CFLM 2

FILE4 (MIDTERM)
TYPES OF DECISION
MAKING –
17 IMPORTANT TYPES OF
DECISIONS
1. Programmed Decisions:
 They are otherwise called routine decisions or structured decisions.

2. Non-Programmed Decision:
 They are otherwise called strategic decisions or basic decisions or
policy decisions or unstructured decisions.
 This decision is taken by top management people whenever the need
arises.
3. Major Decision:
 Major decision relates to the purchase of fixed assets with more
value.
 The purchase of land and building is an example of major decision.
This decision is taken by the top management.

4. Minor Decision:
 Minor decision relates to the purchase of current assets with less
value.
 Purchase of pencil, pen, ink, etc., are some of the examples of minor
decision. This decision is taken by lower level management people.
5. Operative Decision:
 Operational or tactical decisions relate to the present issues or problems.

 This type of decision is taken by middle level management people normally. The
reason is that they are working at supervisory level and have a good knowledge of
the operations.
 The time of payment of overtime wages is fixed by middle level management
people. It is an example of operative decision.

6. Organizational Decision:
 The decision-maker takes a decision and implements it for effective functioning
of organization and it is called organizational decision.
 He takes this decision on his authority and capacity.
7. Personal Decision:
 The decision-maker takes a decision for his personal life which is known as personal
decision.
 He implements this decision in his home and sets right his personal life.

 This decision does not reflect the functioning of an organization.

 The decision maker is not a member of an organization while taking a personal decision.

8. Individual Decision:
 Confusion exists regarding the difference between individual decision and personal
decision.
 They are not one and the same.

 The decision-maker is a member of an organization while taking an individual decision.

 He is delegated with authority to take individual decision.

9. Group Decision:
 A committee is formed by the top management for specific purposes.

 Here, the top management feels that no individual can take effective decision to
solve a problem.
 The top management fixes the time within which the committee is expected to
submit its report with concrete decisions.

10. Departmental Decision:

 The decision-maker is department head or department manager.

 He takes a decision to run the department.

 Department decision has no impact on other departments. This decision is

implemented within the concerned department itself.
11. Non-Economic Decision:
 Non-economic decision refers to a decision which does not incur any expenses.

 These types of decisions are taken at all levels of management.

 A decision which relates to setting right the morale behaviour of workers is termed
as non- economic decision.

12. Crisis Decision:

 A decision is taken to meet unexpected situations.

 There is no possibility and time for the decision-maker for getting through
investigation while taking a crisis decision.
 It may be otherwise called spot decision. The reason is that whenever a need
arises, the decision maker has to take a decision without wasting a second.
13. Research Decision:
 A decision is taken after analyzing the pros and cons of a particular
matter.
 There is no pressure on the decision-maker to take such a decision.

 Research decision requires a lot of information. The quality of research

decision is fully depending upon the availability of reliable information.

14. Problem Decision:

 A decision is taken to solve a problem.

 The problem may be an expected one or unexpected one.

15. Opportunity Decision:
 This pertains to a decision taken to make use of the advantages available to the
company or organization.
 The advantages may be increasing the turnover, introducing a new product,
building of another similar unit to avoid competition etc.

16. Certainty Decision:

 Here, the term certainty refers to accurate knowledge of the outcome from each
choice.
 For example, ascertaining how much profit will be maximized by introducing a new
product or increasing the selling price and the like.
 The decision-maker himself knows the outcome and consequences of choice.
17. Uncertainty Decision:
 The outcome is not accurate or several outcomes are possible
whenever a decision is taken.
 The reason is that the decision-maker has incomplete knowledge
and he does not know the consequences.
Differences between Individual and Group Decisions
Individual Decisions:
1. Decisions are taken by a single
individual.
2. Individual decisions are less costly.
3. They are based on limited information
gathered by managers.
4. Individual decisions are taken in
situations of crisis or emergency.
5. They do not involve moral commitment
on the part of members to accept and
implement them.
6. Individual decisions do not affect
morale or job satisfaction of employees.
Group Decisions:
1. Decisions are taken by a group of
persons.
2. Group decisions are costly in terms of
time and money.
3. They are based on extensive
information collected by members of the
group.
4. Group decisions are taken when there
is sufficient time to make decisions.
5. Group decisions are easier to
implement as group members feel
committed to them.
6. Group decisions positively affect
morale and job satisfaction of employees.
7. They introduce one-man control.
8. Individual decisions do not promote
interaction amongst superiors and
subordinates.
9. Decisions are usually based on clear
policy guidelines.
10. Though decisions are based on
individual thinking, they are high-quality if
the individual has expertise and
experience in making such decisions.
11. Individual decisions are usually taken
in competitive business situations where
people are not open to suggestions.
7. They introduce self-control.
8. They promote superior-subordinate
interaction and healthy relationships
amongst them.
9. Group decisions are taken when the
problem requires creativity and expert
knowledge of a group.
10. It usually results in high-quality
decisions as they are based on
extensive brainstorming. They provide
the benefit of synergy.
11. Group decisions are usually taken in
supportive business situations where
group members encourage problem-
solving together.
 LEVELS OF THE DECISION
MAKING PROCESS
1. Strategic Level → For making the decisions strategically,
strategic information is very essential. This type of the
information is very wholistic and un-structured in the nature.
Strategic Information is obtained in huge amounts from the
external environment. During this level, futuristic inputs are used
as these help in the long – term planning.
2. Tactical Level → Medium and short term planning is
generally done with the help of the Tactical information that
can be obtained from the middle management, budgets, fore
– casts, analysis, cash / funds flow projections etc. The
Tactical information can be obtained from the internal
environment and also from the external environment.
3. Operational Level → The people ranging from a
shift to a day or a week or a month can be controlled
or operated with the help of the Operational
Information and this type of the Information provides a
great look about what is currently happening around
with – in the organization.
 CHARACTERISTICS OF
DECISION MAKING
 Selective: It is a selective process in which the optimal alternative is opted, among the various
alternatives. The selection of the alternative is done, only after evaluating all the alternatives against the
objectives.
 Cognitive: As the decision making encompasses the application of intellectual abilities, such as analysis,
knowledge, experience, awareness and forecasting, it is a cognitive process. Dynamic: It is a dynamic
activity in the sense that a particular problem may have different solutions, depending upon the time and
circumstances.
 Positive or Negative: A decision is not always positive, sometimes even after analysing all the points a
decision may turn out as a negative one.
 Ongoing process: We all know that a company has perpetual succession and various decisions are taken
daily by different levels of management to keep the firm going. These decisions are taken, keeping in mind
the objectives of the organization.
 Evaluative: Evaluation of the possible alternatives using critical appraisal methods, is a part of the
decision-making process.
QUIZ #1 (MIDTERM)