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Types of programmed and non-programmed decisions

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Definition of decision making
Decision making represents a process of choosing the best alternative from among many possible options available to the manager of a business unit. A manager at any given moment of making a decision concerning the business would first of all assess all the different alternative decisions available to the business entity. Each of these alternative decisions will be looked at in terms of their advantages and disadvantages which are known to the managers of the business. From this evaluation, a final decision may be arrived at. Weighing the merits and demerits of each choice or option helps the managers of the company to make the best decisions.

Decision making can be categorized into two main types; Programmed decision making and non-programmed decision making. There are also different kinds of programmed and non-programmed decision making.

Of the programmed and non-programmed decision making, there are also different kinds of them. We would now take a look at the various kinds under each of these categories.

Organisational and Personal decisions
These kinds of decision involve the use of authority conferred on the individual taking the decision by the organisation’s structure. Organisational decisions are those decisions taken purely in the interest of the organization. Managers are given the authority by the firm to make decisions in the interest of the organization. However, this authority does not grant them the power to make personal decisions. It must also be understood that while organizational decisions can be delegated, personal decisions cannot be delegated.

To clarify further the deference between personal and organizational decision, let us consider the following example. James Harrison was fired by the manager because he did not obey the rules of the company. This would be an organizational decision. However, if James Harrison was fired simply because the manager hated him for no reason related to the company then that would be a personal decision. An organizational decision is programmed but a personal decision is non-programmed.

Operational decisions are mostly taken in matters relating to daily operation. By their very nature these kinds of programmed decisions are meant to achieve short term objectives of the company. These decisions are usually taken by lower level and middle level managers. Operational decisions must be taken within the framework of the companies already established policies. As a result, those who must take operational decision are allowed a limited use of their own discretion and initiative.
Operational decisions are only meant to affect part or a department of the company such as procuring stationery and other raw materials on a daily basis. As we can see such a decision will only affect the purchasing department.

Strategic Decisions
Decisions concerning very important but non-recurring problems are referred to as strategic decisions. These kinds of decisions are made using extensive managerial skills, experience and judgment. Unlike, operational decisions, strategic decision concerns the long-term aims of the firm. In strategic decision, the person or group of persons taking the decision must carefully consider the relationship between the business organization and its environment. Because the environment is constantly changing, strategic decisions are riskier in nature. Another deference between strategic and operational decision is that strategic decisions are taken by top-level management. 

An example of a strategic decision could be a decision to upgrade a technology, or open a new business branch office. Unlike operational decision which affects only a department of the company or an aspect of its operation, strategic decisions turn to affect the whole company, and may entail a marked departure from what has been a company policy or practice in the past. An operational decision is a form of programmed decision but a strategic decision is non-programmed.

Research and Intuitive or crisis decisions
Decision made based on frequent surveys of the market within which the business is operating in would be termed researched decision, while those made under crisis or in emergency situation would be called crisis or intuitive decision.  Consider a decision to allot money for research and development of new product or to improve on existing products. This is a clear research decision. On the other hand, when a drug manufacturing company decides to increase its production because there has been an earthquake and more drugs are needed would be an illustration of a crisis-intuitive decision. A research decision is a kind of programmed decision but a crisis-intuitive decision is a non-programmed decision.

Opportunity and problem-solving decisions
These forms of decisions show foresightedness. A manager must make projections into the future and try to figure out which opportunities might come the way of the firm. This forecast is expected to help the business position itself in order to exploit the opportunity to achieve maximum growth. These kinds of decisions are called opportunity decision. For example, forecasting an opportunity to diversify or enter a new market is an opportunity decision.

Problem-solving decision addresses specific problem such as a decision to stop the production of a particular line of products because the business is making losses by producing that product. An opportunity decision is programmed while a problem solving decision is non-programmed in form.

Types of decision making - non-programmed decision making
Steps in the decision making process

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