types of decision making

Decision Making: Definition,Types & Importance

If you are to start a business, what should the goal of your business be? Who are going to be your target customers? How are other operations going to function? These are just a few questions related to any business. For the success of a business, the prerequisite is to have a proper decision-making process. It is the wise decisions that later on determine the fate of any organization.

What is decision making?

A decision is a chosen conclusion after being faced with a question and considering the alternate possible ways. The decision-making process is defined as the process that analyses all the alternative solutions available for an issue and chooses the one course of actions that would lead to the most optimum outcome. Decision making is one of the core responsibilities of management. There are a few steps included in decision making. They are:

  • Identification of the problem
  • Defining a clear objective
  • Development of information pool
  • Stating alternatives
  • Evaluation based on information
  • Selecting among alternatives
  • Implementation of decision
  • Review effectiveness

Goal-oriented decision making helps to serve the purpose of the business. Decision making is a skill that requires deductive logic and clarity of judgment. It is a continuous and dynamic task. No planning process of an organization can start or end without having a certain decision made about resolving the issue.

Types of decision making

There are different tiers of decision making needed in any particular hierarchy of any organization. The impact of the decisions on these different levels vary in-depth and time span. To keep the workflow of an organization smooth, operational, strategic, and tactical decisions are taken on a regular basis. From the perspective of management, there are several types of decision making. The basic ones are:

  • Programmed and nonprogrammed decisions
  • Routine and strategic decisions
  • Organizational and personal decisions
  • Individual and group decisions
  • Operating and policy decisions

For better understanding, we are going to discuss these sequentially.

Programed and nonprogrammed decisions:

Programmed decisions are taken when structured problems arise. That is when the problems are known and there are standard procedures of taking care of these. Nonprogrammed decisions are required when the problem is relatively unfamiliar and a predefined certain set of activities cannot be found.

Programmed decisions are mostly taken in case of recurring problems. The detection and implementation of such decisions are quick. These decisions do not require a higher level of strategic concentration. Show the decisions are simple and have a relatively smaller effect on the organization. The time and effort dedicated to these decisions are not of a very significant amount.

Non programmed decisions are taken in case of unique situations. Since there is no predetermined way of solving the issues, these decisions take a longer time. The complexity of these decisions required expertise and a lot of evaluation. Generally, the top management of any organization deals with such types of decisions.

Routine and strategic decisions:

Routine decisions are associated with issues that need to be taken care of more often. Decisions regarding the everyday functionalities of an organization fall under this section. Strategic decisions are related to the core functionalities of a firm. The organizations take strategic decisions for a broader range of time and impact.

Routine decisions are mostly taken by the basic level managers. Like programmed decisions, these are also repetitive. These decisions do not require precise research and dynamic evaluations. The decisions are quick, concise, and demand relatively less time.

Strategic decisions act like the spine of organizational activities. Most other decisions depend on these to set a definite objective. Since these decisions have a large impact on the organization, the executives and top-level managers are concerned with these. The influence of strategic decisions is long term and can be a strong factor of change.

Organizational and personal decisions:

Organizational decisions are those that are directly related to the organization’s wellbeing. A manager takes his decisions as a part of the organization. Here the manager is a delegate of the organization. These decisions are taken keeping the elements of the organization in mind. The impact of these decisions is direct.

Personal decisions are the decisions of the manager. It may include how the manager wants to work and where he or she allocates his time and effort. Even though these decisions do not affect the organization directly, they may have an indirect impact on the business environment. These decisions are confined to one particular individual.

Individual and group decisions:

When an individual takes a decision in an organization, it is called an individual decision. When a few individuals are working together and the group takes any particular decision, that can be defined as a group decision. In both cases, the decisions have to be taken in a formal manner within the responsibilities of the organization.

Individual decisions have more impact on smaller organizations. the employees need to have a certain degree of autonomy in order to take proper individual decisions. These decisions can actively affect the productivity level of any employee. Group decisions have long term consequences. Proper diversity management is required for the effectiveness of forming groups.

Individual decisions give the employee the ability to understand the goal clearly and act accordingly. The sense of autonomy gives the employees a sense of value. Group decisions include the participation of individuals with different perspectives. The diversity in a group results in the formulation of more alternatives, which leads to a more creative solution or decision. However, group-think may occur and dominant influence might win over a better resolution.

Operating and policy decisions:

Operating decisions include how the physical and infrastructural resources will operate. Policy decisions are taken in order to formulate and innovate the policies and rules of an organization.

Operating decisions take care of operational issues. These are directly dependent on policy decisions. Generally, lower all middle-level managers take these decisions based on the policy decisions taken by the executive and top-level management. Policy decisions highly impact the planning of activities and future plans of an organization. These decisions can be categorized as crucial strategic factors of a business.

The significance of decision making

Decision-making integrates disciplines like organizational behavior, management, logic, human psychology, etc into a complex structure. In determining what the business will take and how the business will proceed, effective decision-making personnel is considered valuable. Merging different values and ideas and finding the best possible outcome is possible through a prospective decision-making process. This adds meaning and purpose to the work of the employees.

No matter what type of decision is being taken, it is essential to have the culture and values of the organization into consideration. Proficient decision-making management can enable an organization to have a competitive advantage and better opportunities in any given business environment.

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