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.
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, 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 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 consider as 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 the 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 in a government investigation center.
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 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 the routine decisions according to the guideline of the organization.
Group decisions are taken by conduct committee meetings for any specific purpose. Such deci9sions are very important for the organization.
6. policy and operative decisions
Policy decisions are very important, 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 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 behavior, 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 fulfill 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) determine by decision making.
- Decision making is important for all management activities. It helps to set objectives, prepare plans of action, determine organizational structure, motivate employees to be more productive, and introduce innovations.
|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 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.