Types Of Decision
Making
INTRODUCTION
In the course of managing an organization, the manager is
confronted with several problems which require immediate
and appropriate solutions.
Hardly a day passes without making some decisions is
impossible.
Definitions
According to Harold Knootz, “Decision making is
defined as the selection of a course of action among
various alternatives; it is the care of planning”.
According to Peter F.Drucker, a decision is a
judgement. It is a choice between alternatives. It is
rarely a choice between right and wrong. It is a best
choice between “almost right” and “probably wrong”.
Types of decisions
Decisions taken by managers may be classified under various
categories depending upon the scope, importance and the
impact that they create in the organization. The following are
the different types of decisions
Programmed and Non-programmed
Operational and strategic
Organizational and personal
Individual and group
I. Programmed and Non-Programmed
Decisions:
Programmed decisions are normally repetitive in nature.
Easiest to make
Usually these decisions are taken in consultation with the
existing policy, rule or procedure.
Ex: making purchase orders, sanctioning of different types
of leaves, increments in salary etc.
Non-Programmed:
Non-Programmed decisions are different in that they are
non-routine in nature.
Ex: Issues related to handling a serious industrial relations
problem, declining market share, increasing competition etc.
The solutions may widely differ in the case of non-
programmed decisions.
The effectiveness of the manager lies in handling
exceptional situations.
II. Operational and strategic decisions:
Operational or Tactical decisions relate to the present.
The primary purpose is to achieve high degree of efficiency
in the company’s ongoing operations.
Ex: Better working conditions, effective supervision, better
maintenance of the equipment etc.
The focus in the operational decisions is on the short-run
Strategic decisions:
Expanding the scale of operations, entering new markets,
changing the product mix, shifting the manufacturing
place from one place to other etc. Are strategic in nature.
Such decisions will have far impact on the organization.
Strategic decisions require extensive deliberations and huge
resources and are taken by top level managers.
It is on the long-run in the case of strategic decisions.
III. Organizational and Personal Decisions:
Decisions taken by managers in the ordinary course of
business in their capacity as managers relating to the
organizational issues are organizational decisions.
Ex: Decisions regarding introducing a new incentive system,
transferring an employee, reallocation etc. Are taken by
managers to achieve certain objectives.
Personal Decision:
Managers do take some decisions which are purely personal
in nature.
However, their impact may not exactly confine to their
selves and they may affect the organization also.
Ex: The manager’s decision to quit the organization, though
personal in nature, may impact for the organization.
IV. Individual and Group Decisions
It is quite common that some decisions are taken by a
manager individually while some decisions are taken
collectively by a group of managers.
Individual decisions are taken where the problem is of
routine nature.
Group decisions:
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.
It contributes for better coordination among the people.
DECISION MAKING
process
INTRODUCTION
“Decision making is the process of making
a choice between a numbers of options
and committing to a future course of
actions.”
Decision Making Process
There are 8 steps of Decision Making:
Identification of problem.
Identification of decision Criteria.
Allocating weight to criteria.
Develop alternatives.
Analysis of Alternatives.
Selection of alternatives.
Implementation of the best alternatives.
Evaluation of decision effectiveness.
Step1: Identifying The Problem
A problem is defined as a discrepancy between an existing and a desired
state of affairs.
Some cautions about problem identification include the following:
◦ Make sure it’s a problem and not just a symptom of a problem.
◦ Problem identification is subjective.
◦ Discrepancies can be found by comparing current results with some standard.
◦ Managers aren’t likely to characterize a discrepancy as a problem if they
perceive that they don’t have the authority, information, or other resources
needed to act on it.
Identifying The Problem
Step2: Identifying Decision Criteria
Decision criteria are factors that are Important
(relevant) to resolving the problem.
A. Costs that will be incurred(investment required)
B. Risk likely to be encountered( chance of failure)
C. Outcomes that are desired (growth of the firm)
Step3: Allocating Weights to the
Criteria
Decision criteria are not of equal importance:
Assigning a weight to each item places the items
in the correct priority order of their importance in
the decision making.
Each possible solution must have features or cons and pros. A
manager should score the criteria according to the need of the
situation.
Step4: Developing Alternatives
As manager it is advised you select a viable
alternative that could also resolve the problem. At
this point we are just listing not evaluating the
alternatives.
Step5: Analyzing Alternatives
Appraising each alternative strengths and weaknesses.
An alternative’s appraisal is based on its ability to resolve the
issues identified in steps 2 and 3
Step6: Selecting Alternatives
Choosing the best alternative or the one that
scored the highest among all.
Step7: Implementing the Decision
Putting the decision into action by
conveying into those affected and getting
their commitment to it.
Step8: Evaluating the Decision’s
Effectiveness
Evaluating the outcome or result of the decision to see
if the problem was resolved.
If the problem still persists, the managers should re-
assess the problem and start over again.
