Chapter 9.1: Types of decisions and problems

Question 1

Types of decisions and problems

Answer 1

• Programmed decisions

- Non-programmed decisions

Question 2

What are programmed decisions?

Answer 2

Programmed decisions are made in response to reoccurring organizational issues. In situations that have occurred multiple times, and enough to enable decision rules to be developed in the future.

e.g.
Paper and other office supplies need to be reordered when then inventory drops to a certain level; that is a programmed decision.

Question 3

What are non-programmed decisions?

Answer 3

A non-programmed decision is made as a response to situations that are unique and haven’t happened before. They are poorly defined largely unstructured. They have high consequences for the company.

Question 4

What is certainty?

Answer 4

Certainty means that all the information a decision maker needs is totally available.

Problem/goal: clear
Info: clear
Outcome: clear

e.g.
If a company is considering investing $100.000 in new equipment that it knows for certain will save $40.000 in costs per year for over the next 10 years, managers can calculate a before-tax rate of return of about 40%.

Question 5

What is risk?

Answer 5

Risk means that a decision had clear goals and good information at reach, but the future outcomes have a chance of failure.

Problem/goal: clear
Info: clear
Outcome: unclear (can sometimes be calculated)

Question 6

What is uncertainty?

Answer 6

Uncertainty is the opposite of certainty; managers know which goals they want to achieve, but there is not enough information about alternatives and future events. Factors that can affect the decision are difficult to analyze or predict. In this situation, managers often need to make assumptions, which carries high risks.

Problem/goal: clear
Info: unclear
Outcome: unclear

Question 7

What is ambiguity?

Answer 7

It means that the goals to be achieved or the problem to be solved is unclear. Alternatives are also difficult to define and there is no information about the outcome.

Problem/goal: unclear
Info: none
Outcome: unclear

e.g.
Your teacher gives you a group project, but with no topics, directions or guidelines whatsoever.