Name of Reporter: Jessie N.

Delos Reyes
Schedule of Report:
Topic: Types of Decisions
Making Rational Decisions
Making “Good Enough” Decisions
Name of Professor: Dr. Elizabeth F. Soriano,Ed.D.

TYPES OF DECISIONS

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.
1. 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.
2. 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.
3. 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.
4. 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.
5. 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.

MAKING RATIONAL DECISIONS

Rational decision making brings a structured or reasonable thought process to the act of
deciding. The choice to decide rationally makes it possible to support the decision maker
by making the knowledge involved with the choice open and specific. This can be very
important when making high value decisions that can benefit from the help of tools,
processes, or the knowledge of experts.
Choosing rationally is often characterized by the following:

 Decision making will follow a process or orderly path from problem to

solution.
 There is a single best or optimal outcome. Rational decisions seek to
optimize or maximize utility.
 The chosen solution will be in agreement with the preferences and beliefs
of the decision maker.
 The rational choice will satisfy conditions of logical consistency and
deductive completeness.
 Decision making will be objective, unbiased and based on facts.
 Information is gathered for analysis during the decision making process.
 Future consequences are considered for each decision alternative.
 Structured questions are used to promote a broad and deep analysis of the
situation or problem requiring a solution.
 Risk and uncertainty are addressed with mathematically sound approaches.
In the ideal case, all rational decision makers would come to the same conclusion when
presented with the same set of sufficient information for the decision being made. This
would suggest that collaborative decision making will often employ a rational decision
making process.

Problems and limitations with choosing rationally

Most of the issues and limitations associated with rational choice result from falling short
of the ideal proscribed in the full rational decision making model. Here are three areas
that generate much of the concern.

1. Limits of human capabilities - The limits on our human ability to gather, process, and
understand all the information needed to optimize a decision outcome make it impractical
to meet the ideal except in very constrained or simple situations. We have limits in our
ability to formulate as well as solve very complex problems. Our desire to optimize is also
limited, and we will usually "saticfice", or be content with acceptable solutions when
confronted with obstacles.

2. Limits on information and knowledge - The model assumes we should or can gather
sufficient information in terms of quantity, quality, accuracy, and integrity. It also assumes
that we have access to the required knowledge of the cause and effect relationships that
are important to the evaluation of alternative solutions, particularly with respect to
projecting future consequences.

3. Limits in time - Search for the optimum solution will generate a delay that could
negatively impact the benefits of the chosen alternative. In essence, if the decision
alternatives are not properly discounted for changes due to decision timing, the chosen
alternative may not be optimum.
The benefits of rational choice

Within the limitations described above, choosing rationally can provide a number of
benefits that include:

 Addressing complex decisions by breaking them down

 Characterizing decision problems and goals to ensure addressing all needs and
desires
 Being aided by structured techniques, mathematics, and computers
 Ongoing improvement when codified in a process, procedure, or program
 A long list of decision making techniques and tools with proven usefulness
 A growing capability to analyze and access the information that can improve
guidance based on the facts

MAKING GOOD ENOUGH DECISIONS

Being faced with a decision—even between two positive things—can be a source of

stress. Make life easier on yourself by accepting “good enough” decisions when you can.

It’s no secret that humans aren’t perfect decision makers. Without the help of outside
tools, we’re just not great at holding all the information we need in our heads at once.
Fortunately, we don’t have to. As tips blog Barking Up the Wrong Tree points out, “good
enough” decisions are usually good enough:

Make a “good enough” decision. Don’t sweat making the absolute 100% best decision.
We all know being a perfectionist can be stressful. And brain studies back this up.
Trying to be perfect overwhelms your brain with emotions and makes you feel out of
control.

Of course, there are always exceptions. Who you marry and what career you choose are
important, and it’s okay to think those over. What you eat for dinner or what movie you
watch? Those don’t matter as much. The less you worry over making the right decision
when it doesn’t matter, the less it’s going to stress you out thinking about the decisions
that do matter.