Programmed Decisions

Decisions that can be taken by following some standard

policies, rules or procedures
Repetitive in nature

Decision-maker simply has to refer to the standard

practice or policies to make decision (Easy Decision
Making)
Used for routine work

Two managers will come to the same decision

Eg: Lathe operators have specifications to decide

whether to accept or reject
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Non-Programmed Decisions

Decisions that cannot be taken by following some

standard policies, rules or procedures
New & non-repetitive in nature

Requires subjective judgement as information is

not available (Complex Decision Making)
Problems are unstructured

Decisions vary from person to person

Eg: An organization facing an unexpected low-level

productivity
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Programmed Decisions
Recurring & Repetitive
Guided by Standard Policies
& Procedures
Problems are structured
Small Impact
Decisions taken by Lower
level management
Same decision taken by all
managers
Easy decision making
Non-Programmed
Decisions
New & Non-repetitive
Subjective Judgement is
needed
Problems are unstructured
Long term impact
Decisions taken by Top level
management
Decision varies from
manager to manager
Complex decision making
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Techniques for Non-Programmed
Decisions
1. Delphi Method
2. Nominal Group Technique
3. Experience
4. Quantitative Decision Tools (Linear
Programming, Operation Research, PERT)

4
 Decision Making

Three different conditions under which

decisions are made:

1. Decision making under certainty

2. Decision making under uncertainty

3. Decision making under risk

5
 Certaint
y

Manager
ial
Control Risk

Failure
probabili
ty
Uncertain
ty

6
1. Decision Making Under
Certainty
Certainty: Decision making situation where we are
certain of the future outcome

Complete information is available for decision

maker

Decision maker knows resources, time available &

nature of problem

Mostly, solutions are readily available from past

experience

Eg: Decision to restock raw materials at low level 7

1. Decision Making Under
Certainty
Cause & effect relationship is known

Only a few problems are under conditions of

certainty

Example for technique used: Linear

Programming

In Linear programming, a desired objective is

expressed as a function of decision variables.

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 2. Decision Making Under Risk

Risk: Decision making situation where there are

different possible outcomes of known probabilities

Only partial information is available for decision

maker

Decision maker knows nature of problem, possible

alternatives & success probability of each alternative

Manager cannot guarantee how each alternative will

work

Eg: Decision to invest in new product development

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 2. Decision Making Under Risk
Steps

Problem is defined & all possible alternatives are

identified

Possible outcomes are allocated a probability of

occurrence

Expected Payoff is calculated for each alternative

Alternative with highest Expected Payoff is selected

Manager should do sensitivity analysis

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 2. Decision Making Under Risk

Techniques used:

1. Sensitivity Analysis
2. Decision Tree Analysis

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12
3. Decision Making Under
Uncertainty
Uncertainty: Decision making situation where
there are different possible outcomes with
unknown probabilities

All possible outcomes cannot be foreseen by

decision maker

Decision maker uses knowledge, judgement &

experience to take decisions

Eg: Decision to expand business to an

unfamiliar country 13
 3. Decision Making Under
Uncertainty
Approaches used:

1. Maxi-max Solution
2. Maxi-min Solution
3. Mini-max Solution
4. Laplace criterion

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Under Certainty Under Risk Under Uncertainty
Certain about Possible outcomes Possible outcomes with
future outcome with known unknown probabilities
probabilities (some outcomes are still
unknown)

Complete Partial information Very little information

information available available
available
Can guarantee how Cannot guarantee Does not even how each
each alternative how each alternative work
work alternative work
Solutions available Decision is taken Decision taken using
from past after computing knowledge, experience &
Expected Payoff judgement
Value
Eg: Decision to Eg: Decision to Eg: Decision to expand
restock material at invest in a new business to an unfamiliar
a low level product country
Eg for Technique Eg for Technique Eg for Technique used: 15
Creative Process and Innovation

Creativity – Ability to develop new ideas

Innovation – Application of new ideas

Creative Process:
1. Unconscious Scanning
2. Intuition
3. Insight
4. Logical Formulation

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Brainstorming

Technique for improving creativity

Developed by Alex F. Osborn
Improves problem solving by finding new &
unusual solutions by group discussion

Rules:
1. No ideas are criticized
2. The more radical the ideas, the better
3. Improvement of ideas by others is
encouraged
4. Quantity of idea creation is stressed 17