Organizational decisions differ in a number of ways. The following basis are used to classify the decisions:
We’ll be covering the following topics in this tutorial:
Purpose of Decision-making
On the basis of the purpose of decision-making activities, the organizational decisions are divided into 3 categories:
Strategic Planning Decisions: Strategic planning decisions are those decisions in which the decision-maker develops objectives and allocates resources to achieve these objectives. Such decisions are taken by strategic planning level (top level) managers.
Management Control Decisions: Management control decisions are taken by management control level (middle level) managers and deal with the use of resources in the organization.
Operational Control Decisions: Operational control decisions deal with the day-to-day problems that affect the operation of the organization. These decisions are taken by the managers at operational level (bottom level) of the organization.
Levels of Programmability
Simon on the basis of level of the programmability of a decision, proposed two types of decisions:
Programmed, also known as structured decisions
Non-programmed, also known as unstructured decisions.
Programmed or structured are those decisions, which are well defined and some specified procedure or some decision rule might be applied to reach a decision. Such decisions are routine and repetitive and require little time for developing alternatives in the design phase. Programmed or structured decisions have traditionally been made through habit, by operating procedures or with other accepted tools.
Non-programmed /Unstructured Decision
Decisions, which are not well defined and have not pre-specified procedures decision rule are known as unstructured or non-programmed decisions.
Knowledge of Outcomes
Another approach of classifying decisions is the level of knowledge of outcomes. An outcome defines what will happen, if a decision is made or course of action taken. When there is more than one alternative, the knowledge of outcome becomes important. On the basis of the level of knowledge of outcomes, decision-making can be classified into three categories.
- Decision under certainty: Decision-making under certainty takes place when the outcome of each alternative is fully known. There is only one outcome for each alternative.
- Decision under risk: Decision-making under risk occurs when there is a possibility of multiple outcomes of each alternative and a probability of occurrence can be attached to each outcome.
- Decision under uncertainty: Decision-making under uncertainty takes place when there are a number of outcomes for each alternative & the probabilities of their occurrences are not known.