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HOW TO ANALYZE DECISION-MAKING PROCESS

HOW TO ANALYZE DECISION-MAKING PROCESS

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Part of a manager’s role is having to make a series of large and small decisions. Reaching the right decision in every situation is an ambition that is well worth striving to achieve. 

Defining Decisions

A decision is a judgement or choice between two or more alternatives and arises in an infinite number of situations from the resolution of a problem to the implementation of a course of action. Managers of people, by definition, must be decision-makers.

Who makes decisions?

A decision is a choice between a variety of alternatives, and a decision-maker is whoever makes such a choice. A decision can be made instantly but more often involves the decision-maker in a process of identification, analysis, assessment, choice, and planning.

To arrive at a decision, a manager must define the purpose of the action, list the options available, choose between the options, and then turn the choice into action. Decisions and the process of decision-making are fundamental to all management processes – just as they are to everyday life.

Categorizing Decisions

The various types of decision a manager have to make include routine, emergency, strategic, and operational. Many decisions are routine: the same circumstances recur, and when they arise you choose a proven course of action. Some situations, however, are without precedent – you make the decision on the spot as events unfold. This is emergency decision-making and can take up most of a manager’s time.

The most demanding form of decision-making involves strategic choices: deciding on aims and objectives, and converting these into specific plans, or sub-decisions, is a manager’s most important task. Operational decisions, especially those concerned with “people’s problems” (including hiring and firing), require particularly sensitive handling.

Breaking Down the Process

Reaching a decision involves a methodical thought process. The first step is to identify the exact issue that is being tackled and to prioritize objectives. An analysis of the situation will reveal those options that are impossible or impractical to implement, leaving a range of alternatives for more detailed assessment. At this stage, the views of others may be enlisted. The advantage and disadvantages of each course of action should be carefully evaluated, keeping the ultimate goal in the forefront. Finally, a plan can be devised to show how the decision will be carried out.

ANALYZING THE DECISION PROCESS

Identify IssuesWhat exactly has been decided?
Undertake AnalysisWhat are the alternatives?
Evaluate OptionsWhat are the pros and cons?
Identify ChoicesWhat alternative is the best?
Implement PlansWhat action needs to be taken?

 

 Evaluating Solutions

Sometimes the risks involved in a decision can be reduced by testing, either in the marketplace or by simulation. For example, if a new product in the market has a problem – it has missed its target and is losing money, says – you can look at some possible solutions and simulate the financial outcome of each.

Closing production down at once to prevent further financial loss;

Carrying on marketing the product with renewal vigour but along the same lines;

Replacing the management team and having them review the marketing campaigns;

Redesigning the product and starting the campaign from scratch;

Selling the product to another company and developing a new product.

The correct decision in such an instance was to redesign the product and start again, as that offered the best for the long-term future, with acceptable costs in the short-term.

Understanding Risks

Most decisions involve an element of risk, though some are less risky than others. Sometimes, even when theoretical options exist, their disadvantages are so great that there is no real alternative. This may arise from a bad original decision.

For example, a company has overstretched itself financially by deciding to invest in a new factory. It could decide to halt the project, but only at the risk of immediate financial collapse. That may be averted if the new plant eventually meets its target. Therefore to retreat is riskier than to proceed. Also, remember to watch for knock-on risks. Cutting staff may seem a safer decision, but not if it risks a deterioration in customer service.

Tips

Examine every alternative closely before making a decision.

If you find that previous decisions are still workable, make use of them.

Make long-term decisions with the short-term in mind.

Change decisions that are no longer appropriate.

Consider the implications of each decision – they can be huge.

Try to foresee and prepare for any changes in a situation.

Always ask what can go wrong when you are making a decision.

Always consider all possible outcomes when making a decision.

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