7 Important Types of Decisions in Business

Last updated on April 11th, 2024 at 01:13 am

For every business, deciding about their next move is the core part. The management has to decide on the upcoming event or situation. These decisions can make or break types of decisions, which could boost the boost or drop it down in the dumps.

In the same way, middle- and low-level managers also have to make decisions regarding their respective fields. These are more operational decisions. In this blog post, we will understand what a decision is and the types of decisions.

First, let us take a look at what Decision making is –

What is Decision Making? 

Decision-making is the concept of understanding and evaluating the nature of the problem or opportunity that arises. Based on the evaluation, further decisions regarding how to solve the problem or explore the opportunity are selected from the alternatives prepared for the situation.

Several factors affect the decision-making process. We have to make sure we understand these factors. Understanding these factors can increase the quality of our decision and alternatives. These factors are –

• Establishment of the core of the problem
• Adequacy of data about the matter
• Available time for taking the decision
• Compromise at different positions
• Pre-established standards
• Cooperation of the environment
• Calculation of Risk and uncertainties
• Understanding the motive and value of the process
• Ability to manage and understand the available data
• Problem-solving skills

Before we jump onto learning about the types of decisions in business. Let us see what the problems are in decision-making –

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Problems in Decision Making 

Indecisiveness

This aspect is more related to a person’s personality. When someone is not sure about the decision they are taking, a problem can arise. This lack of courage can lead to many lousy choices and, often, confusion and no final decision.

As a manager or a businessman, you’re skilled and must be sharp and quick. It would be best if you took decisions in a snap. But this type of timid behavior can consume a lot of decision-making time. Which could increase the problem or you will lose a good opportunity.

Procrastination

One of the biggest reasons for the problem in the decision-making process is the do-it-later attitude. A personality trait almost everyone has—is the habit of procrastination.

This habit of doing later or on time can lead to missing out on essential data. When a person leaves their decision to be made later, they miss out on analytical things. They don’t have enough time to gather information on the topic. Due to this, the decision taken is entirely baseless.

Misunderstanding the base

Not being able to understand the situation’s origin can also lead to wrong decisions. If you are not aware of where the problem is, you can’t solve it.

It’s like when your laptop stops working and shuts down. You would assume that is due to battery problems and would follow up. But the problem could be that your screen died.

Reliability of Sources

Another one of the problems in decision-making is the source and the data they provide. How reliable is your source? Because several times, even your sources have taken the data from somewhere else.

The chances are that your source could just be repeating someone else’s words. You must find out if the data provided is true or untrue.

No follow-ups

The last process of the decision-making process is to follow up on your decision. The activities have to be monitored continuously. If there are any errors or updates, the matter’s decision must be taken quickly.

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Now, let us study about the types of decisions taken in business-

Types of Decisions

Structured Problem and Programmed Decisions

These decisions are straightforward. These types of decisions are used when the situation has occurred previously. So, the decision maker already has a standard procedure or response to the crisis.

Structured problems are straightforward, easily defined, and clear to understand. For example – A person is returning their clothes at the shop. The problem is defined and clear to understand.

The programmed decision is the answer to the structured problem. It refers to a situation that has occurred and has a ready response. For example – When a customer comes in with a faulty laptop. The issue is clear, with an already defined procedure to exchange the product.

Unstructured Problem and Non-Programmed Decisions

The next in the list of Types of Decisions in business is a Non-Programmed Decision. An unstructured problem refers to an unexpected problem occurring. These problems can’t be solved using programmed decisions. These are new and expected problems, so there usually are no pre-established procedures to solve these problems.

Merging businesses, employee layoffs, and financing for expansions are some examples of unstructured problems. These are non-recurring and expected.

So, to solve such unstructured problems, one must develop a compatible solution. These new and creative decisions are called Non programmed decisions. A decision that has not been applied before.

Strategic and Operational Decisions

The third in the list of Types of Decisions in business are Strategic and Operation decisions. Strategic decisions are taken by the top management, i.e., the board of directors. These decisions are about business policies, funding, stocks, marketing, etc. The top management has to ensure that their decision reflects the business value and mission. These decisions are one-time investments.

Operational decisions refer to the decisions regarding day to day operation of the business. These are taken by the lower-level management. The lower-level management is provided with enough authority to make operational decisions. These decisions have to be taken daily according to the changes.

Tactical Decisions

Tactical decisions are the decisions made related to the policy of the company. The board of directors takes these. They aim to set up long-term guidelines for the business.

For example, the board of directors has to make a policy for the pension plan for employees.

Business and Personal Decisions

As the name suggests, these are decisions concerning business and personal activities.

Business decisions are the decision taken within the official capacity. At the same time, personal decisions are taken outside the official capacity.

Major and Minor Decisions

Next on the list of Types of Decisions is major and minor decisions. Major decisions refer to decisions with heavy impact. Example – Decision regarding purchasing a piece of new machinery that came into the market.

Minor decisions are the opposite of Major decisions, as the name suggests. Decisions regarding office stationery purchases are a part of minor decisions.

Individual and Group Decisions

The last in the list of types of decisions A decision taken by an individual is called an individual decision. An individual can make operational decisions. As middle and lower-level managers make operational decisions, they don’t need others’ opinions.

Group decisions are decisions taken by an individual but with the input of the whole team. A committee also takes group decisions. Usually, the board makes group decisions. The reason is that everyone’s opinion is essential.

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FAQs

Closing Statement 

For any business, there are several problems and opportunities arising every day. And for all these situations, there are several types of decisions taken in business. As the person in control, you should be able to react quickly and decide what is suitable for the situation. Several problems can arise while making decisions. These problems are listed above, and I’m sure you know what things you must check to make a better quality decision.

I hope you are well aware and filled with knowledge about the types of decisions involved in a business. If you have any questions or suggestions, take your decision and write in the comment box.

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