Types of Decisions

Decision making and problem solving is a continuous process of analyzing and considering various alternatives in various situations, choosing the most appropriate course of action and following them up with the necessary actions.

There are two basic types of decisions

Programmed Decisions

Non-programmed Decisions

Programmed Decisions

Programmed decisions are those that are made using standard operating procedures or other well-defined methods. They are situations that are routine and occur frequently.

Organizationscome up with specific ways to handle them. Programmed decisions are effective for day-to-day issues such as requests for leave or permissions by employees. Once the decision is taken, the program specifies processes or procedures to be followed when similar situationarises. Creating such programed routines lead to the formulation of rules, procedures and policies, which becomes a standard in the organization.

Non-programmed Decisions

Non-programmed decisions are unique and one-shot decisions. They are not as structured as programmed decisions and are usually tackled through judgment and creativity.

They are innovative in essence, as newly created or unexpected problems are settled through unconventional and novel solutions.

Decisions are typically made under one of three conditions:

Certainty

Risk and

Uncertainty

These conditions are based on the amount of knowledge the decision maker has regarding the final outcome of the decision. The manager's decision depends on a number of factors, like the manager's knowledge, experience, understanding and intuition.

Certainty

        Decisions are made under conditions of certainty when the manager has enough information to know the outcome of the decision before it is made.

      The manager knows the available alternatives as well as the conditions and consequences of those actions.

      There is little ambiguity and hence relatively low possibility of making a bad decision.

Risk

Most managerial decisions are made under conditions of risk.

      Decisions are taken in risk when the manager has some information leading to the decision but does not know everything and is unsure or unaware of the consequences.

Under conditions of risk, the manager may find it helpful to use probability estimates.

This is where the manager’s experience and/or intelligence is of great help.

Uncertainty

        Decisions are made under uncertainty when the probabilities of the results are unknown.

      There is no awareness of all the alternatives and also the outcomes, even for the known alternatives.

Under such conditions managers need to make certain assumptions about the situation in order to provide a reasonable framework for decision making. Intuition, judgment, and experience always play a major role in the decision making process under conditions of uncertainty.

The decision-making process involves the following steps:

Define the problem

Identify limiting factors

Develop potential alternatives

Analyze and select the best alternatives

Implement the decision

e

Problem

Select the best alternative

Identify limiting factors

Analyze alternatives

Develop Probable alternatives