Decision-making occurs at every stage of the business, moving through a pyramidal system from simple decisions made by line employees daily to strategic executive decisions that require years of thought.
Decisions made by managers at different points in time can be classified in this way.
Personal and organizational decisions
Decisions to watch TV, study, or retire early are examples of personal decisions. They affect the organization indirectly. For example, a personal decision to buy a Toyota rather than a Ford indirectly helps one company’s sales and hurts another by losing them. Individual decisions cannot be delegated and have limited influence.
Managers make organizational decisions in their official or formal capacity. These decisions aim to advance the interests of the organization and can be delegated. However, in attempting to bring value to the company, leaders must consider the interests of all stakeholders, such as employees, customers, suppliers, and the public.
Managers need to make management decisions carefully to ensure that all stakeholders benefit from what they do (e.g., pricing products correctly, not engaging in unethical practices, not selling inferior products, etc.).
Individual and group solutions
One person makes individual decisions. These are primarily everyday decisions. On the other hand, group decisions are decisions made by individuals gathered for that purpose — for example, the admission committee of the university and the board of directors of the company.
Compared to individual decisions, group decisions have far-reaching consequences and affect several people and departments.
- A group has more information than one person. Participants drawn from different areas can provide more information and knowledge about the problem.
- The group can generate more alternatives. This can lead to a broader experience, a greater variety of opinions, and closer scrutiny of the facts than a person can.
- Participation in collective decisions increases recognition and commitment from people who now consider this decision their own and are interested in its success.
- Participants understand the solution better because they took part in its origin and development, which means they will make efforts to smoothly implement the solution.
- Interaction between people with different points of view leads to greater creativity.
- In groups, a lot of time is lost to generating a management decision.
- Groups create pressure to agree. Collective thinking forces its members to compromise.
- To bring together the right team members, some solutions come at a cost.
- The team consists of separated people and, therefore, it is easy to turn the tide and avoid responsibility.
Therefore, they require serious discussion, caution, and debate. Below are the advantages and disadvantages of group management decision-making.
Programmed and non-programmed solutions
The programmed decision is everyday and repetitive. Rules and conditions are set in advance to resolve problems that arise quickly.
Programmed decisions leave no room for reconsideration. However, they need to be followed in a certain way. Such decisions are usually made by lower-level personnel according to established rules and procedures.
Non-programmed solutions deal with unique/unusual problems. Those that arise unexpectedly, and there is no established procedure or formula for their settlement. Deciding whether to disband the team, how to restructure the organization to improve efficiency, and where to locate the company’s new warehouse are all examples of unprogrammed decisions.