Types of managerial decision - ENGINEERING ECONOMICS & FINANCIAL ACCOUNTING - DR.K.BARANIDHARAN, SRI SAIRAM INSTITUTE OF TECHNOLOGY, CHENNAI

2. Prepared by :
Dr. K. BARANIDHARAN
PROF.MBA
SRI SAIRAM INSTITUTE OF TECHNOLOGY
CHENNAI
ENGINEERING ECONOMICS
AND
FINANCIAL ACCOUNTING
Sri Sairam Institute of Technology 2

3. Engineering
Economics& Financial
Accounting
Ee&fa
310 August 2014

4. Types of Managerial decision
making

6. Basic
• Basic decisions are those which are unique,
one-time decisions involving long-range
commitments of relative permanence or
duration, or those involving large investments.
• Examples of basic decisions in a business firm
include plant location, organization structure,
wage negotiations, product line, etc. In other
words, most top management policy decisions
can be considered as basic decisions.

7. Routine
• Routine decisions are at the opposite extreme from basic
decisions. They are the everyday, highly repetitive,
management decisions which by themselves have little
impact on the overall organization. However, taken together,
routine decisions play a tremendously important role in the
success of an organization.
• Examples of, routine' decisions are an accountant's decision
on a new entry, a production supervisor’s decision to
appoint a new worker, and a salesperson's decision on what
territory to cover. Obviously, a very large proportion of the
decisions made in an organization are of the routine variety.
However, the exact proportion of basic to routine types
depends on the level of the organization which the decisions
are made.

8. . Programmed and Non-programmed
Decisions
• programmed Decisions
The difference between Programmed (routine,
repetitive) decisions and Non-programmed (unique,
one-shot) decisions.
• While programmed decisions are typically handled
through structured or bureaucratic techniques
(standard operating procedures),
• non-programmed decisions must be made by managers
using available information and their own judgement.
As is often the case with managers, however, decisions
are made under the pressure of time.

9. Mechanistic
• If a decision is a routine and repetitive in nature
it is called mechanistic decision.
• The number of variables in decision making are
relatively limited.
• There are clear cut alternative for taking
mechanistic decisions and each alternative has
a well defined outcome.
• Example: if I know how many computers gets
sold in a computer exhibition (from my
experience, I have been participating in the
Industrial exhibition for the last….

10. Analytical
• Complex nature, they have large number of
variables.
• But the outcome of each alternative can be
computed.
• The problem pertain to engineering, production,
maintenance, project management, fall under this
category.
• These are complex in nature Yet, they can be solved.
• OR and Management Science provide an array of
tools and techniques such as linear programming,
inventory models, queuing theory, PERT/CPM to
determine optimal solutions.

11. Judgemental
• Limited number of decision variable
and each decision alternatives has
unknown outcomes, it is called a
judgemental decision.
• Manager take judgemental decisions
while dealing with problems in most of
the functional areas of management
such a personnel, marketing,
production, R&D etc

12. Adaptive
• There are large number of decisions
variables with lot of uncertainty over the
outcomes, it is a case of adaptive decision.
• Even managers find it difficult to reach a
consensus on decision strategies.
• Such decisions cannot be structured for
easy solutions.
• Managers of diverse technical skills are
normally required to handle such decisions.

13. 13
Certainty, Risk, Uncertainty, Ambiguity
● Certainty
● all the information the decision maker needs is fully available
● Risk
● decision has clear-cut goals
● good information is available
● future outcomes associated with each alternative are subject to
chance
● Uncertainty
● managers know which goals they wish to achieve
● information about alternatives and future events is incomplete
● managers may have to come up with creative approaches to
alternatives
● Ambiguity
● by far the most difficult decision situation
● goals to be achieved or the problem to be solved is unclear
● alternatives are difficult to define
● information about outcomes is unavailable