Various types of decision making approaches are available for successful business operations. Every day, the business people need to focus on the best ones to make valuable decisions for
- Smooth running of everyday business tasks,
- achieving better outcomes in their specialized fields, (to achieve the best results),
- Making profits,
- Investing in new businesses.
Each types of decision making serves a specific purpose. They are appropriate for different situations. The selection of a particular type of decision-making needs to focus on
- The values,
- The preferences, and
- The constraints.
Mastering various types of decision making is essential for success. It helps business people to perform well. To handle complex market dynamics. And decide on proper strategic choices. The quality of decisions is important to
- Achieve desired results
- Reduce the risks and
- Avoid the uncertainties.
The List of Major Types of Decision Making Processes
Rational Decision Making
This one employs a logical approach as follows,
- Define the problem in a clear way
- Gather the essential information
- Generate the possible alternatives
- Check the possible alternatives in a clear way
- Select the best option for a particular problem.
Advantages
- Logical analysis of facts. Here, the goal is very clear.
- Systematic evaluation. It is a scientific one.
- This method reduces the possibility of errors.
Disadvantages
- Need more time for this detailed analysis. It is a time-consuming.
- Requires exhaustive and extensive information.
It is one of best types of decision making.
Intuitive Decision Making
Intuitive decisions will result from
- The inner feelings of a person,
- The past experiences of a person, and
- The past judgements.
Advantages
- Fast instinct decisions are possible
- Very effective in uncertain situations. Particularly for emergencies.
Disadvantages
- It is very subjective in nature,
- It avoids extensive systematic analysis. They are prone to bias and errors. Hence, the possibility of bias is great.
It is an most famous types of decision making.
Policy and Operational Decision Making
Policy Decisions
Policy decisions are strategic decisions. And they are also long-term decisions. And they are based on guidelines and principles for organizational activities. Top-level management made these decisions. They set the framework for the best results in the future. And how best to handle similar situations. They set a clear path for best future and for a success.
Advantages
- Policy decisions set the basic framework of a business
- Policy decisions set the Human resource policies for a business
- Policy decisions set the Pricing policies for a business
- Policy decisions set the Investment policies for a business
Disadvantages
- Sometimes, policy decisions are non-economic.
It is an one of the practical types of decision making.
Operating Decisions
These are all programmed decisions. They are to apply established policies. The lower-level managers made these decisions. These decisions are useful to govern the routine activities in a sincere manner.
Advantages
- Useful to allocate day-to-day work duties in a business,
- For processing routine transactions in a business,
- For managing inventories in a business for the best continuity of a path..
Disadvantages
- Short-term nature.
It is an one of the most useful types of decision making.
Organizational Decision Making
Organizational decisions are decisions based on policies and procedures. The aim is to ensure the smooth functioning of an activity. It helps to achieve organizational objectives in a best manner.
Advantages
- Goal-oriented decisions enhance the organizational effectiveness of a business,
- Supports production planning for goal achievement in a proper manner,
- Improves coordination for the best use of organizational resources for optimal results,
- Take care of employee promotion policies and Pricing decisions in a clear manner.
Disadvantages
- Need more
- formal processes,
- documentation, and
- justification to stakeholders,
- Involves complex procedures,
- Needs proper justification to stakeholders,
- Faces bureaucratic delays.
It is an one of the most effective types of decision making.
Personal Decision Making
Personal decisions are based on individual preferences. They depend on
- The nature of a decision.
- The importance of a decision, and
- The complexity of it.
Advantages
- They apply individual decision-making approaches to make appropriate decisions in a business.
- They balance rational analysis with intuitive preferences in a business.
- They are very flexible in nature in its use.
- The level of personal satisfaction is great.
Disadvantages
- Personal emotions and values influence them more,
- The possibility of poor judgment is higher,
- It will have a direct impact on the individual.
It is an one of the regular types of decision making.
Tactical Decision Making
Middle-level managers frame the tactical decision-making process. This is a medium-term decision. It is for a period of 6 months to 2 years. It helps to install strategic plans. It takes care of proper recruitment planning. And helps with the proper marketing campaigns.
Advantages
- Improves the speedy implementation of strategic plans in a business,
- Enhances the best level of coordination in a business,
- Fulfills organizational goals and helps to achieve the best results.
Disadvantages
- Applies a medium-term focus to a problem,
- May become invalid if there is a change in strategy.
- Requires more care in planning. Errors in Budget allocation and Production scheduling lead to major problems.
It is an one of the best applicable types of decision making.
Strategic Decision Making
Top management makes the strategic decisions. These are all long-term decisions. They determine the future direction of an organization. The Organization-wide impact is great. The impact will be great on the performance of an organization.
Advantages
- Long-term orientation determines competitive advantage for a firm,
- Ensures the competitiveness and long-term survival of a business,
- Provides a good scope for the growth of a business.
Disadvantages
- Involves high risk
- The level of uncertainty is great
- Needs large resources
- It is tough to reverse the process.
It is an one of the structured types of decision making.
Programmed Decision Making
Programmed decisions apply to routine and repetitive actions. They are all well-structured decisions. They follow established rules and procedures. The common examples are listed below
- Preparation of monthly reports in a firm,
- Approval of the employee’s leave in a firm,
- Office supplies reordering processes,
- Customer orders processing in a proper manner.
They use predetermined methods. And they are based on rules and procedures.
Advantages
- It helps to save a lot of time in a business,
- Maintains the consistency of a firm,
- Lessen the managerial burden of a firm,
- Improves the organizational work efficiency of a firm.
Disadvantages
- There is no flexibility
- May not fit for the changing conditions
It is an one of the Organised types of decision making.
Non-Programmed Decision Making
Non-programmed decisions are 100% unstructured decisions. They are always unique. And also, they are complex in nature. They do not have predefined procedures. And they need special attention and managerial judgment. They arise in unusual situations like
- A new market entry situation for a firm,
- New product Launches of a firm,
- Acquisitions of a company, such as acquiring another company,
- The organization restructuring process of a firm.
Advantages
- Supports innovation in a firm,
- Useful to solve unique problems in a firm,
- Encourages strategic thinking in a firm.
Disadvantages
- Involves high risk,
- Takes more time. A time-consuming one,
- Complex in nature, and
- A uncertain type.
Influencing Factors for a Decision Making Processes
All types of decision making processes depend on influencing factors. They depend on two types of influencing factors such as
- Internal Influencing Factors
- External Influencing Factors.
Their impact is great.
The list of Internal Influencing Factors is as below
- Organizational culture of the firm,
- Values and beliefs of the firm,
- Exposure and Knowledge of a firm’s people,
- Total number of years/ Experience of a firm in the business.
The list of External Influencing Factors is as below
- Competition in the market,
- The social and political environment conditions of a country,
- Current Government policies,
- Economic conditions of the country,
- Technology development of a firm.
Procedure for Effective Decision Making
Managers should follow the following steps for an effective decision-making process selection. They should be very careful in
- Identifying the Problem and clearly defining the issue of a firm.
- Gathering all the necessary Information needed for the best solution.
- Collecting the relevant facts and data for support purposes in a decision.
- Generating the alternatives for a decision.
- Developing possible solutions to a problem.
- Evaluating the alternatives in a correct manner.
- Analyzing
- The costs,
- The benefits, and
- The risks.
- Selecting the best alternatives.
- Choosing the most appropriate option for the solution.
- Proper implementation of the decision.
- Carrying out the decision into action in a proper manner .
- Monitoring and evaluating the progress and results in a best way
And make corrections if at all required.
Conclusion
- The right types of Decision Making is a must
- To achieve objectives,
- To solve problems, and
- To maintain competitiveness in a business.
- It is very useful
- To avoid risks
- To prevent uncertainties, and
- To prefer the most appropriate course of action.
- It is essential
- For navigating complex market dynamics, and
- Making sound strategic choices.
- Timely decisions are important for professional success and growth.
