Decisiveness might seem like a personal trait, but effective decision making is a skill that can be learned and improved like any other. Here is our guide to effective decision making to help you both at home and at work.
We make decisions every day – you won’t even be aware of most of them, but high-risk decisions are typically stressful and can be time-consuming to make. That’s why effective decision making can mean the difference between success or failure. Understanding decision-making frameworks can make a huge difference to your career, as well as your personal life and overall stress levels.
This article discusses effective decision-making. The principles can be used both in a personal environment as well as work. It will review:
- The 3 types of decision-making
- The 7 steps of decision-making
- Decision-making techniques
- Improving decision-making
- Decision-making skills
- Strategic, tactical and operational decision-making
- Demonstrating effective decision-making
- Decision making courses
What are the 3 types of decision making?
Whether as a professional in a business or in your private, personal life, we make decisions all the time. Although at first glance these choices might seem worlds apart, they do have some similarities in the way that we decide how to approach them.
1) Business decision making
Right from the conception of a business, decisions have to be made; what is the nature of the business, who is the target customer, where should the business be located? These are just some examples that show that making a decision can have lasting effects and therefore need to be thoroughly thought out. This mirrors important personal decisions such as where to live and which job or career path to take. The way we approach these decisions can be equally involved and complex. As you progress through your career, the types of decisions you make will have higher stakes and a bigger impact on more people, which is why it’s so important to make the right decisions, and ensuring that you have the right information to do so.
2) Personal decision making
Personal decisions are just as important as business decisions, but typically involve a much smaller number of people. However, because they involve the people closest to us and our private lives, they are often more impactful than some business decisions that we make. They ultimately determine who we are, who we have close to us, and our priorities in life. Your personal decisions include everything from what to have for lunch through to who to marry and where to live.
3) Consumer decision making
Consumer decision making can be in a personal or a business context – it covers everything from what type of milk you guy through to deciding which supplier to partner with for a project. Like business and personal decision making, it has its own set of factors and considerations that need to be balanced, such as budget vs. quality, and various unknowns when it comes to buying from somebody new.
What are the 7 steps of decision making as a core set?
It typically takes 7 steps to make a decision, regardless of the setting or decision type. The amount of time and focus spent on each will vary between situations.
Let’s look at these steps in detail, using the example of ‘finding information about effective decision-making’
With situations where it is not possible to try multiple solutions, great care and time must be taken during steps 2, 3 and 4 (research, generate and evaluate), to minimise risk. That might include a long pitching process or tender exercise at work, or prolonged information gathering to ensure you’re making your decision based on the best possible data.
Decision making techniques
Effective decision making techniques help you get through several stages of the decision making process effectively. That means providing sound solutions based on your information gathering, and evaluating those solutions well and fairly. People employ a range of decision-making techniques, and it’s best to try out a few to see what works best for you. Here are a few examples:
Affinity diagrams are used for grouping data based on their relationship to each other. The purpose of this technique is to help you make sense of a lot of information. The process is simple – write down each idea, group those that are related. This allows you to cluster or bundle ideas together, and then eliminate overlaps or see which area is the most popular/populated.
Cost/benefit analysis, is a methodical process of approximating the pros and cons of decisions to achieve the most cost-effective result. You can use this to mitigate against the negative impact of a decision, or during a decision of whether or not to do something based on the positive outcomes vs. the risks.
Decision making trees are simple yet effective models, similar to flow charts, that are used to visualise decisions and their consequences.
Heuristic methods problem-solve by creating estimates and ‘good enough’ decisions. It’s a flexible way of making a decision quickly, but isn’t as precise or detailed as other decision making models, but works in certain circumstances. For example, if ‘A’ didn’t work last time, it is unlikely to work this time therefore let’s decide to go with decision ‘B’.
Influence diagrams, or ID, can be used to see how two or more factors influence each other. Influence diagrams can include feedback loops. Although simple they can be a great way to understand how multiple factors can interact with one another.
Multiple criteria decision analysis, or MCDA, is often the preferred technique for complex decision making. MCDA divides the problem into sub-problems, making it easier for analysis and achieving a meaningful solution. An example of this is the Analytic Hierarchy Process, also known as AHP. This method uses mathematics and psychology to organise and analyse complex decisions by deconstructing the main problem into more easily understandable smaller problems and then organising them in a hierarchy based on a variety of aspects i.e. understanding, tangibility or priority.
Multi-voting is best used alongside brainstorming or affinity diagrams and is ideal when group decision making is required. The team will vote on the ideas generated to deliver group consensus. Trial and error is the least analytical method of decision making and is fairly uncommon in business, although more likely to occur peoples’ personal life. Essentially, you try something and if it does not work you try something else until it does. One example of using trial and error in business is through the use of subjecting panels of judges to product trials. Analysis of which product performs the best should lead to an accurate decision of which product to take to market.
How to improve decision making
No matter how informed you are, there is always room for improvement. Fortunately, there are lots of ways to a make more effective and efficient decision both at home and in the workplace.
Learning from experience is probably the most common, and in some ways, the most passive way to improve your decision-making abilities. Learning from your mistakes and figuring out which methods work and which do not through trial and error might seem a little counterintuitive in the short term, but in the long term, few things are more effective for improving your decision-making skills than learning from experience. However, for this method to be successful, you need to study why your decision worked or did not work and logically consider your own actions.
If you prefer to actively improve your decision making skills and ideally see results faster, there are a variety of options available to you. You could:
- Review your standard decision making processes and decide to try out something new from the list above – it may help you to review your options better or make more rational and thought-out decisions.
- Review your information gathering processes – a decision is only ever as good as the information that it’s based on. At work especially, we have a variety of data types and information sources available; expanding and improving how you get your information will help you make better decisions.
- Ask for advice from someone who is a good decision maker and ask them to explain their processes and information gathering tactics, which may differ from yours.
- Take a course on key things such as critical thinking, risk analysis, data analysis, decision making, and problem solving, which will all help your decision making skills.
A good exercise is looking at a decision you recently made which you would like to do differently. Map out the 7 stages and how you completed them the first time, and how you would now change that with your new information and the benefit of hindsight. Try to apply the second framework when you make another decision in future.
Identifying and developing decision making skills
Decision making skills can be broken out into 4 main types; problem solving, collaboration, emotional intelligence, and logical reasoning. However, creativity and strong communication are often highly valuable in the decision making process as well. The balance of these skills depends on what type of decision you’re making and what type of decision it is. For example, you may not need to collaborate very much on personal decisions but it’s essential in a work or group context.
Active listening, interpersonal skills and leadership are some of the most important skills you can have if you are directing a group decision. Great qualities to demonstrate as a leader are honesty and integrity, confidence, the ability to inspire others, commitment and passion, communication, accountability, delegation and empowerment, creativity and innovation, empathy, resilience, emotional intelligence, humility, transparency, and vision and purpose. Combining all of these qualities and using them to lead your team will no doubt help them to make great decisions.
To help you solve problems, look for critical thinking, analytical and logic skills. These are especially valuable during steps 4 and 7 of the decision making process. Whether working in a group or individually, good time management is essential to reduce the pressures that can result in poor decisions.
Work on strategic decision making
Strategic decision making is a process where decisions are made according to a larger and often more long-term objective. This is very common in business and will be used to guide decisions based on company goals or targets. Lateral thinking is a particularly useful skill for this kind of problem-solving because the problem solver has to consider often hypothetical situations that have not occurred yet. An example of strategic decision-making would be if a company wants to be the most popular brand of chocolate bar.
To achieve this, strategic decisions are compartmentalised into tactical decisions – if the strategy is considered long term, tactics are the middle term. Using the chocolate bar company as an example a tactical decision might be to improve the recipe or alter the design of the packaging. They may also make the tactical decision not to develop new forms of sweets or cake, as that would distract from their chocolate bar mission.
Breaking down tactical decisions into operational decisions enables companies to effectively make short term, day-to-day decisions. For example, the chocolate bar company decide to change the packaging. An operational decision might be which team members are best suited to work on this project.
Strategic decision making isn’t limited to businesses. If you want to save money for example, the only way to achieve that is by making a series of smaller decisions to avoid buying expensive items, to eat at home rather than having a takeaway, and eventually saving up enough money to meet your goals.
How to demonstrate effective decision-making
It is one thing learning about how to make effective decisions, but how do you demonstrate effective decision-making? You will have to do this at various stages of your career, in everything from your interviews through to reviews. Here are a few tips for showing off your decision making skills:
- Be transparent: if you are evaluating a series of options, make sure other people know what the criteria is and how you are evaluating them so that other people can understand that your decision making was a process and how just a quick guess.
- Be data-driven: in many situations, data driven decision making is synonymous with logical or rational decision making.
- Be communicative: often the best way to demonstrate a skill is to communicate well throughout the process of using it. Make sure other people understand the decision and the factors that influenced it.
- Review your decisions: you cannot know whether your decision was good or not without reviewing afterwards. With big decisions, like suppliers, you may want to build in regular reviews to do this. A good decision after 6 months may not still be a good decision after 18 months.
Decision making courses
If you would like to learn more about our decision-making we have lots of courses available for enrolment now.
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