Figure ds.02 A taxonomy of decisions
- Structured decisions. A decision is structured if it is based on a well-defined and recurring decision-making procedure. In most cases structured decisions can be traced back to an algorithm, which may be more or less explicit for decision makers, and are therefore better suited for automation. More specifically, we have a structured decision if input flows, output flows and the transformations performed by the system can be clearly described in the three phases of intelligence, design and choice. In this case, we will also say that each component phase is structured in its turn. Actually, even decisions that appear fully structured require in most cases the direct intervention of decision makers to cope with unexpected events, caused for example by unusual values of some input flows.
- Unstructured decisions. A decision is said to be unstructured if the three phases of intelligence, design and choice are also unstructured. This means that for each phase there is at least one element in the system (input flows, output flows and the transformation processes) that cannot be described in detail and reduced to a predefined sequence of steps. Such an event may occur when a decision-making process is faced for the first time or if it happens very seldom. In this type of decisions the role of knowledge workers is fundamental, and business intelligence systems may provide support to decision makers through timely and versatile access to information.
- Semi-structured decisions. A decision is semi-structured when some phases are structured and others are not. Most decisions faced by knowledge workers in managing public or private enterprises or organizations are semi-structured. Hence, they can take advantage of DSSs and a business intelligence environment primarily in two ways. For the unstructured phases of the decision-making process, business intelligence tools may offer a passive type of support which translates into timely and versatile access to information. For the structured phases it is possible to provide an active form of support through mathematical models and algorithms that allow significant parts of the decision-making process to be automated.
Sometimes situations may arise where the nature of a decision cannot be easily identified unambiguously. When facing the same problem, such as establishing the sale price of a product, different decision makers operating in different organizations may come up with dissimilar choices. For example, a first decision maker may believe that the best sale price can be obtained by comparing cost and price demand elasticity curves. As a consequence, such decision maker may consider the choice phase of the decision-making process as structured. By contrast, a second decision maker may believe that the elasticity curve does not reflect all the factors influencing the response of the market to price variations since some of these elements cannot be quantified. Depending on their scope, decisions can be classified as strategic, tactical and operational.
- Strategic decisions. Decisions are strategic when they affect the entire organization or at least a substantial part of it for a long period of time. Strategic decisions strongly influence the general objectives and policies of an enterprise. As a consequence, strategic decisions are taken at a higher organizational level, usually by the company top management.
- Tactical decisions. Tactical decisions affect only parts of an enterprise and are usually restricted to a single department. The time span is limited to a medium-term horizon, typically up to a year. Tactical decisions place themselves within the context determined by strategic decisions. In a company hierarchy, tactical decisions are made by middle managers, such as the heads of the company departments.
- Operational decisions. Operational decisions refer to specific activities carried out within an organization and have a modest impact on the future. Operational decisions are framed within the elements and conditions determined by strategic and tactical decisions. Therefore, they are usually made at a lower organizational level, by knowledge workers responsible for a single activity or task such as subdepartment heads, workshop foremen, back office heads.
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