How to make good decisions,
with James Manktelow & Amy Carlson.
Imagine that your company has been expanding rapidly over the past 12 months. Sales are up 50 percent, but costs and overheads have also increased, so your operating profit has fallen. Decisions need to be made – and fast! But first you’re going to need to consider your options...
We make decisions every single day. Some are simple, others are more complex.
Some of your decisions will be so routine that you make them without giving them much thought. But difficult or challenging decisions demand more consideration. These are the sort of decisions that involve:
When you’re making a decision that involves complex issues like these, you also need to engage your problem-solving, as well as decision-making skills. It pays to use an effective, robust process in these circumstances, to improve the quality of your decisions and to achieve consistently good results.
This article outlines one such process for combining problem-solving and decision-making strategies when making complex decisions in challenging situations.
In real-life business situations, decisions can often fail because the best alternatives are not clear at the outset, or key factors are not considered as part of the process. To stop this happening, you need to bring problem-solving and decision-making strategies together to clarify your understanding.
A logical and ordered process can help you to do this by making sure that you address all of the critical elements needed for a successful outcome.
Working through this process systematically will reduce the likelihood of overlooking important factors. Our seven-step approach takes this into account:
Let’s look at each of these steps in detail.
This process will ensure that you make a good decision in a complex situation, but it may be unnecessarily involved for small or simple decisions. In these cases, focus on the tools in Step 5.
Decisions can become complex when they involve or affect other people, so it helps to create a constructive environment in which to explore the situation and weigh up your options.
Often, when you are responsible for making a decision, you have to rely on others to implement it, so it pays to gain their support. If it’s most appropriate to make the decision within a group, conduct a Stakeholder Analysis to identify who to include in the process. To build commitment from others, make sure that these stakeholders are well represented within your decision-making group (which will ideally comprise five to seven people).
If you’re not sure how much say other people should have in the final decision, use the Vroom-Yetton-Jago Decision Model to decide whether to consult them or to give them a vote.
To avoid groupthink , encourage people to contribute to the discussions, debates and analysis without any fear of the other participants rejecting their ideas. Make sure everyone recognizes that the objective is to make the best decision possible in the circumstances – this is not the time for people to promote their own preferred alternative.
The Charette Procedure is a systematic process for gathering and developing ideas from many stakeholders. Alternatively, consider using The Stepladder Technique to introduce more and more people to the discussion gradually, while ensuring that everyone gets heard.
Before you can begin to make a decision, you need to make sure that you fully understand your situation. It may be that your objective can be approached in isolation, but it’s more likely that there are a number of interrelated factors to consider. Changes made in one department, for example, could have knock-on effects elsewhere, making the change counter-productive.
Start by considering the decision in the context of the problem it is intended to address. Use the 5 Whys technique to determine whether the stated problem is the real issue, or just a symptom of something deeper. You can also use Root Cause Analysis to trace a problem to its origins.
Once you've uncovered its root cause, define the problem using Appreciation to extract the greatest amount of information from what you know, and Inductive Reasoning to draw sound conclusions from the facts. You can also use the Problem-Definition Process to gain a better understanding of what’s going on.
As well as this, consider using CATWOE to explore the problem from multiple perspectives, and to make sure you’re not missing any important information.
The wider the options you explore, the better your final decision is likely to be.
Generating a number of different options may seem to make your decision more complicated at first, but the act of coming up with alternatives forces you to dig deeper and look at the problem from different angles.
This is when it can be helpful to employ a variety of creative thinking techniques. These can help you to step outside your normal patterns of thinking and come up with some truly innovative solutions. Our Creativity Tools page has a comprehensive set of tools and techniques that can help you generate great ideas.
Brainstorming is probably the most popular method of generating ideas, while Reverse Brainstorming works in a similar way, but starts by asking how you can achieve the opposite outcome from the desired one and then turning the solution on its head.
Other useful methods for getting a group of people producing ideas include the Crawford Slip Writing Technique and Round-Robin Brainstorming . Both are effective ways of ensuring that everyone's ideas are heard and given equal weight, regardless of their position or power within the team.
Don’t forget to consider how people outside the group might influence, or be affected by, your decision. You can do this by using tools like the Reframing Matrix , which uses 4Ps (Product, Planning, Potential, and People) as a way to gather different perspectives.
You can also ask outsiders to join the discussion, or use the Perceptual Positions technique to encourage existing participants to adopt different functional perspectives (for example, having a marketing person speak from the viewpoint of a financial manager).
If you have very few or unsatisfactory options, try using Concept Fans , to take a step back from the problem and approach it from a wider perspective, or Appreciative Inquiry , to look at the problem based on what's "going right" rather than what's "going wrong." This can help when the people involved in the decision are too close to the problem.
When ideas start to emerge, try using Affinity Diagrams to organize them into common themes and groups.
When you're satisfied that you have a good selection of realistic alternatives, it’s time to evaluate the feasibility, risks and implications of each one.
Almost every decision involves some degree of risk. Use Risk Analysis to consider this objectively by adopting a structured approach to assessing threats, and evaluating the probability of adverse events occurring – and what they might cost to manage.
Then, prioritize the risks you identify with a Risk Impact/Probability Chart , so you can focus on the ones that are most likely to occur.
Another way to evaluate your options is to consider the potential consequences of each one. The ORAPAPA tool helps you evaluate a decision’s consequences by looking at the alternatives from seven different perspectives. Or you could conduct an Impact Analysis or use a Futures Wheel to brainstorm "unexpected" consequences that could arise from your decision.
Other considerations are whether your resources are adequate, the solution matches your objectives, and the decision is likely to work in the long term. Use Starbursting to think about the questions you should ask to evaluate each alternative, and assess their pros and cons using Force Field Analysis or the Plus, Minus, Interesting approach.
Weigh up a decision’s financial feasibility using Cost-Benefit Analysis . Our Bite-Sized Training session on Project Evaluation and Financial Forecasting can also help you evaluate promising financial alternatives using a range of effective techniques such as NPVs and IRRs.
Once you’ve evaluated the alternatives, the next step is to make your decision. If one particular alternative is clearly better than the rest, your choice will be obvious. However, if you still have several competing options, there are plenty of tools that will help you decide between them.
If you have various criteria to consider, use Decision Matrix Analysis to compare them reliably and rigorously. Or, if you want to determine their relative importance, conduct a Paired Comparison Analysis to decide which ones should carry the most weight in your decision.
Decision Trees are also useful when choosing between different financial options. These help you to lay options out clearly, and bring the likelihood of your project succeeding or failing into the decision-making process.
If your decision is being made within a group, there are plenty of excellent tools and techniques to help you to reach a group decision .
If the decision criteria are subjective, and it's critical that you gain consensus, Multi-Voting can help your team reach an agreement.
When anonymity is important, decision-makers dislike one another, or there is a tendency for certain individuals to dominate the process, use the Delphi Technique to reach a fair and impartial decision. This uses cycles of anonymous, written discussion and argument, managed by a facilitator . Participants do not meet, and sometimes they don't even know who else is involved.
If you're working with an established team, use Hartnett's Consensus-Oriented Decision-Making Model to encourage everyone to participate in making the decision. Or, if you’re working with several different teams, or a particularly large group, assign responsibility for each stage of the decision-making process with Bain's RAPID Framework , so that everyone understands their responsibilities and any potential in-fighting can be avoided.
With all the effort and hard work you’ve already invested in evaluating and selecting alternatives, it can be tempting to forge ahead at this stage. But now, more than ever, is the time to "sense check" your decision. After all, hindsight is great for identifying why things have gone wrong, but it's far better to prevent mistakes from happening in the first place!
Before you start to implement your decision, take a long, dispassionate look at it to be sure that you have been thorough, and that common errors haven't crept into the process.
Your final decision is only as good as the facts and research you used to make it. Make sure your information is trustworthy, and that you’ve done your best not to "cherry pick" data. This will help you avoid confirmation bias, a common psychological bias in decision making .
Discuss your preliminary conclusions with important stakeholders to enable them to spot flaws, make recommendations, and support your conclusions. Listen to your own intuition, too, and quietly and methodically test assumptions and decisions against your own experience. If you have any doubts, examine them thoroughly to work out what’s troubling you.
Use Blindspot Analysis to review whether common decision-making problems like over-confidence, escalating commitment, or groupthink may have undermined the process. And consider checking the logical structure of your process with the Ladder of Inference , to make sure that a well-founded and consistent decision emerges at the end.
Once you've made your decision, you need to communicate it to everyone affected by it in an engaging and inspiring way.
Get them involved in implementing the solution by discussing how and why you arrived at your decision. The more information you provide about risks and projected benefits, the more likely people will be to support your decision.
If people point out a flaw in your process as a result, have the humility to welcome their input and review your plans appropriately – it’s much better to do this now, cheaply, than having to do it expensively (and embarrassingly) if your plans have failed.
There are very many tools and techniques that you can use as part of making a good decision. If you use them all, however, you could wind up spending a very long time making a very small decision. Pick and choose tools appropriately, depending on the nature and scale of the decision you want to take.
Although problem solving and decision making are different processes, it is often necessary to combine them when making a complex decision.
Systematically incorporating problem-solving and decision-making tools can help you make fully-informed decisions, either individually or as part of a group. The seven-step strategy is:
There are a number of skills involved in making a good decision. Take our How Good is Your Decision-Making? quiz to find out how well you're doing now!
Think about an upcoming decision you have to make. How could this seven-step process help organize your own decision-making process?
Next time your team has to make a decision, use this seven-step approach to streamline the process.
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