What do you mean by Decision Making?

MEANING OF DECISION MAKING

According to G.R. Terry,” Decision making is the selection based on some criteria from two or more possible alternatives”.

Decision making is the process of selecting a best course of action out of many available alternatives. A manager in an organization has to make different decisions in setting goals, determining plans and taking actions, formulating strategies and policies, assigning jobs to subordinates, etc. decision making is the process of solving organizational problems by choosing a specific course of action.

FEATURES:

1.       Selective process

2.       Rational process

3.       Dynamic process

4.       Goal oriented

5.       Continuous process

6.       Impact of decision i.e. negative or positive.

TYPES OF DECISION MAKING

1.       Programmed and Non-programmed decision making

Programmed decisions are structured and routine. They are simple and easy to understand. Such decisions are made in accordance with policy, rules and procedures which are already established. They don’t have to be handled each time they occur. These decisions are generally repetitive routine and are usually the easiest for managers to make. Such decisions are often made by middle level and lower level managers. E.g. requisition of material, placing purchase order, pay role procedure, loan policy of bank, providing leave to employees, etc.

Non programmed decisions are unstructured and non-repetitive. These decisions are usually concerned with complex problems which are new and are different from previous ones. Therefore, these decisions need creativity in problem solving. Managers need to use their judgmental ability to make such decisions. As there is no standard operating procedure, top level managers deal with such decisions. E.g. introducing a new product, making a capital expenditure decision, computerization in the organization, dropping an existing product, new investment in certain field, etc.

2.       Strategic, Tactical & Operational decisions

Strategic decisions are related to organization policies, goals and environment of the organization. They deal with unstructured and non-repetitive problems. Such decisions are made by top level management.

Tactical decisions are made to implement the strategic decisions. Such decisions are of short-term nature and are related to a particular department. These decisions are made  by middle level managers.

Operational decisions are routine and repetitive. They are related to the jobs to be done and are made by lower level managers.

3.       Individual and Group decision making

The types of decision which are made by an individual are called individual decisions. Generally, such decisions are made in small firms where the owner himself is the controller and the manager of the business. Such decisions are generally simple but sometimes may also be complex.

Group decision is a type of decision which is collectively made in a group. Generally, such decision is taken by Board of Directors, committees, taskforce, by the team, etc.