2.21.

TYPES OF DECISIONS
Managerial decisions
Managerial de
may be classified into the following categories.
()
categoies.
Programmed and Non-programmed decisions
i) Organisational and personal decisions
(ii) Tactical (Policy) and
operational decisions
(iv) Major and minor decisions

921.1.Programmed Decisions and Non-programmed Decisions

Progranmed decisions are also called routine decisions or structured decisions
because these types of decisions are taken frequently and they are repetitive in nature.

Such decisions are generally taken by the middle lower level managers and they
or

have a short tem impact. This decision is taken within the preview of the policy of the
organisation. For example, making a purchase order, sanctioning the different types

of leaves, increments in salary, reordering of standard inventory terms, etc. Managers

dealing with such issues of routine nature usually follow the established clear-cut
procedure. Managers know in advance what decisions he has to be taken in a
particular set of conditions. They need not ask anything from their superiors.
 ent
Non-programmed structures are also called strategic decisions or basic decisia
or policy decisions or unstructured decisions. This decision is taken by
isions
leal with top
management people whenever the need arises. These decisions deal with unigs unique or
unusual or non-routine problems. Such problems cannot be tackled in
a
predetermined manner. There are no established methods or readymade answers
for
such problems. A careful analysis is made by the management before takinp
a
decision. For example, issues related to industrial relations problem, declining market
et
share, increasing competition, problems with the collaborator, starting new busines
ess,
acquisition of a business etc. This decision has a long-term impact on business.

The following table gives the comparison between programmed and non.
n
programmed decisions.

S. No. Programmned decisions Non-programmed decisions

It deals with routine or repetitive It deals with unique or unusual or
type ofproblem. non-routine problems.

2. They are highly uncertain

They are highly certain conditions.
conditions.

3 There are established procedures to There is no established procedure.

take decisions.

4 Middle or low level executives take This type of decision is taken by

this type of decision. top level executives.

5. It requires little judgment and It involves much thought and

deliberation. Judgment.

2.21.2. Organisational and Personal Decisions

Organisational decisions are decisions taken by an individual in his official

capacity to further interest of the organisation. These decisions are based on
rationality, judgment and experience. For example, decisions such as introducinga
new incentive system, transferring an employee, reallocation or redeployment of
employees etc. Such decisions affect the functioning of the organisation directly.
 If decision is taken
by the executive in the
his personal life), it is personal capacity (thereby attecting
known as personal
decision. Sometimes these
affect functioning of the organisation
also. For example, if an
decisions
organisation, it may atfect
the
executive leaves the
organisation. The authority of taking
decisions may be delegated, whereas organtzationa
personal decisions cannot be delegated.
2.21.3. Tactical (Policy) and
Operational Decisions
Decisions pertaining to various policy matters of the organisation are po11y
decisions.
decisions. These are taken
by the top management after careful analysis and
evaluation of various alternatives. These decisions have long term
impact on the
functioning of the concern. For example, decisions
regarding location of plant, capital
expenditure, volume of production and channcls of distribution, etc. are policy
decisions. Operational decisions relate to
day-to-day functioning or operations of
business. Middle and lower level
managers take these decisions. An example 15,
sending samples of a food product to the Government investigation centre.

2.21.4. Major and Minor Decisions

Decision pertaining to purchase of factory premises is
new a major decision.
Major decisions are taken by top management. Purchase of office stationery is a
minor decision which can be taken by office superintendent.

2.22. DECISION-MAKING UNDER DIFFERENT CONDITIONS

Normally, decision-making includes the selection of right alternative from

various available alternatives. When the selected alternative comes to action based on
the present decision-making in future period, it might not consider the problems
associated with alternatives. So, today's decision will affect the future action
considerably. If it is a long-term decision-making process, the reflection of future
should be considered in today's decision to avoid more deviation from the original
one. The future conditions will vary from perfect certainty to complete uncertainty
which will come in future. Therefore, decision-making involves conditions of perfect
certainty, conditions of risk und conditiuons of complete uncertainty. The conditions of
 2.82 ent
priori probability,
risk aremainly analysed in three
forms such as
empirical
em:

probability and subjective probability.

2.22.1. Decision Under Certainty

the work. The circumstan
manager of the organisation
The of
knows the nature
of certainty exists due to its nature. It makes the manager to take decision-maki
umstance
model.
king
can use a dete ministiC In thie
pertectly time-to-time. In this condition, he this
case, he does not need to analyze each element of work. Th- payoff table method i
is
followed. In Payoff table method, the outcomes of a decision under varione
conditions are made based on the demand of the product in the form of low, moderate
te
and high. First, the highest demand of the product is considered. Then, the next
nighest 1s considered and so on. This method leads to get more profit to the

organisation. So, the manager is forced to see the profitability.

2.22.2. Decision Under Uncertainty

If managers of organisation do not have information about the outcome of the

decisions, then he will be in a condition to run organisation under uncertainty
conditions. In this case, even insufficient data is not available to develop the estimate
similar to empirical probability method. So, a number of different decision criteria
have been proposed in possible forms to make decision-making. They are as follows.

(a) Maximizing the maximum possible payoff (Optimistic).

(b) Maximizing the minimum possible payoff(Pessimistic)
(c) Minimizing the maximum possible regret to the decision maker (Regret).

(d) Assuming equally likely probabilities for the occurrence of each possible
state of nature (Insufficient reasoning).

2.22.3. Decision Under Risk

Generally, most of the organisations make the decision based on the conditions

ofrisk. For example, the outcome of the decision is decided with less information
PIarnl

but
vailable but with the
with the
sufficient ( 2.83
develop the variou various estimates of
information.
O In this
this situation, the manager has to
situation, the
events
occurring. ma
incomplete lete information and
intelligence. The estimates
The estimates' are experience,
arc
ed estimates. The A At
t the same time, risk will be involved in
ar outcome with
probability
of risk is calculated as percentageinvor
repeated actions in a the
large number of times. Tner
of t
percentage
s a

methods determine the

to
probability of estimates.
1. A priori
probability
2. Empirical probability

3. Subjective probability.
a) A priori probability:
This probability is
obtained by inferences from
assumed conditions. For
ample, a coin is tossed several
times to predict the outcome ofa
single toss.
ai) Empirical probability:
Empirical probability is determined by collecting and recording actual experience
for a period of time. The percentage of each event with respect to time is calculated
for the event occurred. So, this probability provides quantitative information about
the event.

(i)Subjectiveprobability:
In some cases, managers do not get sufficient numerical data to calculate the

probability of event using both empirical and priori methods. In this situation, the
his judgment. The accuracy of the decision
managers make his decision based on own

other methods due to unavailability of sufficient data.

Is less as compared to