like men, money and material comes under this category. For example, choice of Investment Avenue, transfer of human resources, deciding word load, allocation of territories to sales persons, allocation of profits for various purpose, dividend decision, ploughing back of profit, etc.
d. Negotiating Decision:
Bargaining on behalf of the enterprise comes under this classification e.g., negotiating favourable terms for the enterprise, fixation of remuneration after interview, negotiating with suppliers for various services, negotiating with unions for various issues, negotiating with contractors, etc.
a. Policy Decisions:
Decisions taken by top level management in respect of recurring issues like purchase policy, credit policy, recruitment policy, financial policy, marketing policy and so on.
b. Administrative Decisions:
It is taken by middle level management in respect of such issues which are repetitive in nature but have far reaching consequences, like administration of welfare measures, purchase policy, market policy. Middle level executives decide as to how to execute the policies framed by top management.
c. Executive Decisions:
Decisions taken by low level employees while translating administrative decision into reality e.g., calling maintenance department to repair machine.
5. Decisions on the Basis of Responsibility:
a. Major Decisions:
It refers to those decisions which involve huge expenditure. The consequences of major decisions are expected to last for many years. It benefits the organization as a whole. For example, computerization of operations, introduction of new product, expansion of business, modernisation and so on.
b. Minor Decisions:
It refers to decisions concerning day to day operations. E.g., granting casual leave, purchase of consumables and stationery, changing the workers among the different shifts, delivery decisions and so on.
Decisions made by a single individual are called individual decisions. They are mostly pertaining to routine matters. Individuals working in the organization are delegated powers to take decision. He/she takes decision in the light of policies, rules, procedures and so on. Such decisions taken in one’s official capacity refer to an individual decision.
b. Group Decision:
Group decision is the process by which individuals who are identified as a group participate together in a decision-making process. Board of Directors, which represent the highest decision-making body, is an example for group decision making.
Similarly, many committees functioning in the organization like canteen committee, grievance committee, finance committee, recruitment committee, disciplinary action committee, safety committee etc., are delegated powers to take decisions. They represent group decision making.
Types of Decision Making – Programmed and Non-Programmed Decisions, Major and Minor Decisions, Routine and Strategic Decisions, Operating Decisions and a Few Others
Decisions are of several types.
Classification of these types is as follows:
1. Programmed and Non-Programmed Decisions:
Decisions are classified into programmed and non-programmed decisions. While the former deals with the routine and repetitive type of problems, the latter deals with problems which are not routine and non-repetitive. For example, an enterprise has a set of procedures to handle normal orders from the buyers and this matter need not be referred to the Board of Directors or any other higher authorities for decision. As this problem is repetitive, a standard procedure should be used for handling such problems. This is a case of programmed decision.
On the other hand, if the enterprise receives unusually very large orders for its products in any particular year, it would constitute a problem involving non-programmed decision. For handling such large orders, the sales department may take the guidance of board of directors, since it has to deal with the problem which is non-repetitive and for which no definite procedure has been laid down.
2. Major and Minor Decisions:
Decisions may be classified as major and minor. For example, a decision to purchase a machine worth lakhs of rupees or deciding to open some branches is a major decision. On the other hand, purchase of some pencils or paper for office use is a minor decision which can be taken by the office superintendent.
3. Routine and Strategic Decisions:
One more method of classification of decisions is routine and strategic decisions. Usually, routine decisions do not require lengthy deliberations and such decisions are taken in a routine way. Some of the examples of routine decisions are – deciding to send samples to government test house, deciding to place an order with the supplier who has given a favourable quotation, deputing an employee to annual conferences, etc.
Strategic decisions generally involve lengthy deliberations and also may have much impact on the functioning of the business concern. Some examples of strategic decisions are – decisions relating to product diversification or product line, entering a new market, pricing strategy, advertising strategy, etc.
4. Policy and Operating Decisions:
Decisions can be policy decisions and operating decisions. While policy decisions are taken at a high level after lengthy deliberations, operating decisions are taken at a much lower level. For example, deciding to grant leave encashment benefit to employees is a policy decision whereas calculating the amount due to each employee because of the leave encashment benefit is an operating decision.
5. Organisational and Personal Decision:
If any decision is taken by an executive in his official capacity, that decision is called organisational decision. For example, decisions relating to appointment, promotion or transfer of employees are organisational decisions. In the case of personal decisions, an executive takes decisions as an individual and not in his official capacity. For example, to opt for voluntary retirement from the business concern is the personal decision of the executive.
6. Individual and Group Decisions:
Another method of classification of decisions is individual and group decisions. Individual decisions are taken by any individual and generally, they relate to routine matters. For example, sanctioning of leave to a worker is an individual decision.
In the case of group decisions, the superior managers take decisions in collaboration with their subordinates. For example, taking a decision by the production manager in consultation with his subordinates to change the design of the product slightly is a group decision.
7. Departmental, Inter-Departmental and Enterprise Decisions:
Decisions can be departmental, inter-departmental or enterprise decisions. Departmental decisions relate to the concerned department and they are taken by the departmental heads. For example, allotting work to the employees of a department is a departmental decision.
Inter-departmental decisions are made by the managers of the concerned or affected departments with the help of the controlling manager. For example, a decision relating to change the product design slightly is an inter-departmental decision.
Enterprise decisions are those which are taken at a higher level, i.e., Managing Director or Board of Directors. These decisions are concerned with the entire enterprise. For example, decisions relating to opening of branches, entering a new market, pricing decisions or decisions relating to giving of bonus to employees are enterprise decisions.
These are the basic types of decision taken in an organisation. Adopting a specific type, depends upon the situation that prevails in the organisation. Good decision or bad decision is better than indecision. Managers should not postpone decision on an issue. Postponing any type of decision will make the problem more complex and put the organisation into trouble.
Types of Decision Making – According to Herbert Simon
In terms of Herbert Simon, organizational decisions are categorized as:
1. Programmed decisions and
2. Non-programmed decisions.
1. Programmed Decisions:
Routine decisions and repetitive decisions and which are made within the framework of organizational policies, rules and programmed decisions. They are usually highly structured, with clear and well-known goals. Predefined decisions making process and available sources and channels of information, programmed decisions are easy to make and do not involve much risk, programming of recruitment schedules, etc.
2. Non-Programmed Decisions:
Decisions that occur suddenly or infrequently and do not have any previously developed procedure are called non-programmed decisions. For these decisions, the situation is not well structured with ambiguous information and vogue goals. Many a time these decisions have long-term consequences; as such the higher level management team makes them.
Other classification of decisions is:
(a) Organizational and Personal Decisions:
Organizational decisions are made by the business executive in the interest of the organization to fulfill its goals and objectives. When a person makes a decision to satisfy is personal goals it is known as personal decision.
(b) Routine and Strategic Decisions:
The decisions made to meet the day-to-day operations of an organization, which are well structured and repetitive in nature, are known as routine decisions. In case decisions are made to meet the current period demand/requirement, whose effect is felt during some future period are known as strategic decisions.
(c) Policy and Operative Decisions:
Top executives of the organization, which is concerned, with the basic policies of the organization make policy decisions and they have long-term impact. Operative decisions are made by middle or lower (supervisor) level managers to meet the needs of day-to-day operation of the business.
(d) Programmed and Non-Programmed Decisions:
Programmed decisions are repetitive in nature and have short-term effect and are made by middle level managers and these are made within the broad policy structure. Non-programmed decision are non-repetitive in nature and are made by top level management as they require commitment of organizational resources and the effect will be seen in long period. The Non-programmed decisions include problems like change of product line, opening of branch of the organization etc.
(e) Individual and Group Decisions:
When an individual takes decision to fulfill his persona] desires, it is known as individual decision. When a group of people or a committee or a group of certain interest makes decisions it is known as group decision, which are taken to satisfy the needs of the group.
(f) Reversible and Irreversible Decisions:
Reversible decisions are subjected to change completely either before, during or after the agreement of taking action. It makes it possible to acknowledge a mistake early in the process rather than perpetuate it. These are useful for changing circumstances where reversal is necessary. Irreversible decisions which if made once cannot be undone. Whatever is decided would then have its repercussions for a long time to come. It commits one irrevocably when there is no other satisfactory option to be chosen course. A manager should never use it as an all-or-nothing but instant escape from general indecision.
When a manager is not much clear about the future and sufficient data is not available to take an effective decision, Experimental decisions are useful which will have general clarity regarding the direction of action. These are not final decisions and they are made experimentally to test the outcome of the decision. Hence, until first results appear and prove themselves to be satisfactory and the feedback is positive then proceed to make the real decision.
(h) Trial and Error Decisions:
In Trial and Error decision-making, knowledge is derived out of the past mistakes. A certain course of action is selected and is tried out, if the results, are positive, the action is carried further. In case of negative results, another course of action is selected by terminating the first one. This act of making one decision and testing it, if fails selecting the next decision is continued until get a suitable alternative to select the course of action. It allows the manager to adopt and adjust plans continuously before the final commitment.
(i) Decisions Made in Stages:
Here the decisions are made in stages until whole action is completed. As soon as one stage is over, by monitoring the risk and testing the indications of from outcome and tackling the obstacles at every stage, further steep is decided. Decision by stages allows feedback and further discussion before the next stage of the decision is made.
(j) Cautious Decisions:
Once a decision is made, many a time problems/risks may crop up at the time of implementation. But decision makers always put their best efforts to adopt right course of action. Many a time, cautious decisions help to limit the risk that are inherent in decision-making process. Here manager will be very cautions to reject/scale down risky projects if necessary and the situation dictates.
(k) Conditional Decisions:
Conditional decisions are either/or type of decisions with all options kept open. These decisions can be alerted if certain unexpected circumstances arise. It prepares manager to react, if the competitions make a new move or if the game plan changes radically. It enables one to react quickly to the ever-changing circumstances of competitive market.
(l) Delayed Decisions:
A decision is made and put on hold till a right time is identified to release the decision and ask the lower level managers to start action when the required elements are in place. A decision made in wrong time may have adverse effect on the organization. This is prevents a manager from making decisions made in wrong time or before all the facts are known. Sometimes it may happen that the organization may forgo an opportunity in the market that require prompt action.
(m) Rational Decision:
Rational decision-making brings a structured or reasonable thought process to the act of deciding. The choice to decide rationally makes it possible to support the decision maker by making the knowledge involved with the choice open and specific. This can be very important when making high value decisions that can benefit from the help of tools, processes, or the knowledge experts.
Choosing rationally is often characterized by the following:
(i) Decision-making will follow a process or orderly path from problem to solution.
(ii) There is a single best or optimal outcome. Rational decisions seek to optimize or maximize utility.
(iii) The chosen solution will be in agreement with the preferences and beliefs of the decision maker.
(iv) The rational choice will satisfy conditions of logical consistency and deductive completeness.
(v) Decision-making will be objective, unbiased and based on facts.
(vi) Information is gathered for analysis during the decision-making process.
(vii) Future consequences are considered for each decision alternative.
(viii) Structured questions are used to promote a broad and deep analysis of situation or problem requiring solution.
(ix) Risk and uncertainty are addressed with mathematically sound approaches.
In the ideal case, all rational decisions makers would come to the same conclusion when presented with the same set of sufficient information for the decision being made. This would suggest that collaborative decision-making will often employ a rational decision making process.