Examples of non programmed decisions include deciding whether to acquire another organization, deciding which global markets offer the most potential, or deciding whether to sell off an unprofitable vision. Such decisions are unique and non-recurring. When a manager confronts an ill-structured problem no cut and dried solution is available. A custom made non programmed response is required.
Non-programmed decisions: Decisions that must be custom made to solve unique and nonrecurring problems.
The creation of a new organizational strategy is a non programmed decision. This decision is different from previous organizational decision because the issue is new a different set of environmental factors exists, and other conditions have changed. For example, Amazon.com’s Jeff Bezos’s strategy to get big fast helped the company grow tremendously. But this strategy worked at a cost – perennial financial losses. Bezos made decisions regarding sorting orders anticipating demand, more efficient shipping, foreign partnership and opening a marketplace allowing other sellers to sell their books at Amazon. As a result, for the first time in company history, Amazon earned a profit.
How can you integrate problems, types of decisions a level in the organization?
Exhibit describes the relationship among types of problems, types of decisions and level in the organization. Well structured problems are responded to with programmed decision making. Ill-structured problems require non-programmed decision making. Lower level managers essentially confront familiar and repetitive problems; therefore they most typically rely on programmed decisions such as standard operating procedures. However, the problems confronting managers are more likely to become ill structured as the manager move up the organizational hierarchy. Because lower level managers handle the routine decisions themselves and pass upward only decisions that they find unique or difficult. Similarly, managers pass down routine decisions tot heir employees in order to spend their time on more problematic issues.
Few managerial decisions in the real world are either fully programmed or fully non-programmed. Most decisions fall somewhere in between. Few programmed decisions are designed to eliminate individual judgment completely. At the other extreme, even the most unusual situation requiring a non-programmed decision can be helped by programmed routines. A final point on this topic is that organizational efficiency is facilitated by programmed decision making – a fact that may explain its wide popularity whenever possible management decisions are likely to be programmed. Obviously this approach is not too realistic at the top of the organization, because most of the problems that top management confronts are of a nonrecurring nature. However, strong economic incentives for top management motivate them to create policies, standard operating procedures, and rules to guide other managers.
Programmed decisions minimize the need for managers to exercise discretion. This factor is important because discretion costs money. The more non-programmed decision making a manager is required to do, the greater the judgment needed. Because sound judgment is an uncommon quality, it costs more to acquire the services of managers who possess it.
In what ways does technology assist decision making?
Expert systems: Software that acts like an expert in analyzing and solving ill-structured problems.
Information technology is providing mangers with a wealth of decision making support including expert systems, neural networks, groupware, and specific problem solving software. Expert systems use software programs to encode the relevant experience of an expert and allow a system to at like that expert in analyzing and solving ill-structured problem. The essence of expert systems is that (1) they use specialized knowledge about a particular problem area rather than general knowledge that would apply to all problems (2) they use qualitative reasoning rather than numerical calculations and (3) they perform at the level of competence that is higher than that of non-expert humans. They guide users through problems by asking tem a set of sequential questions about the situation and drawing conclusions based on the answers given. The conclusions are based on programmed rules that have been modeled on the actual reasoning processes of experts who have confronted similar problems before. Once in place, these systems allow employees and lower level mangers to make quality decisions that previously could have been made only by senior managers.