TYPES OF DECISION MAKING

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INTRODUCTION
Decision making is the mental process of choosing
from a set of alternatives
Every decision-making process produces an outcome
that might be an action, a recommendation, or an
opinion
Since doing nothing or remaining neutral is usually
among the set of options one chooses from, selecting
that course is also making a decision.
TYPES OF DECISION MAKING
1. PROFRAMMED & NON PROGRAMMED DECISIONS:
(a) Programmed decisions are those made in accordance
with some habit, rule or procedure
Every organization has written or unwritten policies that
simplify decision making in recurring situations by
limiting or excluding alternatives
For example, we would not usually have to worry about
what to pay to a newly hired employee; organizations
generally have an established salary scale for all
positions
Routine procedures exist for dealing with routine
problems.
Cont’d
Routine problems are not necessarily simple ones; programmed
decisions are used for dealing with complex as well as with
uncomplicated issues
To some extent, of course, programmed decisions limit our freedom,
because the organization rather than the individual decides what to do
However, the policies, rules or procedures by which we make decisions
free us of the time needed to work out new solutions to old problems,
thus allowing us to devote attention to other, more important activities
in the organization
(b) Non-programmed decisions are those that deal with unusual or
exceptional problems
If a problem has not come up often enough to be covered by a policy or is
so important that it deserves special treatment, it must be handled by a
non-programmed decision.
Cont’d
Such problems are:
(1) How to allocate an organisation’s resources
(2) What to do about a failing product line,
(3) How community relations should be improved will
usually require non- programmed decisions.
As one moves up in the organizational hierarchy, the
ability to make non- programmed decisions becomes
more important because progressively more of the
decisions made are non-programmed.
2. MAJOR & MINOR DECISIONS:
Decisions may be classified as major and minor
For example, a decision to purchase a machine worth
hundreds of thousands or millions of $ 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.
Cont’d
Minor Decision:
Made on a regular basis.
Do not require much thought.
Important at the time but probably will not have much impact
on the future.
Example:
Stay "in state" for college or attend an out of state university.
Major Decision:
Requires much thought and time.
Maybe difficult to make.
May have long term effects.
3. Routine & Strategic Decisions
Routine decisions are of repetitive nature
Do not require much analysis and evaluation
Are in the context of day-to-day operations of the
enterprise
Can be made quickly at middle manage­ment level
An example is, sending samples of a food product to
the Government investigation centre.
Cont’d
Strategic decisions relate to policy matter
re taken at higher levels of management after careful
analysis and evaluation of various alternatives
Involve large expenditure of funds and a slight mistake
in decision making is injurious to the enterprise
Examples of strategic decisions are- capital
expenditure decisions, decisions related to pricing,
expansion and change in product line etc.
4. ORGANIZATIONAL &PERSONAL
DECISIONS
When a particular decision has been taken by a person as an
executive of an organization, such decision can be considered as an
organizational decision
The impact of such decision can be felt on the working of the entire
organization
The power of taking an organizational decision can also be
delegated by a superior to the subordinates
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.
Cont’d
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.
An executive can also take a decision that is related with
himself
Generally the effect of these decisions is on the personal life of
the decision-maker
At the same time, the authority of taking such decision cannot
be delegated to others.
5. INDIVIDUAL & GROUP DECISIONS
Group decisions are taken by a committee constituted for this specific purpose
Such decisions are very important for the organization.
Groups are formed when two or more people interact and are interdependent,
or come together so as to achieve certain common objectives
Group decision making involves the members of the group trying to reach an
optimal solution by considering the input of the group members.
The group members come from varying background and may have differing
perspectives and ways of doing things
This increased diversity of view will be brought to the table during decision
making
There is an increased acceptance of solutions that are arrived at by a group
Cont’d
This is because when a decision is come up with by a group, the
members have a sense of ownership for the solution found
Group decision making also results in increased morale by the group
members as well as a heightened level of commitment by the
individual to the organizational tasks in consideration.
Group decision making results in more complete information being
available to aid in the decision making process
This is because group decision making assists in overcoming the
limitation on knowledge that an individual may have
Groups make it possible to pool information concerning various
complex tasks
The quality of the decisions made by the group is higher than that of
an individual and it is also likely to be more accurate.
Cont’d
Individual decisions are taken by a single individual in
context of routine decisions where guide­lines are already
provided.
Individuals are more likely to arrive at prudent decision
for the organization
Research indicates that groups are likely to make greater
risks in decision making that an individual would
This is because the consequences of a wrong decision to a
group may not be as severe as they may be to an individual
The individual is therefore more likely to exercise caution
when making a decision.
Cont’d
When a timely decision needs to be made, the individual
is best suited to make the decision
This is because groups are time consuming as
deliberations are made
While studies show that committees can make better
decisions than the average individual member, they take
too much time doing this.
Since the individual is not under any pressure to conform,
he/she will come up with an independent solution
This freedom from conformity may result in unorthodox
yet effective results being achieved by the individual.
6. POLICY & OPERATIVE DECISIONS
Policy decisions are very important, they are taken by top
management, they have a long-term impact and mostly relate to
basic policies
The policy decisions are used for deciding the basic policies
related with the organization
These decisions are taken by the top management of the
organization
The policies that have been decided by the top management also
act as the basis for the operating decisions
No decision can be taken that goes beyond the policy framework
In this way, the policy decisions are very important and their
impact is also long-term
Cont’d
On the other hand, the operating decisions are less
significant
These are related with the day-to-day operations of the
organization
The operative decisions are taken while keeping in view
the policies that have been decided by the organization
The operative decisions are taken by the middle and the
lower level management because in these decisions,
real execution and supervision is also involved
Cont’d
For example, the decision to grant bonus to the
employees of the organization can be described as a
policy decision but once this decision has been made,
the exact amount that is going to be paid to each
employee will be an operated decision.
Operative decisions relate to day-to-day operations of
the enterprise and are taken at lower or middle
management level
Whether to give bonus to employees is a policy
decision but calculating bonus for each employee is an
operative decision.
7. LONG TERM, DEPARTMENTAL &
NON ECONOMIC DECISIONS
In case of long term decisions, the time period covered
is long and the risk involved is more.

Departmental decisions relate to a particular

department only and are taken by departmental head.

Non-economic decisions relate to factors such as

technical values, moral behavior etc.
If you have any questions kindly don’t
hesitate to ask during the class timings.