Types of Decision-making

Decision-making is the process of selecting the best course of action from a set of alternative options to achieve a desired goal or objective. It involves four interrelated phases: explorative (searching for potential alternatives), speculative (identifying the factors that influence the decision problem), evaluative (analyzing and comparing the alternative courses of action), and selective (making the final choice of the best course of action). The ultimate aim of decision-making is to find the option that is believed to fulfil the objective of the decision problem most satisfactorily compared to other alternatives.

Types of Decision-making

Managerial decisions may be classified into the following categories:

1. Programmed and Non-programmed Decisions

According to Herbert Simon, programmed decisions are related to routine and repetitive problems. Information about these problems is readily available and can be processed using pre-established methods. These decisions have a short-term impact and are relatively simple, typically made at lower management levels. Decision rules and procedures are in place to streamline the decision-making process and save time. Little thought and judgment are required, as the decision-maker follows predetermined solutions. For instance, dealing with a consistently late employee can be addressed through established procedures. 

On the other hand, non-programmed decisions tackle unique or unusual problems that demand a high level of executive judgment and consideration. There are no ready-made solutions for such problems, as they require creative and thoughtful approaches. Examples of non-programmed decisions include introducing a new product or determining the location of a plant. These decisions are usually made by higher-level managers.

2. Routine and Strategic Decisions

There are two types of decisions in an organization: routine (or operating) decisions and strategic (or policy) decisions. Routine decisions are repetitive in nature and have a short-term impact, mainly concerning day-to-day operations. They are typically made at lower levels of management, using established procedures to ensure quick and efficient handling. For example, a supervisor may make routine decisions regarding employee overtime pay. 

On the other hand, strategic decisions involve long-term commitments and significant investments, influencing the entire organisation’s future. These decisions require careful deliberation and judgment and are usually made at higher levels of management. Examples of strategic decisions include launching a new product, selecting the location for a new plant, or implementing major organisational changes.

3. Organisational and Personal Decisions

Organisational decisions are made by officials in their capacity as resource allocators for the organisation. These decisions rely on sound judgment and experience and can be delegated to other individuals within the organisation. Organisational decisions have a direct impact on the functioning of the organisation and its outcomes. 

On the other hand, personal decisions are made by managers as individuals and cannot be delegated. These decisions pertain to matters that directly affect their personal lives, such as decisions to marry or enrol children in a boarding school. While personal decisions may have implications for the individual manager, they may also indirectly affect the organisation. For instance, the decision of a chief executive to retire early could have a direct effect on the company’s future.

4. Individual and Group Decisions

Individual decisions are made by an individual based on the information available to them. These decisions may involve analyzing various variables, but they are often straightforward. However, in certain situations, significant decisions may be made collectively by a group. 

Group decisions are taken by a team of individuals formed for this purpose, such as the decisions made by a Board of Directors or a committee. These decisions are typically crucial for the organisation. Group decision-making often leads to more realistic and well-balanced outcomes, as different perspectives are considered. Encouraging participative decision-making can be a positive organisational approach, but it may result in delays and can make fixing responsibility for such decisions more complex.