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Whether you are deciding about getting a haircut today, building a multimillion-dollar plant, or buying a new camera, the steps in making a good decision are basically the same: Clearly define the problem at hand. List the possible alternatives. Identify the possible outcomes or states of nature. List the payoff (typically profit) of each combination of alternatives and outcomes. Select one of the mathematical decision theory models. Apply the model and make your decision. The first step is to define the problem. We use the Thompson Lumber Company case as an example to illustrate these decision theory steps. John Thompson is the founder and president of Thompson Lumber Company, ... Get Quantitative Analysis for Management, 13/e now with the O’Reilly learning platform. O’Reilly members experience live online training, plus books, videos, and digital content from nearly 200 publishers.
Get Mark Richards’s Software Architecture Patterns ebook to better understand how to design components—and how they should interact. It’s yours, free.Get it nowReading time: about 4 min Robert Frost wrote, “Two roads diverged in a wood, and I—I took the one less traveled by, and that has made all the difference.” But unfortunately, not every decision is as simple as “Let’s just take this path and see where it goes,” especially when you’re making a decision related to your business. Whether you manage a small team or are at the head of a large corporation, your success and the success of your company depend on you making the right decisions—and learning from the wrong decisions. Use these decision-making process steps to help you make more profitable decisions. You'll be able to better prevent hasty decision-making and make more educated decisions.
The business decision-making process is a step-by-step process allowing professionals to solve problems by weighing evidence, examining alternatives, and choosing a path from there. This defined process also provides an opportunity, at the end, to review whether the decision was the right one. 7 decision-making process stepsThough there are many slight variations of the decision-making framework floating around on the Internet, in business textbooks, and in leadership presentations, professionals most commonly use these seven steps. 1. Identify the decisionTo make a decision, you must first identify the problem you need to solve or the question you need to answer. Clearly define your decision. If you misidentify the problem to solve, or if the problem you’ve chosen is too broad, you’ll knock the decision train off the track before it even leaves the station. If you need to achieve a specific goal from your decision, make it measurable and timely. 2. Gather relevant informationOnce you have identified your decision, it’s time to gather the information relevant to that choice. Do an internal assessment, seeing where your organization has succeeded and failed in areas related to your decision. Also, seek information from external sources, including studies, market research, and, in some cases, evaluation from paid consultants. Keep in mind, you can become bogged down by too much information and that might only complicate the process. 3. Identify the alternativesWith relevant information now at your fingertips, identify possible solutions to your problem. There is usually more than one option to consider when trying to meet a goal. For example, if your company is trying to gain more engagement on social media, your alternatives could include paid social advertisements, a change in your organic social media strategy, or a combination of the two. 4. Weigh the evidenceOnce you have identified multiple alternatives, weigh the evidence for or against said alternatives. See what companies have done in the past to succeed in these areas, and take a good look at your organization’s own wins and losses. Identify potential pitfalls for each of your alternatives, and weigh those against the possible rewards. 5. Choose among alternativesHere is the part of the decision-making process where you actually make the decision. Hopefully, you’ve identified and clarified what decision needs to be made, gathered all relevant information, and developed and considered the potential paths to take. You should be prepared to choose. 6. Take actionOnce you’ve made your decision, act on it! Develop a plan to make your decision tangible and achievable. Develop a project plan related to your decision, and then assign tasks to your team. 7. Review your decisionAfter a predetermined amount of time—which you defined in step one of the decision-making process—take an honest look back at your decision. Did you solve the problem? Did you answer the question? Did you meet your goals? If so, take note of what worked for future reference. If not, learn from your mistakes as you begin the decision-making process again. Tools for better decision-makingDepending on the decision, you might want to weigh evidence using a decision tree. The example below shows a company trying to determine whether to perform market testing before a product launch. The different branches record the probability of success and estimated payout so the company can see which option will bring in more revenue. A decision matrix is another tool that can help you evaluate your options and make better decisions. Learn how to make a decision matrix and get started quickly with the template below. You can also create a classic pros-and-cons list, and clearly highlight whether your options meet necessary criteria or whether they pose too high of a risk. With these 7 steps we've outlined, plus some tools to get you started, you will be able to make more informed decisions faster. Explore additional strategies to help with your decision-making process. Learn more“One of the hardest decisions you’ll ever face in life is choosing whether to walk away or try harder- Ziad K. Abdelnour” That is very true as we constantly face dilemmas in situations related to our life, work, and so many other spheres. It could be extremely tricky in cases where you face conflicting situations between work and personal life, for example, and you don’t know which way to go. How to Master the Decision-Making Process in 6 StepsAs everyone faces this, we must understand how we can get out of such situations as a winner. What does it take to defeat what you have been dreading? What does the path to a winning conclusion look like? Well, we shall discuss all of this in this article so that no matter what circumstances you face, you do not lose out or give in. Let’s have a look at the points involved:
What is a Decision-making skill?Decision-making is your aptitude to comprehend your options and zero in on the best one. You will need to carry out a lot of research, data collection, and scrutinizing to make effective decisions that help you reach your desired output. While this is true for all areas of public life, it holds a great deal of significance in business. In today’s ruthless competition, the employees are to be at the top of their game consistently. This will happen only when they can make the right decisions at the right time. This means you will have to consolidate great thinking with quick thinking. To ensure smooth business operations, the staff must possess the critical characteristic to judge a situation and come up with impeccable solutions. If you have good decision-making skills, you can overcome almost all the challenges at your workplace, and catalyze the process of business growth. Example: William’s company has had to terminate one of its employees. The terminated employee presented his frustration in the form of social media posts by writing grievances about the company. It will soon be read by so many people, including aspiring candidates and CEOs of other businesses. What should be William’s next action so that it does not damage the firm’s reputation? Option 1: Ignore the posts and let them ride until the tide subsides. Option 2: Check if existing employees respond or react to the posts. What are their reactions? Does the terminated employee truly have a point? Option 3: Introduce a social media policy. Fix rules, terms, and conditions for terminated employees. Option 4: Take legal action against the nastiness of the terminated employee. William will have to decide which course to take to deal with such a situation. He gathers enough data, speaks to his advisors, and like many other similarly-sized firms, decides that he will go with Option 1. The team realizes it is possibly the last misadventure by an upset ex-employee. This is only one of the many plots businesses face where they must make a decision for successful sustenance. Let us move on to learn what importance does efficient decision-making hold for any business. Significance of Decision-makingThere are diverse roles in an organization, and a different task is assigned to each employee, depending on their job role. Each task has multiple solutions for achieving the desired outcome. While you may have a lot of options and workable scattered around you, you will need to be careful picking one of them. This is because not every alternative you come across will be efficient or feel right from all perspectives. Before determining the right option, ensure that you have considered all the aspects that will be affected once you make the decision. Some options may not be feasible, or some are not economical; alternatively, some may even take a long time to show results. So, simply put, to make the best decision in the company's interest, an employee should understand the objective, take a close look at all possible options, evaluate the strengths and weaknesses, and determine the best course of action. You can not only select the best option good decisions also lead you to ensure sustainability for your business. You can see how you or your managers have been performing and analyze their performance and productivity. Moreover, you can also work with your resources and bring out their optimum utilization. Innovate procedures and drive business growth. The benefits of decision making process are innumerable. Here is how an adept process of decision-making helps businesses: Importance of Decision MakingEssential Skills for Effective Decision-making processYou will need these skills to ascertain that they make every decision to benefit the company. Making good decisions requires a number of competencies. Here are some of the most important ones:
The Decision-making process in 6 StepsIt is now time we look at the detailed process of decision-making, what goes into it, and the 6 steps that will help you. Chin UpAdversities are a part of life; while getting bogged down by them is easy, it is essential to face them and stay composed. Taking a deep breath and maintaining your composure can take you a long way in the process. Decision-Making Process in 6 StepsThe idea is to not get stressed out. The higher the stress, the more it shall impact your decision-making capabilities. If you have already figured out a task that needs your skills or will require you to choose an option, it is wiser to soak in some positivity before you embark on the journey. When faced with challenges in business, you can consult your financial advisors or take help from legal advisors in the case it involves any legal actions to be taken. A simple team discussion or brainstorming can rescue you if it's something smaller. We all agree that one can make great decisions only when one has all the information related to the task/ assignment. Therefore, it is only obvious that you must gather all the related information and work on it to create a concrete foundation for your decision. Conduct extensive research to establish the facts pertaining to your goals. Perform a quantitative analysis, which further enhances your chances of getting to the right decision. Although critical thinking is common, avoid getting into an over-thinking mode, as that could do more harm than good. Let’s look at a scenario that requires a company to decide to safeguard its name by gathering enough data. Weigh all the Options at HandMany scenarios lead you to believe that you barely have any options to choose from. Yet, careful observation and a keen eye for detail will ascertain that it is not true. An example, here, could be of a company ABC that is trying to penetrate newer markets at different geographic locations. There are names of cities that are already shortlisted. It now has to make a decision to finalize on the market which will produce the best income. So, analyze all your information that presents the metrics that indicate the best location to offer the most profitable outcome. In short, weigh all your options before coming to finalizing them. Count on Expert AdviceEven if you have proved yourself as someone who has mastered the art of decision-making, never shy away from taking others’ suggestions, especially in situations where water runs deep. Take Expert Advice for Decision makingThere will always be areas in business that will catch you off guard, and you may find yourself underprepared. Do not get bothered by this. Instead of trying to arrive at solutions yourself, get a helping hand from team members or your seniors, or anyone who has expertise in the matter. We can sight an example in a hospital scenario where the surgeon discusses the options before surgery with other senior doctors. This not only ensures the best effort to achieve a positive result of the surgery but also helps the doctors exchange a lot of valuable information. This information could be further utilized in future surgeries by everyone. Experience is the Best TeacherMistakes and errors are inevitable in some situations. No matter how well you have performed and tried to avoid them, they can always occur when you least expect them. Let every defeat become a milestone that helps you move ahead with more confidence. Failures are nothing but great teachers. Analyze how your decisions have affected the presumed results. There will always be scenarios where similar decisions have given diverse results. Learn why that happened. Moreover, you can also take clues from others’ mistakes and learn from them. Consider an example of a newly-opened coffee house that analyzed the customer reactions to the neighboring outlet, which did not offer any local delicacies. The new café worked on this and, besides their unique recipes, also included locally-relished food items, which eventually gave them a higher footfall. Be RationalWhen you are about to finalize your decision, consider its short-term as well as long-term effects. Do not be overwhelmed by the situation. Be rational and try to ask yourself the questions that take you closer to what you set out to achieve. Ask questions like what will be the consequences of my decision in a year from now, 2 years from now, or 10 years down the line. Write down the answers you get for all of these. Analyze the impact and move ahead confidently with what you perceive apt. Types of Decision makingVarious ways lead you to make the right decision and derive the results you wish. Some of the ways to make a decision include:
Strategic Decision MakingIt involves drafting strategies to meet the end goals effectively. Example: How will an employee maintain the pace of work and quality of the output during a long-term project in the company? Creating short-term goals for long-term projects makes them more manageable. Moreover, it offers better clarity about the deliverables and the pace to be maintained. Conceptual Decision MakingIn this case, the decisions are made by implementing a concept in which the team firmly believes. Example: Jim's retail company has performed well during their first year of operation. In the next five years, he is looking forward to expanding the company. This new store is a risk, but he feels confident they will succeed, which will help them launch their brand nationwide. Behavioral Decision MakingThe type of decision-making process revolves around a person's personality, traits, or behavior. Example: Here’s an example of a situation an employee faces at their office: James knows that his boss or the manager is wrong about something. What does he do? Saying, “I’ll never point out my boss’s mistakes.”, may not reflect very wisely on James. Yet, this kind of situation requires him to be tactful and confident at the same time. So, he ensures he has the right choice of words. He finds the right time to communicate the error to his boss privately. This way, James ensures that he conveys it without being disrespectful or rude. All these are the major categories of decision-making. It is key for people to develop good decision-making skills to make the most of all the resources & information to make the best decisions for the business. Analytical Decision MakingAnalytical decisions are made by carefully curating all options and the data at hand. A lot of time and effort is invested in bringing up an appropriate decision. Example: ABC news agency is trying to figure out how they can reach a wider audience with their current advertising campaign. The marketing manager requests that each team leader create a report summarizing the numbers, including audience demographics. The marketing manager reviews each report and meets with the team leads. The meeting concludes with the marketing manager purchasing more add space on social media websites for the upcoming 3 months. Directive Decision MakingDecisions are taken using quick, decisive thinking in the directive decision-making style. An individual using this style steers clear of any ambiguous or contradictory ideas. How can Deskera Help You?Deskera People allows you to conveniently manage leave, attendance, payroll, and other expenses. Generating pay slips for your employees is now easy as the platform also digitizes and automates HR processes. Deskera PeopleKey TakeawaysLet's grab the key points from the article here:
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