Page 125 - Fundamentals of Management Myths Debunked (2017)_Flat

124 Part 2 • Planning
a specific direction. The statement that “we promote from within, whenever possible” is an
nonprogrammed decision
A unique and nonrecurring decision that requires example of a policy. In contrast to a rule, a policy establishes parameters for the decision
a custom-made solution maker rather than specifically stating what should or should not be done. Policies often
leave interpretation up to the decision maker. It’s in such instances that ethical standards
may come into play.

How Do nonprogrammed Decisions Differ

from Programmed Decisions?
When problems are unstructured, managers must rely on nonprogrammed decisions in
order to develop unique solutions. Examples of nonprogrammed decisions include deciding
whether to acquire another organization, deciding which global markets offer the most poten-
tial, or deciding whether to sell off an unprofitable division. Such decisions are unique and
nonrecurring. When a manager confronts an unstructured problem, no cut-and-dried solution
is available. A custom-made, nonprogrammed response is required.
The creation of a new organizational strategy is a nonprogrammed decision. This deci-
sion is different from previous organizational decisions because the issue is new; a differ-
ent set of environmental factors exists, and other conditions have changed. For example,
Amazon’s strategy to “get big fast” helped the company grow tremendously. But this strategy
came at a cost—perennial financial losses. To turn a profit, CEO Jeff Bezos made decisions
regarding how to organize orders, anticipate demand, ship more efficiently, establish foreign
partnerships, and create a marketplace for other sellers to sell their books on Amazon. As a
result, Amazon has moved towards profitability. 25

How Are Problems, Types of Decisions, and organizational Level
Integrated?

Exhibit 4–8 describes the relationship among types of problems, types of decisions,
and level in the organization. Structured problems? Use programmed decision making.
Unstructured problems? Use nonprogrammed decision making. Lower-level manag-
ers essentially confront familiar and repetitive problems so they most typically rely on
programmed decisions such as standard operating procedures. However, as managers
move up the organizational hierarchy, the problems they confront are likely to become
less structured. Why? Because lower-level managers handle the routine decisions
themselves and only pass upward decisions that they find unique or difficult. Similarly,
managers pass down routine decisions to their employees so they can spend their time on
more problematic issues.

MANAGERIAL DECISIONS: Real World—Real Advice

• Few managerial decisions are either fully programmed or fully nonprogrammed.
Most fall somewhere in between.
• At the top level, most problems that managers face are unique—that is,
nonprogrammed.
• Programmed routines may help even in situations requiring a nonprogrammed
decision.
• Top-level managers often create policies, standard operating procedures, and
rules—that is, programmed decision making—for lower-level managers in order to
control costs and other variables.
• Programmed decision making can facilitate organizational efficiency—maybe
that’s why it’s so popular!
• Programmed decisions minimize the need for managers to exercise discretion.
• Discretion—the ability to make sound judgments—costs money because it’s an
uncommon and valuable quality and managers who have it are paid more.
• Even in some programmed decisions, individual judgment may be needed.