4 styles of decision-making: A leader's guide

Know when to use the different styles of decision-making – and when it's time to try a different
approach

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By Sanjay Malhotra | July 27, 2018

Many people think that decision-making is a result of personality rather than a strategic choice. With
that said, leaders need to understand that personality can’t stand in the way of making critical corporate
decisions. Successful leaders can alter their approach to decision-making to accommodate the demands
of diverse business situations.

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This article will break down four styles of decision-making, when to apply them, and when it’s time to try
a new approach.

1. Directive decision-making

A directive decision-maker typically works out the pros and cons of a situation based on what they
already know. Directive decision-makers are very rational and have a low tolerance for ambiguity. Their
decisions are rooted in their own knowledge, experience, and rationale, rather than going to others for
more information. The upside to this style is decision-making is quick, ownership is clear, and it doesn’t
require extra communication. However, directive decisions can sometimes be made impulsively, without
all the necessary information.

When to use directive decision-making

This style of decision-making lends itself well to situations characterized by stability, repeating patterns,
and consistent events. Reserve directive decisions for instances where there is a clear and undisputed
cause-and-effect relationship; in other words, a right answer exists and is understood collectively.
A leader’s role in directive decision-making

A leader needs to sense the situation, categorize it as a scenario that calls for a direct decision and
respond appropriately. Make sure there are best practices in place for recurring processes. When
classifying the situation, remember to ask yourself: Is this my decision to make, and do I have all the
required information to make this decision? Delegate if necessary, but remember to communicate in
clear, direct language. It’s a leader’s job to understand when extensive, interactive communication is
unnecessary and to make direct decisions based on the information they already have.

Signs you need to use a different approach

If you start using direct decisions to make complex jobs simple, you need to change your approach.

When operations are running smoothly, it’s easy for leaders to fall victim to complacency. Leaders need
to be mindful of the changing complexity of particular situations. If you start using direct decisions to
make complex jobs simple, you need to change your approach. Understand that changing circumstances
call for changing decision-making styles.

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2. Analytic decision-making

Analytic decision-makers examine much information before taking action. For example, analytic leaders
rely on direct observation, data, and facts to support their decisions. However, unlike directive decision-
makers, an analytic decision-maker will seek information and advice from others to confirm or deny
their own knowledge. These decision-makers have a high tolerance for ambiguity and are very
adaptable, but they like to control most aspects of the decision process. This style is a well-rounded
approach to decision-making but can be time-consuming.

When to use analytic decision-making

Analytic decisions are helpful in situations where there may be more than one right answer. Use this
style of decision-making to solve problems where the cause-and-effect relationship is discoverable but
not immediately apparent. Primarily, you’re using this approach to explore several options or solutions
and using fact-based management to guide appropriate action.

A leader’s role in analytic decision-making

Unlike directive decision-making, leaders need to analyze all the information available to them before
deciding on a course of action. It’s beneficial to assemble a team of industry experts to assist with
analytic decisions; however, leaders need to consider conflicting advice and ideas openly. At the same
time, leaders need to consider the viewpoints of non-experts in order to make the most of the analytic
decision-making process.

Signs you need to use a different approach

The most significant warning sign of overuse of the analytic decision style is analysis paralysis. If you find
yourself functioning in a state of over-analyzing or over-thinking without action or reaching a decision,
you need to drop this approach

3. Conceptual decision-making

The conceptual decision-making style takes a more social approach compared to the directive or analytic
methods. Conceptual decision-makers encourage creative thinking and collaboration and consider a
broad array of perspectives. These decision-makers are achievement-oriented and like to think far into
the future when making important decisions.

When to use conceptual decision-making

Apply conceptual decision-making to problems that involve many competing ideas. This style of decision
is best suited for situations characterized by unpredictability and suited to creative and innovative
approaches. In these scenarios, you find there is no immediate solution, but patterns emerge over time.
Using a conceptual style of decision-making accounts for long-term planning and unknown variables.
[ Read our related article by Sanjay Malhotra: 5 habits of emotionally intelligent leaders. ]

A leader’s role in conceptual decision-making

For conceptual decision-making to be effective, leaders need to create an environment that encourages
experiments designed to reveal instructive patterns over time. As well, leaders need to make a point of
increasing interaction and communication. Create groups of people who can contribute innovative ideas
and help with the development and delivery of complex decisions. Patience is key, and leaders need to
give themselves time for reflection.

Signs you need to use a different approach

If the decision you need to make involves a situation that needs structure and defined outcomes, you
shouldn’t use a conceptual approach. As well, decisions that need to drive immediate results and
circumstances where there is little room for error do not fall under conceptual decision-making.

4. Behavioral decision-making

Behavioral decision-makers try to make sure everyone works well together. Like the conceptual style,
behavioral decision-making is group-oriented; however, rather than brainstorming potential solutions,
the group is given the options available to them. From there, the group discusses the pros and cons of
each choice. This style of decision-making considers many different outlooks and opinions in the
process.

When to use behavioral decision-making

Like conceptual decision-making, the behavioral style requires proactive communication. This style takes
a more introspective approach by discussing solutions that have worked in the past rather than trying to
reveal new patterns.
A leader’s role in behavioral decision-making

Leaders need to open up lines of communication in this style of decision-making. Again, create groups of
people who can contribute their opinions and encourage democratic discussions. When employing the
behavioral decision-making style, don’t just impose a course of action. Instead, look at what decision
creates the most harmony within the organization.

Signs you need to use a different approach

If group discussion sessions never reach an agreement, you may need to consider another approach. In
contrast, if new ideas never come up or no one challenges opinions, behavioral decision-making may not
be the best option either. While this style of decision works to benefit the group as a whole, it requires a
definite and decisive leader to get things accomplished. If necessary, look for ways and experiments to
force people to think outside of what’s familiar.

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The most influential leaders learn how to adjust their style of decision-making to suit particular
circumstances. Different contexts and situations call for individual managerial responses and sometimes
multiple approaches to decision-making. By understanding the various forms of decision-making – and
staying aware of warning signs – leaders can learn how to make better decisions in a variety of complex
contexts.

Models of Decision Making: Rational, Administrative and Retrospective Decision Making Models

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The decision-making process though a logical one is a difficult task. All decisions can be categorized into
the following three basic models.

(1) The Rational/Classical Model.

(2) The Administrative or Bounded Rationality Model.

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(3) The Retrospective Decision-Making Model.

All models are beneficial for understanding the nature of decision-making processes in enterprises or
organisations. All models are based on certain assumptions on which the decisions are taken.

1. The Rational/Classical Model:

The rational model is the first attempt to know the decision-making-process. It is considered by some as
the classical approach to understand the decision-making process. The classical model gave various
steps in decision-making process which have been discussed earlier.

Features of Classical Model:

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1. Problems are clear.

2. Objectives are clear.

3. People agree on criteria and weights.

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4. All alternatives are known.

5. All consequences can be anticipated.

6. Decision makes are rational.

i. They are not biased in recognizing problems.

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ii. They are capable of processing ail relevant information

iii. They anticipate present and future consequences of decisions.

iv. They search for all alternatives that maximizes the desired results.

2. Bounded Rationality Model or Administrative Man Model:

Decision-making involve the achievement of a goal. Rationality demands that the decision-maker should
properly understand the alternative courses of action for reaching the goals.

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He should also have full information and the ability to analyse properly various alternative courses of
action in the light of goals sought. There should also be a desire to select the best solutions by selecting
the alternative which will satisfy the goal achievement.

Herbert A. Simon defines rationality in terms of objective and intelligent action. It is characterised by
behavioural nexus between ends and means. If appropriate means are chosen to reach desired ends the
decision is rational.

Bounded Rationality model is based on the concept developed by Herbert Simon. This model does not
assume individual rationality in the decision process.

Instead, it assumes that people, while they may seek the best solution, normally settle for much less,
because the decisions they confront typically demand greater information, time, processing capabilities
than they possess. They settle for “bounded rationality or limited rationality in decisions. This model is
based on certain basic concepts.

a. Sequential Attention to alternative solution:

Normally it is the tendency for people to examine possible solution one at a time instead of identifying
all possible solutions and stop searching once an acceptable (though not necessarily the best) solution is
found.

b. Heuristic:

These are the assumptions that guide the search for alternatives into areas that have a high probability
for yielding success.

c. Satisficing:

Herbert Simon called this “satisficing” that is picking a course of action that is satisfactory or “good
enough” under the circumstances. It is the tendency for decision makers to accept the first alternative
that meets their minimally acceptable requirements rather than pushing them further for an alternative
that produces the best results.

Satisficing is preferred for decisions of small significance when time is the major constraint or where
most of the alternatives are essentially similar.

Thus, while the rational or classic model indicates how decisions should be made (i.e. it works as a
prescriptive model), it falls somewhat short concerning how decisions are actually made (i.e. as a
descriptive model).

3. Retrospective decision model (implicit favourite model):

This decision-making model focuses on how decision-makers attempt to rationalise their choices after
they have been made and try to justify their decisions. This model has been developed by Per Soelberg.
He made an observation regarding the job choice processes of graduating business students and noted
that, in many cases, the students identified implicit favorites (i.e. the alternative they wanted) very early
in the recruiting and choice process. However, students continued their search for additional
alternatives and quickly selected the best alternative.

The total process is designed to justify, through the guise of scientific rigor, a decision that has already
been made intuitively. By this means, the individual becomes convinced that he or she is acting
rationally and taking a logical, reasoned decision on an important topic.

Some Common Errors in Decision-Making:

Since the importance of the right decision cannot be overestimated enough for the quality of the
decisions can make the difference between success and failure. Therefore, it is imperative that all
factors affecting the decision be properly looked into and fully investigated.

In addition to technical and operational factors which can be quantified and analyzed, other factors such
as personal values, personality traits, psychological assessment, perception of the environment,
intuitional and judgemental capabilities and emotional interference must also be understood and
credited.

Some researchers have pinpointed certain areas where managerial thinking needs to be re-assessed and
where some common mistakes are made. These affect the decision-making process as well as the
efficiency of the decision, and must be avoided.

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Some of the errors re:

a. Indecisiveness:

Decision-making is full of responsibility. The fear of its outcome can make some people timid about
taking a decision. This timidity may result in taking a long time for making a decision and the opportunity
may be lost. This trait is a personality trait and must be looked into seriously. The managers must be
very quick in deciding.

b. Postponing the decision until the last moment:

This is a common feature which results in decision-making under pressure of time which generally
eliminates the possibility of thorough analysis of the problem which is time consuming as well as the
establishment and comparison of all alternatives. Many students, who postpone studying until near
their final exams, usually do not do well in the exams.

Even though some managers work better under pressures, most often an adequate time period is
required to look objectively at the problem and make an intelligent decision. Accordingly, a decision
plan must be formulated; time limits must be set for information gathering, analysis and selection of a
course of action.

c. A failure to isolate the root cause of the problem:

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It is a common practice to cure the symptoms rather than the causes. For example, a headache may be
on account of some deep-rooted emotional problem. A medicine for the headache would not cure the
problem. It is necessary to separate the symptoms and their causes.

d. A failure to assess the reliability of informational sources:

Very often, we take it for granted that the other person’s opinion is very reliable and trustworthy and
we do not check for the accuracy of the information ourselves.

Many a time, the opinion of the other person is taken, so that if the decision fails to bring the desired
results, the blame for the failure can be shifted to the person who had provided the information.
However, this is a poor reflection on the manager’s ability and integrity and the manager must be held
responsible for the outcome of the decision.
e. The method for analysing the information may not be the sound one:

Since most decisions and especially the non-programmed ones have to be based upon a lot of
information and factors, the procedure to identify, isolate and select the useful information must be
sound and dependable. Usually, it is not operationally feasible to objectively analyse more than five or
six pieces of information at a time.

Hence, a model must be built which incorporates and handles many variables in order to aid the
decision makers. Also, it will be desirable to define the objectives, criteria and constraints as early in the
decision-making process as possible.

This would assist in making the process more formal so that no conditions or alternatives would be
overlooked. Following established procedures would eliminate the efforts of emotions which may cloud
the process and rationality.

f. Do implement the decision and follow through:

Making a decision is not the end of the process, rather it is a beginning. Implementation of the decision
and the results obtained are the true barometer of the quality of the decision. Duties must be assigned,
deadlines must be set, evaluation process must be established and contingency plans must be prepared
in advance. The decisions must be implemented whole heartedly to get the best results.

Ethically Philosophical

Five Basic Approaches to Ethical Decision-Making

Jules Jules

2 years ago

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Dr. Meeler is a professor at Winthrop University. He has attended Elon University, Unversity of Arkansas
and University of California-Santa Barbra. He has published multiple papers on topics including human
rights, culture, political discussion, posthumanism and international affairs to name a few. Courses he
has taught range from logic to bio-medical ethics.

For more about him click here.

This source discusses the main approaches that philosophers take when battling the topic of ethics.The
first approach that Meeler discusses is the Rights Approach. This was first developed by Immanuel Kant.
This argument basically says that humans are unparalleled in the fact that they can freely make
decisions to do and act how they want. Because of this ability humans have a “fundamental moral right”
for others to accept and not interfere with these choices. So what makes an action immoral, or wrong, in
this theory is when it violates someone’s choices. This argument also states that all other rights stem
from a human’s basic right of choice (Meeler offers rights to privacy and not to be injured as examples).
This ethical theory is summarized in the quote “An action or policy is morally right only if those persons
affected by the decision are not used merely as instruments for advancing some goal, but are fully
informed and treated only as they have freely and knowingly consented to be treated.” The next
approach Meeler offers is the Utilitarian Approach. This theory states that the moral and ethical thing to
do is the action that will produce the most good. So out of any two actions the more ethically
permissible would be the one that benefits the most people in the greatest amount. The next approach
is the Virtue Approach. This theory states that there are ethical ideals and if we have certain virtues (as
Meeler describes “attitudes or character traits that enable us to be and act in ways that develop our
highest potential”) we will be able to achieve them. So to apply this approach one must think as to what
they should do, and what there virtues tell them to do. The Fairness (or Justice) Approach stems from
the Grecian philosopher Aristotle. This approach is based in equality. It states that “favoritism and
discrimination” are immoral, so all humans should be treated alike. Finally, there is the Common Good
Approach. This theory states that what is good for an individual in inherently good for the community.
Therefore, the most ethical thing to do is what provides the most good for the community. While
individual interest is considered, the common good holds more moral weight. Meeler then goes to
provide sample questions and examples to help further understanding of these theories.

Check out this source here.

Five Basic Approaches to Ethical Decision-Making

By: Dr. David Meeler

The Rights Approach

An important approach to ethics has its roots in the philosophy of the 18th-century thinker Immanuel
Kant and others like him, who focused on the individual’s right to choose for herself or himself.
According to these philosophers, what makes human beings different from mere things is that people
have dignity based on their ability to choose freely what they will do with their lives, and they have a
fundamental moral right to have these choices respected. People are not objects to be manipulated; it is
a violation of human dignity to use people in ways they do not freely choose. Of course, many different,
but related, rights are thought to exist — besides this basic one. These other rights can be thought of as
different aspects of the basic right to be treated as we choose. Some other rights might include such
things as rights to the truth, privacy rights, a right not to be injured, and a right to what is agreed (i.e.,
we have a right to what has been promised by those with whom we have freely entered into a contract
or agreement). In deciding whether an action is moral or immoral using this approach, then, we must
ask, Does the action respect the moral rights of everyone? Actions are wrong to the extent that they
violate the rights of individuals; the more serious the violation, the more wrongful the action.

• Identifies certain interests or activities that our behavior must respect, especially those areas of our
lives that are of such value to us that they merit protection from others.

• Each person has a fundamental right to be respected and treated as a free and equal rational person
capable of making his or her own decisions.

• This implies other rights (e.g., privacy free consent, freedom of conscience, etc.) that must be
protected if a person is to have the freedom to direct his or her own life.
• Keep in mind that is often difficult to agree on exactly which rights we have.

• The principle states: “An action or policy is morally right only if those persons affected by the decision
are not used merely as instruments for advancing some goal, but are fully informed and treated only as
they have freely and knowingly consented to be treated.”

The Utilitarian Approach

Utilitarianism was conceived in the 19th century by Jeremy Bentham and John Stuart Mill to help
legislators determine which laws were morally best. Both Bentham and Mill suggested that ethical
actions are those that provide the greatest balance of good over evil. To analyze an issue using the
utilitarian approach, we first identify the various courses of action available to us. Second, we ask who
will be affected by each action and what benefits or harms will be derived from each. And third, we
choose the action that will produce the greatest benefits and the least harm. The ethical action is the
one that provides the greatest good for the greatest number.

• Focuses on the consequences that actions or policies have on the well-being (“utility”) of all persons
reasonably foreseen to be directly or indirectly (but rather immediately) affected by the action or policy.

• Keep in mind, that different people often identify benefits and harms differently.

• The principle states: “Of any two actions, the most ethical one will produce the greatest balance of
benefits over harms.”

The Virtue Approach

The virtue approach to ethics assumes that there are certain ideals toward which we should strive.
These ideals provide for the full development of our humanity, and are discovered through thoughtful
reflection on what kind of people we have the potential to become. Virtues are attitudes or character
traits that enable us to be and to act in ways that develop our highest potential. They enable us to
pursue the ideals we have adopted. Honesty, courage, compassion, generosity, fidelity, integrity,
fairness, self-control, and prudence are examples of virtues frequently cited throughout the world.
Virtues are like habits; that is, once acquired, they become characteristic of a person. Moreover, a
person who has developed virtues will be naturally disposed to act in ways consistent with moral
principles. The virtuous person is the ethical person. In dealing with an ethical problem using the virtue
approach, we might ask, What kind of person should I be? What will promote the development of
character within myself? within my community? Etc.

• Focuses on attitudes, dispositions, or character traits that enable us to be and to act in ways that
develop our human potential.

• Examples might be: honesty, courage, faithfulness, trustworthiness, integrity, etc.

• Keep in mind, different communities may identify differing virtues.

• The principle states: “What is ethical is what develops moral virtues in ourselves and our
communities.”

The Fairness (or Justice) Approach

The fairness or justice approach to ethics has its roots in the teachings of the ancient Greek philosopher
Aristotle, who said that “equals should be treated equally and unequals unequally.” The basic moral
question in this approach is: How fair is an action? Does it treat everyone in the same way, or does it
show favoritism and discrimination? Favoritism gives benefits to some people without a justifiable
reason for singling them out; discrimination imposes burdens on people who are no different from those
on whom burdens are not imposed. Both favoritism and discrimination are unjust and wrong.

• Focuses on how fairly or unfairly our actions distribute benefits and burdens among the members of a
group.

• Fairness requires consistency in the way people are treated.

• The principle states: “Treat people the same unless there are morally relevant differences between
them.”

The Common Good Approach

This approach to ethics assumes a society comprising individuals whose own good is inextricably linked
to the good of the community. Community members are bound by the pursuit of common values and
goals. The common good is a notion that originated more than 2,000 years ago in the writings of Plato,
Aristotle, and Cicero. More recently, contemporary ethicist John Rawls defined the common good as
“certain general conditions that are…equally to everyone’s advantage.” In this approach, we focus on
ensuring that the social policies, social systems, institutions, and environments on which we depend are
beneficial to all. Examples of goods common to all include affordable health care, effective public safety,
peace among nations, a just legal system, and an unpolluted environment. Appeals to the common
good urge us to view ourselves as members of the same community, reflecting on broad questions
concerning the kind of society we want to become and how we are to achieve that society. While
respecting and valuing the freedom of individuals to pursue their own goals, the common-good
approach challenges us also to recognize and further those goals we share in common.

• Presents a vision of society as a community whose members are joined in a shared pursuit of values
and goals they hold in common.

• The community is comprised of individuals whose own good is inextricably bound to the good of the
whole.

• The principle states: “What is ethical is what advances the common good.” Five Corresponding
Questions to Consider 1. Which of the available options treats people with more dignity and respect? All
human beings should be treated with dignity simply because they are human. People have moral rights,
especially the fundamental right to be treated as free and equal human beings, not as things to be
manipulated, controlled, or cast away. Ask things like How do our actions respect the moral rights and
the dignified treatment to which every person is entitled? 2. Does any one of the available options do
more good than harm? Or can we at least try to do more good than harm with our choice? Consider the
short term and long-term consequences of your actions. 3. Which of the available options develops
virtues most effectively? In The Book of Virtues, William Bennett notes that virtues are “habits of the
heart” we learn through models—the loving parent or aunt, the demanding teacher, the respectful
manager, the honest shopkeeper. They are the best parts of ourselves. Consider such questions as, Does
any option cross a line that gives up one of those parts? Or which option, at least somewhat, best
demonstrates integrity, trustworthiness, honesty, compassion, or any of the other virtues we honor? 4.
Is any one of the available options more fair and just? Are we treating each party the same unless there
is some relevant moral reason to treat one differently? Justice requires that we be fair in the way we
distribute benefits and burdens. What parties does the option benefit, and which does it burden? 5.
Does any one of the available options make our community better as a result? Consider your primary
community; however it is reasonable to define it. Now ask something like, Can we get beyond our own
interests to make that community stronger? Are we able to draw on our community’s strengths to help
in our own process of becoming a better business? How some differing approaches might work in an
example. Imagine that you have an elderly aunt who is very wealthy. While she has no children of her
own, you are her favorite among all her nieces and nephews. As a result, she plans to leave all her
wealth to you. Recently, your wealthy aunt was taken ill, and you received a phone call that she is now
in the hospital; furthermore, it would be good if you could come home to visit her in the hospital this
weekend. Unfortunately, you have two expensive tickets to a concert this weekend. The concert is being
performed by your favorite band, who you’ve been waiting almost a year to see perform live, and you
bought the tickets for you and your partner to share the experience together. Because of the travel time
involved, you cannot both attend the concert and travel home to visit your sick aunt in the hospital. You
decide to forgo the concert and instead you travel home to visit your ailing aunt in her sickbed. Different
approaches sometimes recommend different courses of action; other times they recommend the same
(or similar) courses of action, but for very different reasons.

The Utilitarian Approach

For a utilitarian, the decision might turn on such considerations as ‘how much fun the concert will be,’
‘can I visit auntie another week?’ ‘If I don’t visit, will she remove me from the will?’ ‘If I cancel the
concert and tell auntie that she’s more important, I’m sure to get all her inheritance,’ etc. In none of
these situations is a utilitarian being selfish. My own happiness is important, but it must be put into the
mix with everyone else’s happiness as well. So if auntie will be only a little disappointed that I don’t visit
and I’ll be very happy at the concert, then it works out for me to go to the concert. However, if auntie
will be very disappointed that I don’t visit, and if I’ll feel guilty about going to the concert, then it’s bad
for me to choose the concert. Of course, if you factor in the likely effects on my inheritance, my
“happiness-quotient” goes way up if I visit auntie in the hospital. In fact, my happiness goes up so much
that it virtually guarantees that I should forgo the concert and visit my sick aunt in the hospital.

The Rights Approach

The basic idea here is that people have a right to be treated with respect and dignity. While it might be a
bit strong to say that mu aunt has a right to have me visit, it is less unusual to say that I have a general
duty to visit ailing elderly relatives in the hospital. So, it is not obvious that the rights approach would
command me to visit my aunt. However, certain considerations are clearly out. For example, if I do visit
my sick aunt, I must not choose to do so in order to ensure that I obtain her inheritance. Rights theorists
say that his kind of thinking (or the utilitarian ethical approach) does not treat my aunt as a person, but
instead looks at her as a bag of money. When I choose to visit my sick I aunt, I should be motivated out
of respect for her as a sick, elderly lady with no children of her own; I should try to understand her
loneliness and vulnerability, and I should visit her because of my respect for her and my willingness to
see her treated well. So, the money I might get from inheriting her wealth or the fun I might have the
concert simply do not count to a rights theorist. In short, even if she weren’t wealthy, I would drop the
concert and go visit her.

The Virtue Approach

Of course, you might read these two perspectives and think that my proposed choices reveal important
aspects of my personal character. What sort of person would visit his elderly aunt just to get her
inheritance? What sort of person would put his own fun-time aside in order to visit his ailing aunt in the
hospital? So, when I’m trying to decide what I should do, I could just ask myself questions like these
directly. Do I want to be the sort of person who only visits his sick elderly aunt to get her money? If I am
thinking about traditional virtues such as honesty, courage, faithfulness, integrity, etc., then I will ask
myself which course of action best embodies these virtues. Here, the answer may not be so cut and dry.
If I am honest, will I tell my sick aunt that I have these great concert tickets and I’ve been waiting to see
the show for months? If I am faithful in general, to whom should I show the greatest faithfulness?
Myself? My partner? My family? In virtue ethics, the balancing act is often more difficult because there
are many virtuous character traits we should try and embody, and each may have different targets. In
the end, we must strive to achieve the greatest harmony of virtues. So I should probably be faithful to
my family and visit my aunt in the hospital, while also being honest with myself in facing the temptation
that I really wanted to go to the concert (so maybe I’m not so nice in my heart), I should be courageous
enough to tell the bad news to my partner, etc. The Common Good Approach Here, my focus is on
community whose members are joined in a shared pursuit of values, and I often get to define the
relevant community. However, a family is an obvious example of a ‘community’. So, when I think about
what to do this weekend, I do not focus on happiness (like utilitarianism), nor do I focus on building a
virtuous character for myself, nor on respecting my aunt’s needs. Rather, I ask myself which course of
action would be the best for the family overall. So I might need to know more information, such as ‘Will
other family members be with auntie this weekend?’ or ‘If other family-members will be there this
weekend, would it be better for me to visit next weekend?’ Is it better for me to visit her in the hospital,
or stay with her over Spring Break, once she’s back at her home? Either of these last two would mean I
can go to the concert this weekend, but my motivation is doing what best helps the family. The idea is
that I am making myself available as a “team-member” to work with other family-members in ensuring
that auntie, and everyone else in the family, get the assistance needed. Summation So, in the end, the
various ethical approaches represent methods used to evaluate situations and recommend ethical
courses of action. The various approaches often disagree on the best thing to do. Even when they agree
on what to do, they do so for very different reasons. As a result, each approach often needs certain
questions answered that are irrelevant to another approach. It is handy to know which approach we
tend to use for our personal decisions. In business, it is important to know what the company values are
and how they integrate into policies guiding our actions as employees. And when our company is Multi-
National, it is vital to understand any aspects of differing approaches used in the various host-countries
in which we operate. Even when two approaches would come to the same result, you should not ignore
features that are relevant to the other approach, if for no other reason to not insult your friends,
colleagues, family members, hosts, etc. Try always to appreciate the fact that many methodologies can
work together well, if first we take the time to understand and integrate them.

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Types of Decisions:

As managers “we will make different types of decisions under different circumstances. When deciding
whether or not to add a new wing to the administration building, or where to build a new plant, we will
have to consider our choice carefully and extensively. When deciding what salary to pay a new
employee, we will usually be able to be less cautious. Similarly, the amount of information we will have
available to us when making a decision will vary. When choosing a supplier, we will usually dose on the
basis of price and past performance. We will be reasonably confident that the supplier chosen will meet
our expectations. When deciding to enter a new market, we will be much less certain about the success
of our decision. For this reason, we will have to be particularly careful making decisions when we have
little past experience or information to guide us.”

In short, the nature and circumstances of a decision can vary enormously. Managers have to vary their
approach to decision-making, depending on the particular situation involved. For our purposes, it will be
useful to distinguish between situations that call for programmed decisions and those that call for non-
programmed decisions. Business managers have to make various types of decisions. Such decisions can
be placed into three broad categories: technical decisions, managerial decisions and institutional
decisions.

These three types of decisions may now be briefly illustrated:

(i) Technical Decisions:

In every organisation there is need to make decisions about core activities. These are basic activities
relating directly to the ‘work of the organisation’. The core activities of Oil India Ltd. would be
exploration, drilling, refining and distribution. Decisions concerning such activities are basically technical
in nature. In general, the information required to solve problems related to these activities is generally
concerned with the operational aspects of the technology involved.

In short, technical decisions are concerned with the process through which inputs such as people,
information or products are converted into outputs by the organisation.

(ii) Managerial Decisions:

Such decisions are related to the co-ordination and support of the core activities of the organisation.

Managerial decision-making is also concerned with regulating and altering the relationship between the
organisation and its external (immediate) environment. In order to maximize the efficiency of its core
activities it becomes absolutely essential for management to ensure that these actions are not unduly
disturbed by short-term changes in the environment.

This explains why various organisations often build up inventories and forecasting of short-term changes
in demand and supply conditions are integral parts of managerial decision-making.

(iii) Institutional Decisions:

Institutional decisions concern such diverse issues as diversification of activities, large-scale capital
expansion, acquisition and mergers, shifts in R & D activities and various other organisational choices.
Such decisions obviously involve long-term planning and policy formulation.

In the words of Boone and Koontz: “Institutional decisions involve long-term planning and policy
formulation with the aim of assuring the organisation’s survival as a productive part of the economy and
society.” The implication is clear: if an organisation is to thrive in the long run as a viable organisation, it
must occupy a useful, productive place in the economy and society as a whole.

With changes in society and in its economic framework, an organisation must adapt itself to such
changes. Otherwise it may cease to exist. Due to shortage of traditional sources of energy the passenger
car industry of the U.S. was reeling under recession from 1973 onwards. Some automobile companies
faced with falling demand for petrol-operated cars have produced battery-operated motor cars.

Managers in every organisation are faced with these three types of decisions, viz., technical, managerial
and institutional. Table 8.1 illustrates each type of decision for two different organisations: one profit-
seeking firm (an oil company) and non-profit seeking firm (an oil company) and one non-profit
organisation (a hospital).

Two Organisations and Three Kinds of Decisions

7. Decision-Making at Different Levels in the Organisation:

A study of the decision-making in different organisations reveals that the three types of decisions listed
above are not evenly spread throughout the organisation. In general most institutional decisions are
mostly made at the supervisory level. This point is illustrated in Fig.8.4.

Types of Decisions and the Management Hierarchy

Fig.8.4 gives an indication of the relative number of each type of decision made at each level in the
organisations. However, the categories should not be treated as exclusive. For example, the production
manager of a machinery manufacturing firm like the Texmaco might primarily be engaged in technical
decisions, while the legal adviser of the company might be involved in institutional matters.

8. Programmed and Non-Programmed Decisions:

Nobel Laureate H. A. Simon has distinguished between two types of decisions, viz., programmed and
non-programmed moved decisions. He has made the point that decisions differ not only in their content
but also in terms of their relative uniqueness. By the term ‘relative uniqueness’ he means the degree to
which a problem or decision (1) has been seen before; (2) occurs frequently and at regular intervals; and
(3) has been solved or resolved in a satisfactory manner.

According to Simon, programmed decisions are those which involve simple, common, frequently
occurring problems that have well-established and understood solutions. On the contrary, non-
programmed decisions are those involving new, often unusual or novel problems.

In the words of Stoner:

“Programmed decisions are those that are made in accordance with some habit, rule or procedure.
Every organisation has written or unwritten policies that simplify decision-making in a particular
situation by limiting or excluding alternatives.”

A few examples of such decisions may now be given. In most situations managers will not have to worry
about what to pay a new employee because most organisations have an established salary structure (or
pay policy) for any position. (Of course, salary of highly skilled or top management is often negotiable.
But these are exceptions rather than the rule).

In a like manner managers will not generally have to think about the routine problems they face every
day. Their habits, or those of their peers, will help them decide quickly what to do about them.
There is no denying the fact that programmed decisions limit the freedom of managers to a
considerable extent. In other words, managers hardly enjoy any discretion in matters involving
programmed decisions set managers, decide what to do. This implies that programmed decisions set
managers free on most occasions.

The policies, rules or procedures by which managers make decisions free them of the need to find out
new solutions to every problem they face. For instance, it would really be time-consuming to decide
how to handle customer complaints on an individual basis. Adoption of routine procedures such as
permitting customers to exchange unsuitable merchandise would really help matters.

Since managers regularly have a series of decisions to make, organisations have to develop varying
decision rules, programmes, policies, and procedures to use. Existing pay scales are used as guideline to
fix the starting salary of a new factory guard or a new security officer. Similarly, when inventory of raw
materials occurs.

What can be said in favour of programmed decisions is that such decisions can be made “quickly,
consistently and inexpensively since the procedures, rules and regulations eliminate the time-consuming
process of identifying and evaluating alternatives and making a new choice each time a decision is
required. While programmed decisions limit the flexibility of managers, they take little time and free the
decision maker to devote his or her efforts to unique, non-programmed decisions. It is perhaps easiest
for managers to make programmed decisions.”

It is perhaps easiest for managers to refer to a policy rather than think of some problem and suggest
solution. Effective managers usually rely on policy as a time saver. But they must remain alert for any
exceptional case(s). For example, in case of a multi-product firm like the Godrej, the company policy
may put a ceiling on the advertising budget for each product.

However, a particular product, say Cinthol, may demand an expensive advertising campaign to counter a
competitor’s aggressive marketing strategy. In such a situation a programmed decision — that is a
decision to advertise the product in accordance with budget guidelines — may prove to be wrong. Thus
when a situation calls for a programmed decision managers must ultimately make use of their own
judgement.
Non-programmed decisions, as Stoner has put it, are “those that are out of the ordinary or unique. If a
problem is complex or exceptional, or, if it has not come up often enough to be covered by a policy, it
must be handled by a non-programmed decision.”

Such decisions are needed to solve problems like how to allocate an organisation’s resources, what to
do about a failing product line, how community relations should be improved, and almost all significant
problems a manager faces. In Table 8.2, we prepare a list of the traditional and modern techniques of
decision-making.

Techniques of Decision-Making

In those organisations and decision situations where non-programmed decisions are the rule, the
creation of alternatives and the selection and implementation of the most appropriate one becomes the
distinction between effective and ineffective managers is drawn on the basis of their ability to make
good non- programmed decisions.

However, managers are often evaluated on the basis of their ability to solve problems, to apply
creativity and judgement to the solution of problems and to make decisions in a logical, step-by-step
manner. Since established procedures are of little use for making such decisions, new solutions are to be
found out.

This explains why most management training programmes are directed towards improving a manager’s
ability to make non-programmed decisions by teaching them how to take such decisions.