Types of Decisions
In the realm of decision making, various types of decisions exist. These decisions can be classified into different categories based on their nature and impact. A thorough understanding of these types of decisions is important for individuals and organizations alike, as it enables them to navigate the complex situations of decision-making with clarity and purpose.
Though managers are constantly called upon to make decisions and all managerial decisions are essential in their ways, some decisions have a limited scope while others involve the whole organisation in a significant manner.
For a better understanding of the managerial decisions, types of decisions can be classified as follows:
- Programmed and Non-Programmed Decisions
- Major and Minor Decisions
- Routine and Strategic Decisions
- Policy and Operative Decisions
- Organisational and Personal Decisions
- Individual and Group Decisions
- Long-Term, Departmental and Non-Economic Decisions
- Crisis and Research Decisions
- Problem and Opportunity Decisions
1) Programmed and Non-Programmed Decisions
The decisions can be classified into two classes:
i) Programmed Decisions are normally repetitive and are taken within the broad policy structure. An organization can develop specific processes for handling these decisions, For example, standing operating procedures and policies. Programmed decisions have short-run impacts and are taken by lower-level managers, such as granting leave to an employee, purchasing materials in normal routine, etc.
ii) Non-Programmed Decisions are non-repetitive. Their need arises because of some specific circumstances, such as the opening of a new branch, introducing a new product in the market, etc. They involve judgment, intuition and creativity. Such decisions are always taken by top management.
2) Major and Minor Decisions
Decisions may be categorised as major and minor. For example, if it relates to the purchase of a big machine worth, say a lac of rupees, it is a major decision. On the other hand, the purchase of fountain pen ink or a few reams of paper are minor matters and may be decided by the office superintendent.
3) Routine and Strategic Decisions
Tactical decisions are another name for routine decisions. They are taken in the context of the day-to-day operations of the organisation. They are not very important. Mostly they are repetitive and do not need much analysis and evaluation and can be made quickly. Strategic or Fundamental decisions relate to policy matters and usually involve large investments or expenditures of funds. These decisions are mostly non-repetitive. These decisions are taken by higher levels of management after careful analysis and evaluation of various alternatives.
4) Policy and Operative Decisions
Policy decisions are taken by top management and they mostly relate to fundamental policies. Such decisions are very essential and they have a long-term impact. Big concerns generally publish their policy decisions in the form of a ‘Policy Manual’ which becomes the base for other operative decisions.
Operative decisions relate to the day-to-day operations of the company. They are generally taken by middle and lower-level management who are more closely related to the supervision of actual operations.
5) Organisational and Personal Decisions
The executive makes organisational decisions when he acts formally as a company officer. Such decisions reflect the basic policy of the organisation. They can be delegated to others. Personal decisions relate to the executive as an individual and not as a member of the organisation. Such decisions cannot be delegated.
6) Individual and Group Decisions
As is apparent, personal decisions are taken by an individual in the context of routine or programmed decisions where the analysis of variables is simple and for which broad policies are already provided. Group decisions are taken by a group or a standing committee constituted for this specific objective. Such decisions are very important for the organisation because they involve the participation of a large number of people.
7) Long-Term, Departmental and Non-Economic Decisions
Decisions may also be categorised as long-term, departmental and non-economic. In the case of long-term decisions, the time covered is long and the risk involved is greater. Departmental decisions are taken by the heads of the department and relate to the department only. Decisions relating to non-economic factors (such as technical values, moral behaviour, etc.) may be termed non-economic decisions. While making decisions on these elements, care should be taken to see that justice is done to all and as a result of this decision, no new problem is created for the organisation.
8) Crisis and Research Decisions
An extreme type of non-programmed decision is a crisis decision that occurs when an unexpected problem arises and leads to disaster if not resolved. Crisis decisions commonly involve a few, very high-level decision-makers. A crisis consists of a perceived threat to the decision makers and their state and a finite period within which to make a decision which is usually very short.
A research decision does not involve any urgency and executives can take time to reach any decision.
9) Problem and Opportunity Decisions
Problem decisions may be defined as those that fall in between, being evoked by milder pressures than crises. Crisis decisions are generally triggered by single stimuli. They present themselves suddenly and unequivocally, and require immediate attention, as in the case, for example, of a fire or a bankruptcy. Opportunity decisions are generally those that are customer-centric such as cross-sell and up-sell decisions Opportunity decisions also use expert judgement, and increasingly, analytics to predict the likely response of a customer & the potential size of the opportunity.