Decision Making is an art of selection of one feasible alternative decision from many. Decisions are of two types.
Programmed Decisions: These are the decisions made in well-structured, repetitive and routine basis through predetermined decision rules. Several programmed decisions are taken from the previous experiments and practices. Computer software is the best option to deal with complex programmed decisions. Programmed decisions may taken by first line or middle line managers.
Non-Programmed Decisions: These are the decisions taken in the dramatic or critical sudden situations. These are referred as predetermined and impractical ones in accordance with problems.
Types of Problems and Managerial Decision Making
There are different type of problems faced during the process and progress, so a variety of decisions are implemented in accordance with situation of problem, either problem is well structured or roughly Poorly structured.
- Well structured problems are predefined problems and are easy to tackle from the past history or practice. They can be handled by the managers through programmed decisions. Three plans are there to take programmed decisions.
- Procedure: It is a process of continuous sequences, which can be applied in structured problem.
- Rule: It is the guideline to the managers that whether they can do or cannot do anything.
- Policy: It is a set of parameters that are used in making a decision includes the boundaries and limits along with restrictions.
- Unusual or new problems with limited or insufficient information are poorly structured problems. Non programmed decisions are used to tackle such type of problems. The decision in such type of problem should be customized and unique.
General Organizational Situations
Poorly structured problems are managed through non programmed decisions by higher levels of managers within the organization and well-structured problems are solved through programmed decisions by lower levels of managers within an organization.
The decisions are made on the basis of rationality, perception and bounded rationality by the managers, so we have to understand them gradually:
Assumptions of Rationality
Decision Making by the managers is assumed to be rational due to the choices that are reliable and valuable under the specified parameters. They are summarized as:
- The problems are very clear, target oriented, all alternative options are well known, clarity of preferences, parameters are non cost and time consuming and maximum profitable in these assumptions.
- Economic interests of the organization that are kept in mind in these assumptions are not of the managerial interests.
These assumptions can be achieved if; goals are clear, alternatives are limited and simple problems are faced by the manager, in which output is solid and countable and risk & innovation is supported by organizational behavior.
The fault of rational model is that it’s not applicable to actual decision targets for two reasons;
- Unavailability of complete information.
- Decisions are interfered by the personality factors and norms of the manager.
Actual decision making models are calculated with the presentation of the ideal rational model.
All the decisions are made to solve the problems by the managers with different styles and perspectives. The approach of decision making differs in two dimensions. One is individual’s thoughts, i.e. rational or instinctive, and other is the (high or low) tolerance of uncertainty.
Four decision-making styles are resulted by going through two dimensions.
- The style that characterizes by low tolerance for uncertainty along with a rational way of thoughts is Directive Style.
- The style, which is characterized by a high level of tolerance for uncertainty with rational thinking way, is Analytic Style.
- Instinctive thinking way and high tolerance towards uncertainty are the characteristics of Conceptual Style.
- Low tolerance towards uncertainty and instinctive thinking way, are the characteristics of Behavioral Style.
From a realistic point of view, the most of the managers have dominant and alternative styles, some of them rely on their dominant style and some of them become flexible according to situations.