Techniques of Decision Making

The decision-making techniques can be classified into two categories:

• Traditional Techniques
• Modern Techniques
Traditional Techniques of Decision Making
In traditional technique the decision can be classified into two
categories:
1. Programmed decision
2. non-programmed decision
Programmed Decisions
Programmed decisions are of a routine nature and are taken within the
specific procedures. These decisions are made with regard to routine and
recurring problems. The decision rules for programmed decision should
be prepared carefully and perceptively so that lower level executive are
able to take the decision without referring to higher managerial levels.
No judgement or little judgement is required to find out solution to
search problems. Decision rules and Procedures for taking such problem
can be formulated in advance to reduce the time and effort. These
decisions remain consistent for a longer period of time and over many
solutions.
Non-Programmed Decisions
Non-programmed decisions are related to problems which are unique
and non-repetitive. The information and knowledge about such
decisions is not available. Best decisions are made under new
circumstances. Non-programmed decisions are usually made for solving
unstructured problem which keep on changing from time to time. Every
problem has to be restructured and analysed by the manager by using
his skill, judgement and creativity.
 Comparison Between Programmed and Non-programmed Decisions

Programmed Decisions Non-Programmed Decisions

1)These are for solving day to day and routine 1) These are for solving non-repetitive, tactical
problems and are repetitive in nature. and unique problems.

2) Rules and procedures are described for taking 2) Every decision will have to be taken separately
these decisions. by analysing and evaluating each problem.

3) These decisions remain consistent for a relatively 3) Every decision is different and there is no
longer period of time and over many situations consistency.

4) These decisions are made for solving both simple and 4) Such decisions are for solving complex problems.
complex problems.

5)Decisions are of routine nature requiring no

judgement 5) Such decisions require judgement in each case

6) usually made at lower level Management 6) Generally made at the top-level management

Decision making for programmed decisions

Following techniques are used for taking programmed decisions
1. Standard Procedures and Rules
2. Organisational Structure
1.Standard Procedures and Rules
Every organisation develops standard procedure and rules for taking
routine and repetitive decision. Whenever needed, a manager refers to
the standard procedure and rules before taking simple decision. An
effort is made to have consistency in routine decisions. Routine decision
does not require application of special skill and knowledge so such
decision can be taken without much difficulty.
Organisational structure
Organisational structure established relationship between superior and
subordinate. Person at different organisational structures are assigned
work to be done by them. For taking up this work, managers need
authority to take to decisions. The authority to take to decisions needs
proper information backup. All managers or decision-making centres are
linked to information system for supplying information when needed.

Decision making for Non-Programmed Decisions

Linear programming
Linear programming technique is a mathematical or quantitative
technique used to determine the best use of limited resources like time,
machinery, market money etc. The word 'linear’ indicates that the
relationship among different variable is proportionate. the term
'programming' means planning. It is based on the assumption that there
exists a linear relationship between variables and the limits of variations
could be ascertained. Linear programming is applicable in such problem
areas as Production planning, transportation, warehouse location and
utilisation of production and warehouse facilities at an overall minimum
cost.
Game Theory
The term game represents a situation where involving at least two
people or parties. Game theory helps in making decisions under
competitive situation. Game theory is deal with making decisions when
two or more intelligent and rational competitors are involved under
condition of conflict or competition. For example, Hyundai will increase
the price of its mid-size car if it feels that Maruti has increased its prices.
In such a situation the final outcome depends on combination of strategy
selected by the competitors. The competitive involved in the game are
called the players. The goal of every player is to choose the strategy that
will distract the opponent's action and finally win the game. The primary
aim of game theory is developed rational criteria for selecting a strategy.
This is based on the assumption that every player in the game is perfectly
rational and seeks to win the game. Game theory has been applied in
military problems. In business, it has been applied in simple competitive
situation because it is very difficult to assess the competitors’ responses
in complex situations.
Queuing Theory
Queuing theory is also known as 'waiting line theory' to be applied for
maintaining a balance between the cost of waiting line and the cost of
preventing the waiting line in respect of utilisation of personnel,
equipment and services. In waiting line situations problem arises
because of either too much demand on the facilities. An effort is made
to obtain balance between the cost associated with waiting time and idle
time and queuing theory help in achieving this balance. This theory does
not directly solve the problem of minimising the total waiting and
services cost but it provides the management with information
necessary to take relevant decisions and for the purpose.
Probability Theory
This statistical tool is based on the assumption that certain things are
likely to happen in future in a manner which can be predicted to some
extent by assigning various probabilities. In this technique payoff matrix
and decision tree are constructed to represent variables. The decision
tree and payoff matrix help the manager to assigning financial result to
various available resources action, modifying these result probabilities
and comparing them for selecting an appropriate course of action.
Network Techniques
Network technique is used for preparing and controlling the project
activities. Project evaluation and review technique and critical path
method are used for planning, monitoring and implementing time bond
projects. These techniques help manager in deciding the logical
sequence in which various activities will be performed. By applying these
techniques large and complex projects can be executive with the
stipulated time and cost.