Types of Decision Making

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There are three main classifications or types of decision making supported by business intelligence. They can be characterised by their frequency and impact on the organisation.

Click here for a definition of decision making

The impact can be quantified in terms of risk of failure or mishap and by the level of financial success achieved.

It can take many years for the consequences of a decision to appear. The time for the effect of a decision to be seen is a useful and important way of classifying the potential impact of decisions.

The diagram shown on the data warehouse basics page also reflects the classification stated here.

There are three types

  • Strategic
  • Tactical
  • Routine or Operational

Each of these types of decision can also be defined by the type of data needed to support them. These decisions should be classed as data driven decision making.

Potential Impact of the Types of Decision Making

The following chart depicts the frequency of decision and types of decision making against its potential impact on the organisation

Types of Decision Making and the Impact

Strategic Decisions are usually infrequent e.g. annually but can have a huge impact on the organisation. For example

  • Select a Market
  • Acquire a Company
  • Recruit additional staff
The data used to drive these types of decision is usually found external to the organisation. e.g. market research reports, press releases

Tactical Decisions are more frequent e.g. weekly, monthly. Examples would be:

  • Change product pricing
  • Reschedule work
  • Reorganise a department

The impact of these types of decision is of a medium nature in terms of risk to the organisation and impact on profitability.

The data used to drive this type of decision is usually found in summaries of routine transactions e.g. sales orders from the next level or classification.

Operational or Routine Decisions are usually very frequent e.g. hourly, daily but can have a lesser impact on the organisation. For example

  • How to answer a sales enquiry
  • Approve a quotation
  • Approve an Invoice

The data used to drive this decision type is usually prescribed or defined in the procedures and rules of the organisation.

Click on the following link to find out what type of decision maker you are

Which of the 5-kinds of decision maker are you

What to Learn more about Decision Making

Find out more about decision making - see the following links:

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