Types of decisions and problems
A decision is a choice made from available alternatives. Decision making is the process of identifying problems and opportunities and then resolving them. Decision making involves effort both before and after the actual choice.
Programmed and non-programmed decisions
Programmed decisions involve situations that have occurred often enough to enable decision rules to be developed and applied in the future. Once managers formulate decision rules, employees and others can make decisions, thus freeing managers for other tasks. Non-programmed decisions are made in response to situations that: • are unique • are poorly defined • are largely unstructured • have important consequences for the organisation.
Non-programmed decisions often involve strategic planning because uncertainty is great and decisions are complex. Routine decision rules for solving the problem do not exist.
Certainty, risk, uncertainty and ambiguity
Managers try to obtain information about decision alternatives that will reduce decision uncertainty. Every decision situation can be organised on a scale according to the availability of information and the possibility of failure. The four positions on the scale are (see Exhibit A page 272): • Certainty. All the information the decision maker needs is fully available. Few decisions are certain in the real world. Most contain risk or uncertainty. • Risk. A decision has clear-cut objectives and good information available. However, the future outcomes associated with each alternative are subject to chance. • Uncertainty. Managers know which goals