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Types of Decision (Decision-Making)
A decision can be made by analyzing the available alternatives. Making a decision is a key function of the manager. A manager take different decisions based on time and requirements. There are five types of managerial decisions that can be made by the manager for the growth of the organization.
The major types of decision in management include:
- Programmed and Non-Programmed Decisions
- Routine and Basic Decisions
- Operational and Strategic Decisions
- Organizational and Personal Decisions
- Individual and Group Decisions
Programmed and Non-Programmed Decisions
Programmed decisions are types of decisions that are taken for regular and repetitive problems whereas non-programmed decisions are needed for unique or new problems.
Related: Decision-Making: Definition, Features, Types, Process, & Importance
Programmed decisions are repetitive and routine in nature. They are the easiest to make. Usually, these decisions are taken by the first-line managers based on the framework, rules, regulations, and standard operating procedures of the organization or in consultation with the existing policy, rule, or procedure which are already laid down in the organization.
For example: making purchase orders, sanctioning different types of leave, increments in salary, settlement of normal disputes, etc. Managers dealing with such issues of routine nature usually follow the established procedures.
Non-programmed decisions are different in that they are non-routine in nature. They are creative, unique, novel, and consequential in nature. They are related to some exceptional situations for which there are no established methods of handling such things. According to Peter Druker, non-programmed decisions are strategic decisions and are regarded as truly managerial decisions.
For example, issues related to handling a serious industrial relations problem, declining market share, increasing competition, problems with the collaborator, product diversification, new investment, and growing public hostility towards the organization fall in this category. Problems like these have to be handled differently.
While different managers reach the same solution in the case of programmed decisions because they are guided by the same policy or procedure, the solutions may widely differ in the case of non-programmed decisions. As one moves up in the hierarchy, many of the decisions that managers make are non-programmed in nature.
Also Read: The 7 Important Steps in the Process of Decision Making (Explained)
Routine and Basic Decisions
Routine decisions are types of decision that are related to the day-to-day activities of the organization. These are the operational decisions made by the lower-level management. Many repetitive problems may arise during the regular operations of the organization. Such problems can obstruct the smooth performance of the organization.
And it is the responsibility of the manager to solve such problems at the proper time. Examples of routine decisions are the exchange of work between co-workers, repairs, maintenance of machines, and making the availability of raw materials for the production process. Generally, routine decisions are repetitive in nature and are like programmed decisions.
Basic decisions are strategic types of decisions. They are made for the long-run growth of the organization. It is made by the top-level management. To make such decisions creativity, innovation, the study of future impacts, judgment, and intuition are required.
For example, investment of extra capital, expansion of the business, replacement of plant and machines, recruitment and selection of new staff, etc. Basic decisions are similar to non-programmed decisions and are taken by considering the long-term vision of the organization.
Operational and Strategic Decisions
Operational or tactical decisions are types of decisions that relate to the present. The primary purpose is to achieve a high degree of efficiency in the company’s ongoing operations. Better working conditions, effective supervision, prudent use of existing resources, better maintenance of the equipment, etc. fall into this category.
On the other hand, expanding the scale of operations, entering new markets, changing the product mix, shifting the manufacturing facility from one place to the other, striking alliances with other companies, etc. are strategic in nature. Such decisions will have a far-reaching impact on the organization.
Usually, operating decisions do not need intensive deliberations and huge resources and are taken by managers at the lower levels while strategic decisions require extensive deliberations and huge resources and are taken by top-level managers. The focus in operational decisions is on the short-run or immediate present, while it is on the long-run in the case of strategic decisions.
Organizational and Personal Decisions
Decisions taken by managers in the ordinary course of business in their capacity as managers
relating to organizational issues are organizational decisions. It is formal and official in nature.
For example, decisions regarding introducing a new incentive system, transferring an employee, promotion, appointment, reallocation, or redeployment of employees, etc. are taken by managers to achieve certain objectives. These decisions are delegation in nature.
As against such decisions, managers do take some decisions which are purely personal in nature. It is informal in nature. An individual takes such decisions based on his capacity and it does not affect the performance of the organization.
For example, the manager’s decision to quit the organization, reject promotion, or refuse to go for higher education. These decisions are not delegated.
Individual and Group Decisions
An individual decision is taken by a single person such as he can be a manager or a chief executive. While coming to a decision he has to consider the objectives of the organization. Based on his personal skill, knowledge, ability, and experience he can make a decision.
In large organizations, a chief executive has the sole authority to make decisions. Similarly, in small organizations like a solo trading concern, the owner or manager has the authority to take such decisions. It is a fast and less time-consuming decision but it may be difficult to implement by subordinates.
A group decision is taken by a group of people they may be a board of directors, management committee, partners, etc. Joint-stock companies and partnership firms are involved in such a decision-making process.
In such decisions, a group of authorities discuss in detail the subject matter and finally decide on mutual consent or a majority of votes. Such discussions are done in the unique or creative nature of the subject matter. A group decision needs more time to decisions but it is practical and easy to implement.