The quality of the decisions that managers make is the yardstick of their effectiveness

The quality of the decisions that managers make is the yardstick of their effectiveness. Sometimes just one or two exceptionally good or exceptionally poor decisions can have significant effects on a manager's career or an organization's success. Union Carbide management made several poor decisions in the aftermath of the cataclysmic accident involving the release of methyl isocyanate in Bhopal. India, in 1984. This tragic event took the lives of more than 200 people. The accident itself, as well as subsequent decisions made regarding the handling of the accident, had profound effects on Union ' Carbide. Worldwide indignation and censure contributed to a collapse in the value of the company's stock, a downgrading of its credit rating, a hostile takeover attempt (by GAF Corp.). and damage claims totalling billions of dollars.

Because decision making is so very important and can have such significant effects, as illustrated in the Union Carbide example above, it has been suggested that management is decision making. It would be a mistake, however, to conclude that only managers make decisions. Increasingly, important decisions are being made in organizations by nonmanagers.

TYPES OF DECISIONS

Managers in various kinds of organizations may be separated by background, lifestyle, and distance, but sooner or later they must all make decisions. Even when the decision process is highly participative in nature, with full involvement by subordinates, it is the manager who ultimately is responsible for the outcomes of a decision. In this section, our purpose is to present a classification system into which various kinds of decisions can be placed, regardless of whether the manager makes the decision unilaterally or in consultation with, or delegation to subordinates.

Specialists in the field of decision making have developed several ways of classifying different types of decisions. For the most part, these classification systems are similar, differing mainly in terminology. We use the widely adopted distinction suggested by Herbert Simon. Simon distinguishes between two types of decisions:

1. Programmed decisions. If a particular situation occurs often, a routine procedure usually will be worked out for solving it. Decisions are programmed to the extent that they are repetitive and routine and a definite procedure has been developed for handling them.

2. Nonprogrammed decisions. Decisions are nonprogrammed when they are novel and unstructured. There is no established procedure for handling the problem, either because it has not arisen in exactly the same manner before or because it is complex or extremely important. Such decisions deserve special treatment.

While the two classifications are broad, they point out the importance of differentiating between programmed and nonprogrammed decisions. The managements of most organizations face great numbers of programmed decisions in their daily operations. Such decisions should be treated without expending unnecessary organizational resources on them. On the other hand, the nonprogrammed decision must be properly identified as such, since it is this type of decision that forms the basis for allocating billions of dollars worth of resources in our economy every year. Unfortunately, it is the human process involving this type of decision that we know [he least about. Exhibit 13-1 presents a breakdown of the different types of decisions, with