Managerial Decision Making

Decision Making is an art of selection of one feasible alternative decision from many. Therefore types of managerial decision making is about implementing a variety of decisions to situations of structured or unstructured problems. Since decisions are of two types.

Programmed Decisions

These are the decisions made in a well-structured, repetitive and routine basis through predetermined decision rules. Although several programmed decisions are taken from the previous experiments and practices. Moreover computer software is the best option to deal with complex programmed decisions. Thus programmed decisions may be taken by first line or middle line managers.

Non-Programmed Decisions

These are the decisions taken in the dramatic or critical sudden situations. So these are referred to as predetermined and impractical ones in accordance with problems.

Types of Problems and Managerial Decision Making

There are different types of problems faced during the process and progress, so a variety of decisions are implemented. Hence in accordance with the situation of the problem, either the 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. Moreover 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 problems.
• Rule: It is the guideline to the managers whether they can do or cannot do anything.
• Policy: It is a set of parameters that are used in making a decision including 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 types of problems. Therefore the decision in such a type of problem should be customized and unique.

General Organizational Situations – Types of Managerial Decision Making

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 – Types of Managerial Decision Making

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.

More From Business Study Notes:- Decision Making Process

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 with by the personality factors and norms of the manager.

Actual decision making models are calculated with the presentation of the ideal rational model.

Challenges in Decision Making

Leaders may face fascinating problems during the decision-making process. Challenges are usually referred to as decision-making barriers or simply obstacles in the business environment.

• Time constraints
• Uncertainty
• Biases
• Commitment levels increasing
• Bounded rationality
• Conflict

Time Constraints

When we talk about time restrictions, we’re not always talking about time management. Managers could have done a good job managing their time, but extraneous factors could have pushed them to make a decision quickly. When there is a lack of time to gather knowledge rationally and make an appropriate decision, time limitations apply.

Uncertainty

No one can be certain of every decision they make in ordinary life. If you answered no, don’t panic; good leaders and managers aren’t always 100 percent certain of their decisions. Uncertainty is defined as the inability to predict an outcome until it occurs, and it is linked to the notion that a consequence is envisioned but not seen. It is unclear how to manifest learning in prospective students inside a learning organization. Leaders may only use a methodology that allows the learner to acquire the most information. A desired conclusion can be imagined, but due to the uncertainty, the conclusion can only be seen after the decision has been made.

Biases

One of the most typical mistakes made by leaders and managers is to put their faith in a bad judgment made on the basis of preconceived beliefs. Biases in decision-making are based on the idea that the decision is intimately linked to underlying beliefs and world views. Furthermore, it strengthens beliefs that are similar to our own. Being aware and sympathetic about an opposing viewpoint is one technique to avoid bias. Leaders may make decisions based on personal worldviews, but such influences can be avoided if they recognize that their decision is based on bias and try to incorporate opposing viewpoints for a more collaborative decision-making process.

Commitment Levels Increasing

It’s difficult to make a difficult decision, and it’s even more difficult to live with that decision if it doesn’t work out. The principle of escalating commitment is that leaders and managers remain committed to a bad decision or find it difficult to reasonably detach themselves from a bad option. As a result, it’s ok if a poor judgment is made, but there are mechanisms in place to assist a student in developing new skills to overcome previous mistakes, hence removing the escalation difficulty.

Bounded Rationality

Decisions made within the organizations are all usually rational in nature. Bounded rationality is the idea that confronting leaders with difficult challenges that they don’t fully comprehend prevents them from being reasonable about the situation and, as a result, from recognizing an alternative. Educators in learning organizations would like to believe that they can learn anything. However, there are instances when individuals are unable to comprehend a certain aspect of learning, and they become victims of bounded rationality.

This can lead to erroneous decisions being made without all of the facts, or the complete abandonment of a problem. Both provide an unsatisfactory result. However, there are occasions when individuals are unable to comprehend a certain aspect of learning, and as a result, they fall prey to constrained rationality. This might lead to erroneous conclusions based on incomplete information or the complete abandonment of a problem. Both yield an unsatisfactory result.

Conflict

Leaders and managers in an organization should not be afraid of tumultuous circumstances. Although not physically or vocally, situations might be tense depending on the circumstances. Within an organization, conflict can be divided into two categories:

• Process conflict
• Relationship conflict

Decision-Making Styles – Types of Managerial Decision Making

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 an individual’s thoughts, i.e. rational or instinctive, and the other is the (high or low) tolerance of uncertainty.

Four decision-making styles are obtained by going through two dimensions.

• The style that is characterized 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, is Analytic Style.
• Instinctive thinking and high tolerance towards uncertainty are the characteristics of Conceptual Style.
• Low tolerance towards uncertainty and instinctive thinking are the characteristics of Behavioral Style.

From a realistic point of view, most of the managers have dominant and alternative styles. Although some of them rely on their dominant style and some of them become flexible according to situations.