Answer to Question 1
Answer: Some problems are straightforward. The decision maker's goal is clear, the problem is familiar, and information about the problem is easily defined and complete. Hence, these are called structured problems. For instance, when a server spills a drink on a customer's coat the customer is upset and the manager needs to do something. Because it is not an unusual occurrence, there is some standardized routine for handling it. For example, the manager offers to have the coat cleaned at the restaurant's expense. This is called a programmed decision, a repetitive decision that can be handled by a routine approach. Because the problem is structured, the manager does not have to go to the trouble and expense of going through an involved decision process.
Not all the problems managers face can be solved using programmed decisions. Many organizational situations involve unstructured problems, which are problems that are new or unusual and for which information is ambiguous or incomplete. Whether to build a new manufacturing facility in China is an example of an unstructured problem. When problems are unstructured, managers rely on nonprogrammed decision making in order to develop unique solutions. Nonprogrammed decisions are unique and nonrecurring and involve custom-made solutions. Lower-level managers mostly rely on programmed decisions because they confront familiar and repetitive problems. As managers move up the organizational hierarchy, the problems they confront become more unstructured. However, few managerial decisions in the real world are either fully programmed or nonprogrammed. Most fall somewhere in between.
Answer to Question 2
Answer: Usually a manager relies on one of three types of programmed decisions to counter structured problems: procedure, rule, or policy.
A procedure is a series of sequential steps a manager uses to respond to a structured problem. Identifying the problem is a bit difficult. Once it is clear, so is the procedure. For instance, a purchasing manager receives a request from a warehouse manager for 15 PDA handhelds for the inventory clerks. The purchasing manager knows how to make this decision by following the established purchasing procedure.
A rule is an explicit statement that tells a manager what can or cannot be done. Rules are frequently used because they are simple to follow and ensure consistency. For example, rules about lateness and absenteeism permit supervisors to make disciplinary decisions rapidly and fairly.
The third type of programmed decisions is a policy, which is a guideline for making a decision. In contrast to a rule, a policy establishes general parameters for the decision maker rather than specifically stating what should or should not be done. Policies typically contain an ambiguous term that leaves interpretation up to the decision maker.
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