The United Nations’ Millennium Project, “The Capacity to Decide”, identified decision-making as one of top 15 global challenges facing humanity today! It is easy to understand why decision-making is viewed with such acclaim, as most monumental public and private sector events and interactions, investments, resource allocations, and control decisions are ultimately determined by woman and men in leadership and managerial roles.
Successful organizations function with skilled and expereienced people continually making smart and appropriate decisions and driving positive and value-add outcomes. Managers plan, organize, staff, lead, and control, their areas of responsibility, by executing workable and pragmatic decisions. Lesson-learned from the 20th century and current 21st century is testimony that no business can reach its full potential without managers making required decisions to support achievement of approved strategies and associated financial goals on a timely basis.
In psychology, decision-making is deemed as the cognitive process supporting the selection of a belief or a course of action among several different potentials. Decision-making is the process of identifying and choosing alternatives based on the values, favorites and beliefs of the decision-maker. Decision-making is accordingly a human event which can be rational or irrational and based on explicit and/or tacit knowledge and personal biases.
Continually making good decisions is a technique that must be learned as it is not something with which we are innately born. In simple terms, it is a formalized process based where the outcome is influenced totally by the decision-maker’s life experience, innate knowledge, insights and beliefs. Personal experiences can sometimes be an ineffective tutor that imparts more bad than good habits, as business decisions generally vary based on context, supporting information, obstacles and limits.
Decision-making is referenced within the human behavior and performance areas as outlined below:
Psychological: examine individual decisions in the context of a set of needs, preferences and values the individual has or seeks.
Cognitive: decision-making process regarded as a continuous process integrated in environmental interactions.
Normative: analysis of individual decisions concerned with the logic of decision-making, communicative rationality, and the invariant choice it leads to.
It is a priority for successful companies to make rapid, knowledge-based, and high-quality strategic and tactical decisions that support their corporate strategic framework. The key responsibility of business managers, in most industry environments, is above all, to make good decisions on an ongoing basis.
Managers at all organizational levels are decision-makers, however, the manner how a manager approaches the decision-making process varies based on their position within the organizational hierarchy. To successfully climb the management ladder, managers need to acquire new skills and behavior to modify the manner they use information and create and evaluate strategic and tactical choices.
The most clearly-troubling situations can usually be identified as symptoms of underlying problems. These symptoms all indicate that something is wrong within an organizational activity, but they don’t identify root causes. Managers need to attack symptoms head-on by working diligently to uncover the factors that cause the symptoms.
Often, time pressures cause managers to move forward after consideration of limited or the most obvious alternatives. Successful problem solving requires thorough and detailed assessment of the challenge, and a quick answer may not result in an appropriate answer and solution. Thus, managers should think through and examine all supporting information and reasonable alternative solutions to a single problem before making a final decision.
Managers predisposed with personal biases lose sight of the bigger picture leading to the absence of total objectivity in decision-making. They typically make poor decisions on complex and difficult issues with the intention of advancing their own personal agenda and career ambitions. Poor decision-making produces an acrimonious cycle that reinforces an already present anxiety about decision making!
Managers that are not ready for leadership roles and prone to fall into the trap of making bad decisions, generally exhibit the below behavioral patterns:
- Addicted to corporate politics
- Can’t see the forest for the trees
- Don’t trust themselves to lead
- Failure to communicate the what, where, when, and how associated with their decisions
- Having no strategic alignment
- Lack clarity of purpose
- Mismanage resources (human and financial)
- Not anticipating unexpected events
- Place too much emphasis on past experiences
When we think of what makes a successful leader, one trait that usually comes to mind is decisiveness. We do not envision successful leaders standing around appearing ambiguous and uncertain. Instead, we view leaders as men and woman who can quickly arrive at the most appropriate decisions and clearly communicate the supporting details to the involved stakeholders.
Successful managers recognize and appreciate how to balance ‘emotion with reason’ and make decisions that positively impact their employees, customers and stakeholders without reliance on negative personal bias. Making good decisions in problematic conditions is no small feat as these types of decisions typically involve change, doubt, anxiety, stress, and unfavorable responses of others.
Effective managers know when to move swiftly and progress with the available information, versus when to take more time and gather additional information. When managers choose to pursue additional information, they must also know when to conclude their search and move ahead. While a large amount of information may be desirable in a perfect world, this activity typically expends unnecessary employee production time and the vast amount of information may be paralyzing to analyze.
The characteristic of good business decision-making managers includes:
- Decision-making choose implies freedom to select from among alternatives without coercion and implies uncertainty about final outcomes.
- Managers need to evaluate all available alternatives to identify the best alternative. As decision making is purposeful, there may just be a decision not to make a decision.
- Decision making is a human and social process and involves the intellectual abilities, intuition, subjective values and judgment.
- Decision making is an intellectual or rational process and involves extensive deliberation and thoughtful consideration of various factors influencing the ultimate choice.
- Decision making is related to the situation or the surrounding environment. A manager may take one decision in a situation and an opposite decision in a different situation.
- Decision making is a pervasive management function and performed by managers though the nature of decisions may differ from one organizational level to another.
The Business Decision-Making Model
The business decision-making model is a step-by-step technique allowing managers to solve problems by gathering and weighing evidence, examining alternatives, and choosing an appropriate path forward. The use of a step-by-step decision-making model support make more effective, deliberate and, thoughtful decisions by formally organizing relevant information and defining alternatives.
This below decision-making model shows a logical structured methodology for decision-making.
- Identify and quantify problem / opportunity
- Gather relevant information evidence
- Weigh evidence within organizational context and evaluation criteria
- Identify affected parties (stakeholders)
- Identify current and future consequences of problem / opportunity
- Brainstorm and think creatively about potential decision actions
- Identify potential decision alternatives
- Choose among decision alternatives
- Take action and implement decision selected
- Review decision and projected values (financial and non-financial)
- Modify original as required