What is Decision making in management?, 7 Types of Decision making, Importance of decision making.

Sukanta Maiti June 30, 2020May 10, 2023 36 Comments

What you are going to learn?

What is Decision making in management?

Decision making is the judgment of the process by which one can choose between a number of alternative courses of action for the purpose of achieving goals.

Managerial decision making is synonymous with the whole process of management. It decides, what should be done? how should it be done? when and by whom should be done?

A decision may also be conceived as a conclusion that a manager has reached so as to know what he should do later on. It calls for both judgemental and imagination activity to select one from many alternatives, so decision making is an intellectual activity.

Decision making -decision — Decision Making

Types of decision making

There are many types of decision making. Some of the Importance types are-

Programmed and non-programmed decision.
Major and minor decision.
Routine and strategic decision.
Organizational and personal decision.
Individual and group decision.
Policy and operational decision.
Long-term, departmental, and non-economic decision.

Let’s elaborate on each type of decision making-

1. Programmed and non-programmed decision

Programmed decisions are those, which are in accordance with some habits, rules, or procedures. Every organization has its own policies that simplify decision making.

For example, we would not worry about deciding the salary of a new employee, the organization generally has established a salary scale for all positions.

Of course, programmed decisions are limiting our freedom to some extent, because organization rather than an individual decides what to do.

However, the policies, rules, and procedures by which we make decisions free us to think about other new solutions. thus help us to devote attention to other, and more important activities.

Non-programmed decisions are those that deal with unusual problems. If the problem such as it did not come up often enough cover by policy or it is so important that needs special treatment, it is taken care of by non-programmed decision.

Some of the non-programmed decisions are –

How to allocate an organization’s resources.

What to do about failing product line.

How community relations should be improved will usually require non-programmed decisions.

2. Major and minor decision

Making the decision to purchase expensive equipment, such as purchasing a CNC is considered a major decision.

The purchase of cheap equipment like a few reams of typing paper is a minor decision.

3. Routine and strategic decisions

Routine decisions are slightly similar to programmed decision making. Routine decisions are repetitive in nature, do not need any analysis and evaluation, are in the context of day to day operations of the enterprise, and can be made by middle management level.

Example: Sending a sample to a government investigation centre.

A strategic decision is related to the policy of the organization, are taken by high levels of management, it involves a large expenditure of fund. A slight mistake in decision making is injurious to the enterprise.

Example: capital expenditure decision, decision-related to pricing, etc.

4. Organizational and Personal decision

A manager makes organizational decisions on behalf of a company’s officer. This type of decision reflects the policy of the organization.

Personal decisions are the manager’s individual decision, and not as a member of the organization.

5. Individual and group decision

Individual decisions are taken by a single individual in the context of routine decisions according to the guideline of the organization.

Group decisions are taken by conducting committee meetings for any specific purpose. Such decisions are very important for the organization.

6. policy and operative decisions

Policy decisions are critical, so they are taken by top management, it makes a long term impact, and mostly related to basic policies. The operative decision related to day to day operations of the enterprise and taken by low-level management.

7. Long term, departmental and non-economic decision

Long term decisions are taken for a longer time period and the risk involves is high.

Departmental decisions are taken by the departmental head, related to a particular department.

The non-economic decision is related to factors such as technical values, moral behaviour, etc.

Importance of decision making

It is required to supply financial, technical, and other information as input to help decision making at a higher management level for achieving maximum profit.
Decisions are generally made to fulfil the objectives of the organization.
In business, whatever the business is small or big, changes in condition take place, shifts in personal occur, unforeseen contingencies arise. Moreover just to get started, and keep them moving, decisions must be made.
Every aspect of the management (planning, organizing, control, etc) determines by decision making.
Decision making is important for all management activities. It helps to set objectives, prepare plans of action, determine the organizational structure, motivate employees to be more productive, and introduce innovations.

Decision-making techniques

Type of decision making

Traditional Technique

Modern Technique

1. Programmed:
Routine, repetitive decisions, an organization develops a specific process for handling them.

(i) Based on habit

(ii) critical routine standard operating procedure.

(iii) organization structure.

(i) Operation research, mathematical analysis, models, computer simulation.

(ii) Data processing.

2. Non-programmed:
Non-routine, one-shot, ill-structured, novel policy decisions handled by the general problem-solving process.

(i) Judgment, intuition, and creativity.

(ii) Rule of thumb.

(iii) selection and training of executives.

(i) Training human decision-makers.

(ii) Constructing heuristic computer Programs.

Decision Making Process

Using a step by step process for any decision making within an organization can help to make a more deliberate and effective decision. So steps of effective decision making are discussed below.

Step 1: Identify the Decision

When you realize that you have to make a decision try to identify and clearly define the nature of decision you are going to make. It will help you to make effective decision.

Step 2: Gather relevant information

Before decision making, it is important to gather all information relevant to your decision making. The source of information can be two types, First one is the internal source- you seek internal information through self-assessment. Another source is external, where you get information from books, the internet, word of mouth, etc.

Step 3: Identify the alternatives

During collecting the information, you will probably find some alternative way, or you can use your imagination to construct new alternatives. You have to list all possible alternatives in order to make a correct and effective decision.

Step 4: Weigh the evidence

In this step use your knowledge and emotion to imagine what it would be like if you carried out each of the alternatives to the end. As you go through this process you will begin to favour certain alternatives, those you think have higher potential to achieve your goal.

After weighing the alternatives you can choose one or combination of alternative, you think best for you.

Step 5: Take action

In this step you are ready to take some positive action. You will perform the alternative you have choosen in step 4.

Step 6: Review your decision

After the decision making, consider the result of your decision and evaluate whether they meet your desired goal or not. If it has not met your target, you need to repeat those of the decision-making process.

Download Decision-Making PDF

Skills needed for Decision-making

Decision-making is such an important skill since it requires many other vital skills in order to be a good decision-maker. Let’s take a look on those skills-

Problem-solving skill

Decision making is a type of problem where you have to decide which option is best for your goal, a good problem-solving ability will be an asset in decision making. you have to approach a decision from a logical mindset, as if it is a problem to solve, odds are that the solutions you come up with and your final decision will be stronger.

Collaboration skill

Decisions can’t always be made perfectly by one person. You need to have a good collaboration and compromise skills to make the best decision when it involves a group decision. Even when you’re making a decision on your own, getting extra input from friends or co-workers can help you to get the best outcome.

Emotional intelligence

Emotional intelligence is the ability to observe and understand your own emotions and the emotions of your collaboration partner. Being able to take emotional intelligence into account will make you a better decision-maker.

Logical reasoning

This skill is key for the middle steps of the decision-making process when you have to analyze and evaluate all information and available option by logic. This skill is closely related to reasoning, the side of decision-making that relies on facts and figures instead of using emotions.

Time management

Make your decisions in a timely manner is not just about making a quick, hasty decision. Managing your time to properly work through the six steps is a skill, and that will put you above everyone else.

Leadership skill

When collaborating or making a group decision, someone needs to take charge of that outcome and make sure the decision is implemented, where a good leadership skill is required.

Ethics

During the decision making make sure your decision should not have a bad effect to any one or on the envaironment. Making ethical decisions is a necessary skill to have.

Research and analysis

Through better research, you can gather more information about the decision. Having strong analytical skills will help you ensure that your decisions are logical and reasonable for your desired goals.

Flexibility

Flexibility is a important skill to have to be a better decision maker, because sometime you have to compromise or adjust your decision whenever a better decision pop up.

Decision Making Examples

Below are some real world examples of decision making.

Choosing which manufacturer to supply the product you sell. In this case, you have to analyze all manufacturer’s offers and choose which one is meeting your expectations.
Choosing a name for a new product. You need to discuss with your team and decide a name most suited for the product.
Comparing different candidates for a job opening or promotion. Evaluation and analytical skills will help you to find out the best candidate depending on the job description and the qualifications of the candidate.
Deciding the best way to boost sales. You’ll need good evaluation, analysis, and creative skills, to think of the best marketing strategy to drive sales.
Deciding how much bonuses will be given for the year. Strong analytical, financial, and reasoning skills are necessary to make a decision like this.

What is Decision making in management?, 7 Types of Decision making, Importance of decision making.

What is Decision making in management?

Types of decision making