7 Steps of the Decision-Making Process
Decision-making is a cognitive process that helps people solve problems by scrutinizing alternative options and determining the best route to take. In simple terms, it is an act of making a choice among available options. As human beings, we make many decisions in our day-to-day lives. From what to eat for dinner to in which school to put your child in, to what assets to invest in, which car to buy, whom to hire and whom to fire, and many more- we have to go through the decision making process almost every second in a day. Decision making is possible when there are two or more options to solve a single difficulty or problem. While it may seem easy for many people, this problem-solving approach of choosing a particular course of action among numerous alternatives can be daunting.
If you think that your poor decision-making capability is lagging behind, you need to understand that there are several steps in the decision-making process that you must adhere to in order to make the right choice.
With that said, in this post, we will discuss the decision-making process and the crucial steps involved.
Let’s get started.
What is the Decision Making Process?
Decision making is one of the most basic yet significant management skills for all of us to have. And it can differ from person to person. Making decisions that are based on careful analysis of numerous circumstances especially in a timely manner is critical. Therefore, it shouldn’t be procrastinated or taken in haste.
Making decisions can be hard, especially when the odds are not in your favor. But, by following the below well-structured process or steps in decision making, you will be able to make influential decisions.
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#1 Determining the Decision to be Made
First things first, you need to identify the decision to be made. It revolves around the following factors:
- New opportunity or the problem on hand
- Why you need to solve that problem
- How the solution will impact you, others or an entire organization
- Criticality and urgency of the decision
If you misidentify the problem or if it is too broad, it can lead to poor decisions. Identifying the problem at its core is essential. Defining the nature of the decision and the problem will help you in making an accurate decision in a timely manner. It will ensure that your goals are met at the end of the process.
Suppose the company you work for is facing troubles regarding low sales. Here the problem is identified as ‘low sales.’ You have identified the problem here, but you need to understand the criticality and urgency of the decision first.
There are two primary factors that stem a decision – desire to exploit a new opportunity and need to correct a problem. Problems are nothing but different situations or circumstances that need to be addressed promptly.
Problems arise from the following sources:
- New opportunities that make you think whether to move on (upgrade) or stick with the existing ones
- Competitive threats
- Deviation from an already established plan
- Decline in performance
- The disturbance caused by unpredictable factors
If you are able to identify the problem along with the decision you need to make, it will be easy for you to jump to the next step in decision making.
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#2 Diagnosing Problem and Collecting Information
Once you have recognized the problem, you must define the nature of the problem. Diagnosing the problem will help you understand the root cause, and therefore, you will be able to gather as much information as possible to find a solution.
However, sometimes problems are diagnosed at very superficial levels, and decisions are made to treat their symptoms rather than the real causes.
Consider this example. Suppose you may conclude that the decline in sales in your organization is due to the lack of effort by the sales team. You may then make the decision to retrain your sales team. But the real cause of the problem may be that the competitors are offering the same product at a low rate or your product has become outdated.
A simple approach in this step to attain maximum credibility is to ask the right questions. This includes seeking out where you can get accurate information on the problem.
For this, you will have to look at the decision both internally and externally and make some self-assessments based on the following questions:
- When does the problem appear to arise?
- Where does the problem appear to arise?
- What is the evidence that a problem really exists?
- Why did the problem occur?
- What factors, processes, people, etc. are related to the problem?
- Who is most involved with the problem?
- How urgent is the problem?
Once you are successfully able to diagnose the problem, it is always worth checking it with people who are not involved in the situation. Talk to people, especially those who will not share the same assumptions as you. This will lead to a more robust diagnosis.
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#3 Identifying the Alternatives
After defining and diagnosing the problem, you need to develop alternative solutions. In simple terms, you will have to establish some decision-making criteria based on which you will be making those decisions. Therefore, it is critical to come up with a range of options.
Continuing with the example in the second step, you can work on having different alternatives to tackle the problem of low sales in your organization. Given that you have identified its root cause as an outdated product. Now, you have two options here – either reintroduce your existing product with new features or retire the product and come up with a completely new product. You need to work on both the options to determine which one will work best considering the situation.
The primary objective of developing alternative solutions is to be able to make the best possible decision out of it. The benefit of identifying alternative solutions is that it allows you to come up with original and creative solutions to the problems. Opting for the alternative based on the decision criteria will enhance the value of your decision.
Some of the prominent decision criteria include:
- Financial benefits
- People needed
- Physical resources needed
- Risk (certainty of the desired outcome)
- Appropriate timescale
- Compatibility with home/business/self/organization
- Acceptability to others
- How it plays out in the future
These decision criteria will help you in developing the alternatives. For example, if you are deciding which refrigerator to purchase, you may choose to base your decision upon energy saving, cost, functionality (double door, single door, etc.), and maintenance.
When you have established the decision criteria, their relative importance can be assessed.
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#4 Choosing the Best Type of Alternative by Weighing the Evidence
Draw on your emotions and gather information and imagine how it works if you carry out each of the alternatives until the end. Simply put, determine how the situation will end up after taking and implementing all the considerations (alternatives).
Suppose you worked on both the alternatives – creating a new product and modifying the existing one. When you analyzed both the alternatives, you realized that re-launching the existing product with certain modifications might help the brand regain its value. However, you think that since many others are offering the same product, why not introduce a new one to the market.
Evaluate each of the scenarios and determine whether the problem identified in step 1 is being resolved effectively and timely. As you go through the process, you will begin favoring certain alternatives. In the process, you will find alternatives that seem to have a higher potential for solving your problem. So, what you have to do is list the options in priority order, based on your preference and value system.
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#5 Evaluating the Alternative
Once you have considered all the evidence and made a list of the potential alternatives on a priority basis, you are ready to choose the alternative that best suits your requirements.
If possible, you can choose a combination of alternatives. Basically, you will choose the alternative that you placed on top of the list. But, still, it is important that you evaluate the priority of the alternatives before making the final call.
Imagine the different consequences it will bring when you choose this particular alternative. Further, determine whether there are ways to modify this alternative to make it better.
Consider the example. You may think that re-launching the existing product with some changes will help in recovering the lost sales. On the other hand, the new product you are talking about has the potential to change the complete market scenario. So, you have finally decided to go with the launch of the new product.
During this step in the decision-making process, you will have to consider the potential path that you will take. Since you have already chosen the alternative, it will be easy for you to determine the path for implementation.
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Finally, it is time to take action. Based on all your thinking, analysis, and evaluation it’s now time to implement the decision. Remember, whether the decision you have made is correct or not will only be determined if you implement it.
Continuing from the example, now that you know you have to launch a new product in the market, you have to take certain steps in the process. From the manufacturing to building its presence even before it hits the market shelves, marketing, etc. all need to be done in advance.
There are three factors in play for proper implementation of the decision:
- Correct timing of the execution since it minimizes the resistance to change.
- Acceptance of decision by people involved in the process.
- Proper and effective communication of the decision to the people involved in the process.
Act on your decision without any delay and uncertainty, after all; you have put in so much effort.
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#7 Review your Decision
How did the decision of launching a new product act out? Was it in your favor? Or did it go sideways? Did it solve your problem?
Once you have implemented it, scrutinize the consequences of your decision. If it wasn’t what you expected, then you chose the wrong alternative.
The Decision-making process is quite a hassle, and it must be made with a clear mind and all the evidence in hand. Moreover, it is vital to review your decision; it doesn’t matter whether it went as you proposed it would or not.
If the decision you made was ineffectual, then you need to evaluate what went wrong. This will help you in correcting your approach.