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Types of Decision Making
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There are many ways of classifying decisions in an organisation, but the following types of decisions are important ones:
Tactical and Strategic Decisions
Tactical decisions are those which a manager makes over and over again, adhering to certain established rules, policies and procedures. They are of repetitive nature and related to general functioning. Authority for taking tactical decisions is usually delegated to lower levels in the organisation.
Strategic decisions, on the other hand, are relatively more difficult. They influence the future of the business and involve the entire organisation. Decisions pertaining to objective of the business, capital expenditure, plant layout, production, etc. are examples of strategic decisions.
Programmed and Non-programmed Decisions
Prof. Herbert Simon (June 15, 1916 - February 9, 2001), an American economist and psychologist, has used computer terminology in classifying business decisions. These decisions are of a routine and repetitive nature. The programmed decisions are basically of a routine type for which systematic procedures have been devised so that the problem may not be treated as a unique case each time it crops up.
The non-programmed decisions are complex and deserve a specific treatment. In the above example, if all the professors in a department stop their teaching work the problem cannot be solved by set procedural rules. It becomes a problem which requires a thorough study of the causes of such a situation and after analysing all factors a solution can be found through a problem-solving process.
Basic and Routine Decisions
Prof. Katona classified decisions as basic and routine. The Basic decision is those which require a good deal of deliberation and are of crucial importance. These decisions require the formulation of new norms through deliberate thought-provoking process. Examples of basic decisions are plant location, product diversification, selecting channels of distribution, etc.
Routine decisions are of repetitive nature and hence, require relatively little consideration. It may be seen that basic decisions generally relate to strategic aspects, while routine decisions are related to tactical aspects of an organisation.
Organisational and Personal Decisions
Organisational decisions are those which an executive takes in his official capacity and which can be delegated to others. On the other hand, personal decisions are those which an executive takes in his individual capacity but not as a member of organisation.
Off-the-Cuff and Planned Decisions
Off-the-cuff decisions involve "shooting from the hip". These decisions can be taken easily and may be directed towards the purposes of the enterprise. On the other hand, planned decisions are linked to the objectives of organisation. They are based on facts and involve the scientific process in problem-solving.
Operating Decisions
Operating decisions are those which are taken by top management and which are of a fundamental character affecting the entire business. Operating decisions are those which are taken by lower management for the purpose of executing policy decisions. Operating decisions relate mostly to the decision marker's own work and behaviour while policy decisions influence work or behaviour pattern of subordinates.
Policy, Administrative and Executive Decisions
Ernest Dale (born in Hamburg, Germany and died at the age of 79) has classified decisions in business organisation as under.
- Policy decisions.
- Administrative decisions.
- Executive decisions.
Policy decisions are taken by top management or administration of an organisation. They relate to major issues and policies such as the nature of the financial structure, marketing policies, or outline of organisational structure.
Administrative decisions are made by middle management and are less important than policy decisions. According to Ernest Dale, the size of the advertising budget is a policy decision but selection of media would be an example of administrative decision.
Executive decisions are those which are made at the point where the work is carried out. Distinguishing between these three types of decisions Dale writes, "...policy decisions set forth goals and general courses of action, administrative decisions determine the means to be used and executive decisions are those made on a day-to-day basis as particular cases come up..."