Types of Decisions

Types of Decisions, Managers in all kinds of organizations face different types of problems and decisions as they do their jobs. Depending on the nature of the problem, a manager can use one of two different types of decisions.

  • Structured Problems and Programmed Decisions.
  • Unstructured Problems and Non-Programmed Decisions.

Structured Problems and Programmed Decisions – One Types of Decision:

Some problems are straightforward. The decision maker’s goal is clear, the problem is familiar, and information about the problem is easily defined and complete. Example might include when a customer returns a purchase to a store, when a supplier is late with an important delivery, a news team’s response to a fast breaking event, or a college’s handling of a student wanting to drop a class. Such situations are called structured problems because they’re straightforward, familiar, and easily defined. For instance, a server spills a drink on a customer’s coat. The customer is upset and the manager needs to do something. Because it’s not an unusual occurrence, there’ probably some standardized routine for handling it.

For example, the manager offers to have the coat cleaned at the restaurant’s expense. This is what we call a programmed decision, a repetitive decision that can be handled by a routine approach. Because the problem is structured, the manager doesn’t have to go to the trouble and expense of going through an involved decision process. The “develop the alternatives” stage of the decision making process either doesn’t exist or is given little attention. Why? Because once the structure problem is defined, the solution is usually self evident or at least reduced to few alternatives that are familiar and have proved successful in the past. The spilled drink on the customer coat doesn’t require the restaurant manager to identify and weight decision criteria or to develop a long list of possible solutions. Instead, the manager relies on one of three types of programmed decisions:

procedure, rule, or policy.

                A procedure is a series of sequential steps a manager uses to respond to a structured problem. The only difficulty is identifying the problem. Once it’s clear, so is the procedure. For example, a purchasing manager receives a request from a warehouse manager. The purchasing manager knows how to make this decision by following the established purchasing procedure.

                A rule is an explicit statement that tells a manager what can or cannot be done. Rules are frequently used because they’re simple to follow and ensure consistency. For example, rules about lateness and absenteeism permit supervisors to make disciplinary decisions rapidly and fairly.

                The third type of programmed decisions is a policy, which is a guideline for making a decision. In contrast to a rule, a policy establishes general parameters for the decision maker rather than specifically stating what should or should not be done. Policies typically contain an ambiguous term that leaves interpretation up to the decision maker. Here are some sample policy statements:

The customer always comes first and should always be satisfied.

We promote from within, whenever possible.

Employee’s wages shall be competitive within community standard.

Unstructured Problems and Non-Programmed Decisions – Another Types of decision:

Not all the problems manager’s face can be solved using programmed decisions. Many organizational situations involve unstructured problems, which are problems that are new or unusual and for which information is ambiguous or incomplete. Whether to build a new manufacturing facility in Japan is an example of an unstructured problem. So, too, is the problem facing restaurant managers in U.S. city who must decide how to modify their business to comply with new law. When problems are unstructured, managers must rely on non-programmed decision making in order to develop unique solutions. Non programmed decisions are unique and nonrecurring and involve custom made solutions.

Below describes the differences between programmed and non-programmed decisions.

CharacteristicProgrammed DecisionNon-programmed Decision
Type of problemstructuredUnstructured
Managerial levelLower levelsUpper levels
InformationReadily availableIncomplete
GoalsClear, specificVague
Time frame for solutionShortRelatively long

Decision Making Conditions:

A manager may face three different conditions. As

  • Certainty
  • Risk

(iii) Uncertainty

Certainty:

The ideal situation for making decisions is one of certainty, which is a situation where a manager can make accurate decisions because the outcome of every alternative is known.

Risk:

Risk is a far more common situation, conditions in which the decision maker is able to estimate the likelihood of certain outcomes.  Under risk, managers have historical data from past personal experiences.

Uncertainty:

If a manager face a decision where he or she not certain about outcomes, then we call this condition uncertainty. Managers do face decision making situations of uncertainty. Under this condition, the choice of alternative is influenced by the limited amount of available information and by the psychological orientation of the decision maker.

@ Decision Making Style:

Managers have different styles when it comes to making decisions.

  • Linear – Nonlinear Thinking Style Profile
  • Decision Making Biases and Errors

Linear – Nonlinear Thinking Style Profile: If you are a manager, then how will you make decision? By research, that four distinct groups of people says, the way a person approach decision making is likely affected by his or her thinking style. Your thinking style reflects two things: (i) the source of information you tend to use (external or internal data), (ii) whether you process that information in a linear way (rational, logical) or nonlinear way (intuitive, creative, insightful). These four dimensions are collapsed into two styles. First, linear thinking style is characterized by a person’s preference for using external data and processing this information through rational, logical thinking to guide decisions and actions. Secondly, nonlinear thinking style is characterized by a preference for internal sources of information (feelings and intuition) and processing this information with internal insights, feelings, and hunches to guide decisions and actions.