Types of Managerial Decision

There are many types of decisions which you would be required to make as a manager. Three most widely recognised classifications are : 

(a)  Personal and Organisational Decisions, 

(b)  Basic and  Routine Decisions, and 

(c)  Programmed and Non-programmed Decisions. 

The fist classification of Personal and Organisational decisions was suggested by Chester Barnard, nearly fifty years ago in his classic book : "The Functions of the Executive". In his opinion, the basic difference between the two decisions is that "Personal decisions cannot ordinarily be delegated to others, whereas organisational decisions can often if not always be delegated" (Barnard, 1973). Thus, the manager makes organisational decisions that attempt to achieve organisational goals and personal decisions that attempt to achieve personal goals. Note that personal decisions can affect the organisation, as in the case of a senior manager deciding to resign. However, if you analyse a decision, you may find that the distinctions between personal and organisational decisions are a matter of degree. You are, to some extent, personally involved in any organisational decision that you make and you need to resolve the conflicts that might arise between organisational and personal goals. 

Another common way of classifying types of decisions is according  to whether they are basic or routine. Basic decisions are those which are unique, one-time decisions involving long-range commitments of relative permanence or duration, or those involving large investments. Examples of basic decisions in a business firm include plant location, organisation structure, wage negotiations, product line, etc. In other words, most top management policy decisions can be considered as basic decisions. 

Routine decisions are at the opposite extreme from basic decisions. They are the everyday, highly repetitive management decisions which by themselves have little impact on the overall organisation. However, taken together, routine decisions play a tremendously important role in the success of  an organisation. Examples of routine decisions are an accountant's decision on a new entry, a production supervisor's  decision on what the new tool room procedures will be, a personnel manager's decision to appoint a new worker, and a salesperson's decision on what territory to cover. Obviously. a very large proportion (most experts estimate about 90 per cent) of the decisions made in an organisation are of the routine variety. However, the exact proportion of basic to routine types depends on the level of the organisation at which the decisions are made. For example, a first-line supervisor makes practically  all the routine decisions whereas the chairperson of the board makes very few routine decisions but many basic decisions.

Simon (1977) distinguishes between Programmed (routine, repetitive) decisions and Non-programmed (unique, one-shot) decisions. While programmed decisions  are typically handled through structured or bureaucratic techniques (standard operating procedures), non-programmed decisions must be made by managers  available information and their own judgement. As is often the case with managers, however, decisions are made under the pressure of time. 

An important principle of organisation design that relates to managerial decision making is Gresham's Law of Planning. This law states that there is a general tendency for programmed activities to overshadow non-programmed activities. Hence, if you have a series of decisions to make, those that are more routine and repetitive will tend to be made before the ones that are unique and require considerable thought. This happens presumably because you attempt to clear your desk so that you can get down to the really 

serious decisions. Unfortunately, the desks very often never get cleared. 

After going through the three types of classification of managerial decisions, you could see that there is no single and satisfactory way of classifying decision situations. Moreover, the foregoing classifications have ignored following two important problem-related dimensions : 

• How complex is the problem in tern of number of factors associated with it; 
• How much certainty can be placed with the outcome of a decision. 

Based on these two dimensions, four kinds of decision modes can be identified : Mechanistic, Analytically, Judgmental, and Adaptive (see Figure). 

Types of Managerial Decision