What is the decision-making process?
For business growth and management, this question has enormous meaning and benefits.
Why is it important?
No matter which business field you are working in ( finance, marketing, sales, project management…), you have to make an array of decisions on a daily basis.
The difference between poor and effective problem-solving come from how well we understand and implement the process of making decisions.
On this page, you will learn and get:
- What does decision-making mean?
- What are the main steps of the decision-making process?
- Decision-making strategies to improve problem-solving.
- Infographic in PDF for free download.
Decision-Making Process in Business: A Step-by-Step Guide.
Believe or not, understanding the decision-making process can bring you a lot of benefits and can make you a successful leader or manager.
Simply, decision-making means to select a choice from available options.
To make decisions every day is a part of our personal and business life! We can not change that. However, we can change the way we make choices, we can learn how to make better decisions.
Let’s see the main steps of the decision-making process.
Step 1: Identification of The Problem
Decisions always are a result of a problem, needs or situations.
In many cases, the exact problem is not clear. You have to make it clear in order to find the right decision for the situation.
Many people underestimate this first step because they think defining the problem is something obvious and there is no need to spend time on it.
However, they are wrong! Why?
Albert Einstein says, “If I were given one hour to save the planet, I would spend 59 minutes defining the problem and one minute resolving it.”
This quote does illustrate an important point: Well-defined problems are easier to solve!
It brings us to the question “How to identify a problem?”
Here are some tips and important methods:
Ask yourself questions related to the problem such as:
- What are the details of the problem?
- Is it a new or an old problem?
- Who is involved in the problem?
- How important is it?
- Why should the problem be solved?
- What will be the consequences if the problem is not solved?
Other tips and points
- Explore carefully the situation
Make a clear picture of what is happening and why it is happening. List down the main points and aspects of the situations.
- Break down the problem into smaller elements
This tip is helpful especially when it is a complex situation with different issues.
- See the problem from different perspectives
Looking at it with different eyes is an important way to have instant insight on new directions. For example: If you are a businessman, always try to see the problem from the customer point of view.
- Define the causes
List and organize the causes of the problem. This will help you to find the solution. There is a wide range of possible causes such as people, changes in the environment, lack of resources, rules, etc. Make sure you find the right causes because this is crucial for the decision-making process.
Step 2: Gathering Information
First, let’s clarify something. It is not just gathering information that is important here. You have to gather the right information in order to create a successful decision-making process.
Information is a great power! If you gather the right information, you have a better chance to resolve the problem.
How to find the right information?
You have to do research! In the researching process there are some important tips you should know:
- Determine exactly what you want to know.
This will save your time. The more precise you are at the beginning, the easier you will find what you are searching for.
- Clarify who will search the information.
You or someone else in the company? One person or several people will do the research?
- List down all possible sources of information.
Examples here are the internet, books, people, other companies or organizations, your own notes and experiences, etc.
- Determine which are the best sources of information and which are just helpful.
- What are the methods and ways of collecting information?
Some of the most popular methods are surveys, public forums, magazines, and premium statistical data.
- Determine the gaps in your knowledge and try to fill these gaps.
- Think about who will use this information.
Only you or some of your colleagues and managers?
- Think about how to present the information in the most easier to understand and effective way.
Effective searching requires a clear focus and flexibility to use different search tools.
Step 3: Find out Alternatives
If you have all the information you need, it is time to move on and to find out paths of action.
No matter what the problem is, there are many alternatives available!
Find out a list of them. This will help you to look at the problem in different ways.
Coming up with more than one option enables decision makers to see which one is the right solution.
How to identify possible alternatives?
When it comes to gather alternatives, brainstorming is a well-known and effective method widely use in the business. You need to use brainstorming properly to hold on your successful decision-making process.
Brainstorming encourages people to come up with ideas that sometimes sound a little bit crazy. One or some of these ideas may be the solution you are searching for.
When you use brainstorming:
- Decide what is more appropriate – individual or group brainstorming.
- Avoid criticizing or rewarding ideas. This is not the right time about that. Every person and every idea has equal worth.
- Provide a free and open environment that encourages everyone to give ideas.
- Choose a comfortable place to sit and think.
- Minimize distractions so that you and other participants can focus on the problem.
Step 4: Evaluation of Alternatives
Thanks to the previous step, you have an array of possible alternatives. Now, you have to evaluate each option without prejudice!
This step allows you to see advantages and disadvantages of each option in detail. Here you have to compare and think about the opportunities that each solution provides.
How to evaluate options in the most effective way?
- Clarify each alternative. Describe each option carefully and highlight any differences. This will give you the chance to find any misunderstandings early.
- Make assumptions. Ask yourself what will happen if a particular option is chosen for the solution of the problem.
- Make comparisons. Compare your options step-by-step. Use equal criteria for each possible solution.
- Consider weaknesses of each plan. What are the negative consequences? Are they important?
- Think about the costs? What are the costs for each action plan? Is it worth the price?
For your help and deeper analyze, there is a range of techniques for evaluation. Some of the best of them are:
- Marginal Analysis
According to Investopedia, “Marginal analysis is an examination of the additional benefits of an activity compared to the additional costs of that activity.” This technique is widely used in the decision-making process by companies in order to maximize their profit.
- Cost Effectiveness Analysis
This is an improvement of the traditional marginal analysis. In this case, the you have to consider the cost-benefit analysis. The alternatives that provide the maximum benefits at the minimum cost are considered for best options.
In our previous post, we describe the main decision-making tools and techniques in details.
Step 5: Select the Best Alternative
Once you go through from Step 1 to Step 5, you can make an informed decision.
Selecting the best action plan is a crucial step in the decision-making process. You have to consider some main points here:
- List down the most appropriate and preferred alternatives from the previous step.
- Which are the risks involved in each of them?
- What problems may create each of the preferred options?
- Do you have the resources needed to implement the plans?
- How much time is needed and which alternatives meet the deadline?
Sometimes, it is better to choose a combination of alternatives. It depends on the situation.
Step 6: Implementation of The Decision
Finally, it is time to resolve the problem!
Convert the alternative you choose into a plan or a sequence of activities.
This step of the decision-making process requires a lot of things to do such as choosing the right activities, defining costs and responsibilities, expected difficulties, scheduling, etc.
The particular actions here depend on the size and complexity of the problem.
We are not going to explain this process in detail here because planning and implementing are a whole science. What is important here are some main tips and points:
Tips and points
- Make the decision clear for everyone who is involved in its implementation. The people in charge have to understand every aspect of the plan and their responsibilities. Good communication skills are what you need here.
- Find out what is the level of acceptance. Is the decision accepted and supported by colleagues? Do you need to put additional efforts to convince someone that the plan is effective?
- Make sure you have a team that “has your back,” and understand the goals of the plan.
- Schedule meetings to discuss progress. Present a list of tasks, goals, and achievements.
- Involve the upper management where appropriate. Keep them informed. This will allow them to be able to react better in a case of problems.
- Create a good communication environment. Give every participant a voice in the process.
Following these tips can help you maximize the success of decision-making process and implementation of the best option.
Step 7: Monitor and Evaluate the Results
It is a time to see the consequences of your decision!
This is the most exciting part of the decision-making process!
You have to experience the results of your decision and find out whether or not the problem is“solved”.
What is the most important here is the monitoring part. The monitoring allows you to review progress.
Here are the main points that can help you to do a successful monitoring process:
- Find out if goals are achieved or not. If not, then consider the following points.
- Is is necessary to change the deadlines?
- Are the goals still seem realistic?
- If it is necessary, change the priorities and focus on the achievement of the goals.
- If it is necessary, change the goals.
- Learn from the monitoring in order to improve future planning activities.
- Consider asking for help from high-level management or professionals.
The decision-making process is one of the most important activities for the business. The way you lead this process can destroy or bring enormous success to the company. Understanding the main steps of making decisions is crucial ability.
Decision-Making Strategies to Improve Problem-Solving
It is all about problem-solving!
We need to learn and follow the steps of the decision-making process in order to be able to resolve problems in the most effective way!
When we resolve problems, we want powerful decisions and sufficient results. We do our best and expect the best. With this in mind, analytical skills and good decision-making strategies are valuable assets for us.
Let’s see a list of simple but crucial strategies to use when we make business decisions:
- Define if the decision is easy to make or difficult.
Clarify what are the aspects and related problems to the situation.
- Do you need additional support?
In the most cases, the answer to this question is YES. It is always better to ask help when the problem is complicated. You can consult with high-level managers, colleagues, experts or someone who has resolved such a problem in the past.
- Make sure the goals are clear for you.
If you have completely clear goals, it will be easier for you to chose the best alternative and action plan.
- Make sure you have realistic expectations.
This is a crucial strategy. Many decisions and plans fail due to unrealistic expectations. Make a complete list of all negative consequences from your decision.
- Learn and use analytical skills.
Analysis skills are vital decision-making skills for effective decisions.
The analysis is about the ability to break problems into parts to see relationships, reasons, and factors. This is the basis for creating plans and finding right solutions. Analysis skills are a whole combination of abilities such as problem-solving skills, management skills, interpersonal skills, setting goals and more.
- Always use a list of Pros and Cons.
This is among the best decision-making strategies! This list will help you see more clearly the benefits and disadvantages of the different options and ideas.
- Never allow emotions and biases to influence your decisions.
We all are people with a huge range of emotions and some biases. It is so unprofessional to let them influence our business decisions. Not to mention that emotions can rule down the whole problem-solving process.
Understanding and implementing the decision-making process gives you more power and increases your chances for effective problem-solving. Business growth and career success depend on the way we make decisions!
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