Decision-making is one of the core functions of management. And it is actually a very scientific function with a well-defined decision-making process. There are various types of decisions the managers have to take in the day to day functioning of the firm. Let us take a look at some of the types of decisions.
Types of Decisions
Strategic Decisions and Routine Decisions
As the name suggests, routine decisions are those that the manager makes in the daily functioning of the organization, i.e. they are routine.
Such decisions do not require a lot of evaluation, analysis or in-depth study. In fact, high-level managers usually delegate these decisions to their subordinates.
On the other hand, strategic decisions are the important decisions of the firm. These are usually taken by upper and middle-level management. They usually relate to the policies of the firm or the strategic plan for the future.
Hence such decisions require analysis and careful study. Because strategic decisions taken at this level will affect the routine decisions taken daily.
Programmed Decisions and Non-Programmed Decisions
Programmed decisions relate to those functions that are repetitive in nature. These decisions are dealt with by following a specific standard procedure. These decisions are usually taken by lower management.
For example, granting leave to employees, purchasing spare parts etc are programmed decisions where a specific procedure is followed.
Non-programmed decisions arise out of unstructured problems, i.e. these are not routine or daily occurrences. So there is no standard procedure or process to deal with such issues.
Usually, these decisions are important to the organization. Such decisions are left to upper management. For example, opening a new branch office will be a non-programmed decision.
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Policy Decisions and Operating Decisions
Tactical decisions pertaining to the policy and planning of the firm are known as policy decisions. Such decisions are usually reserved for the firm’s top management officials. They have a long term impact on the firm and require a great deal of analysis.
Operating decisions are the decisions necessary to put the policy decisions into action. These decisions help implement the plans and policies taken by the high-level managers.
Such decisions are usually taken by middle and lower management. Say the company announces a bonus issue. This is a policy decision. However, the calculation and implementation of such bonus issue is an operating decision.
Organizational Decisions and Personal Decisions
When an executive takes a decision in an official capacity, on behalf of the organization, this is an organizational decision. Such decisions can be delegated to subordinates.
However, if the executive takes a decision in a personal capacity, that does not relate to the organization in any way this is a personal decision. Obviously, these decisions cannot be delegated.
Individual Decisions and Group Decisions
When talking about types of decisions, let us see individual and group decisions. Any decision taken by an individual in an official capacity it is an individual decision. Organizations that are smaller and have an autocratic style of management rely on such decisions.
Group decisions are taken by a group or a collective of the firm’s employees and management. For example, decisions taken by the board of directors are a group decision.
Solved Question on Types of Decisions
Q: Strategic decisions need analysis and in-depth study. True or False?
Ans: This statement is True. A strategic decision is taken by top-level managers after a lot of analysis, study, and fact-finding. This is because such decisions will affect the entire functioning of the organization and are very crucial and significant in nature.