Every single day in our business life is accompanied by decision making. This makes decision skills an absolute necessity. It is an unavoidable process in a business and represents a vital key function of its success in terms of profitability. Decision making in business is directly linked to its success or failure. Thus creating need for the mastery of all essential tools and techniques to be used in decision making.
It is clear that effective decision making is one of the strengths a competent leader should possess. Decision making skills in an employee are what every employer is in search of as observed in all job descriptions. Thus equipping yourself with all the different tools we shall be discussing in the latter part of this write-up is worth your time and effort as it will definitely give you a more professional edge. Bad decisions often cost a business a lot and surely employers are in search of fully competent persons who can assist them prevent these loses.
Without effective decision making tools, it is useless discussing success in business since both move together. Several successful business men and women in the world today often attribute their business success to the smart critical decisions that they often have to take with their team.
Although often neglected by several company owners, every little decision taken in the company is just as important as the company itself. No matter how small a decision is, proper attention should be paid to it and when it has to do with taking a major decision in the company, a thorough check should be done to ensure that the right people for decision making in management are present.
Both suppliers and customers are usually sensitive to the decisions which are often made in a company. Therefore, decision making can easily boost up the potentials of a company or slow them down when done wrongly. Having to properly manage a business also means taking vital decisions that can influence the success of your business in future. Thus, such decisions upon which the success of your company depends should be reached only after a proper research and analysis by those with excellent decision making skills.
Nevertheless, there exist few situations which require immediate decisions making for the advancement of the business. This therefore creates the need for making sure that your team is fully responsive and in possession of skills that allow for instant decision making in business.
The three groups of decision making
Considering the subject matter in question, we notice that there are several kinds of decisions. They have been grouped into three.
Decisions on “whether”
Being a matter of true or false, yes or no; this is a vital decision which when wrongly taken will cost the business much. An example here could be an employer contemplating if he/she should recruit more workers or less. In order to better address this issue, the employer has to be well equipped with effective decision making skills.
Decisions on “which”
Here is a decision to be taken by a leader when presented with two or more alternatives of what he/she is in search of. At this point, he/she has to thoroughly examine and figure out that which best fits the needs at the moment based on his/her decision making skills. Taking such a decision requires proper cautions, for example, an investor seeking for a bank which will grow his/her money with time. There are several banks for such investments yet they are not operating on the same profit rate and security level. The investor therefore has to carry out research to figure out the best amongst them.
Such decisions which are made based on a particular situation which the leader hopes on. An example can be the case of a trader who says if crops produce well this year, then he’ll purchase more than enough for storage.
Decision making approaches
There exist two chief decision making approaches in every structure or organization.
This decision making approach is based solely on the leader or project manager who takes decision based on their competency, decision making skills, experience, and field of specialty. This decision is then submitted to the team for approval and execution for the success of the company.
In this case the decision to be taken is made by the whole team as they analyze the problem or issue in question. In such cases, each group member is free to give a suggestion or proposal which is then discussed with the other team members. On reaching an agreement, they adopt the decision which has been taken.
This entails making decisions by the help of a computer which possesses a previously built logic system to analyze the issue at hand.
Proper decision making procedure
Decision making in management follows a series of steps in order to get the best outcome. These steps are as follows:
Build a constructive environment
A constructive environment can easily be obtained by setting an objective to attain and should include all the competent people concerned with the resolution of the issue in question. Such people play a vital role in the process and they should be able to answer the right questions and their opinions highly considered.
Coming up with potential solutions
After creating a serious environment for discussion, all potential solutions should be brought on the table. The more potential solutions there are, the easier it will be to reach a final result which will work for the best of the business.
Analyzing all alternatives
Decision making in business often present several alternatives. These alternatives each have their risk, cost-benefit and ease in feasibility thus should be carefully analyzed depending on the needs of the structure.
Picking out the best alternative
The analysis of the different existing alternatives should be made in a way that at each stage an alternative is eliminated for its weakness until we are left with just one option. One which we shall take as the best and then implement it.
Strategic planning tools and techniques for proper decision making
Formulating the company’s goals is one of the most important and an unavoidable aspect of starting and properly managing the company. This creates need for mastering all the strategic planning tools and techniques which are aimed at putting a company on mission towards success. Decision making in management by business managers often take into consideration a variety of techniques and tools in order to come up with a proper strategic planning decision. They are as follows:
Counted among the best strategic planning tools and techniques, market research has to do with gathering the maximum amount of information about a certain market. This information will generally include the preferences of customers, the presence of competitors, the availability of suppliers, the ease of transportation, and the current state of the market. Once the manager is in possession of the needs and wants of the potential customers he can then move ahead with their present team to take vital decisions in creating goals that will meet up with the different needs and wants of the potential customers. In market research, some managers go up to the extent of chatting with several customers in order to know what they’ll be expecting from them. Such information is vital time for decision making in the business.
Cost benefit analysis
This is unavoidable when carrying out decision making in management. It consists of accessing in detail the costs and all the potential advantages which are achieved in association with different courses of actions. In such cases, we choose that particular course of action that will lead us to the highest net profit at the least investment.
The SWOT analysis
This analysis is a strategic planning tool which has to do with fully assessing all the strengths and weaknesses of a business together with all the potential opportunities the business is facing and its traits. By simply carrying out a SWOT analysis, managers are able to boost the strengths of their companies for greater benefits. This analysis also permits them to implement strategic decisions that will either eliminate their weaknesses or strengthen them. Being aware of the threats that rise against your business will keep you on guard from running out of the market.
Among planning tools and techniques, feasibility analysis is quite remarkable for its ability to find out if a particular goal, project, or aim can be reached in a given period of time. This study helps entrepreneurs to be more realistic and not allow themselves to be carried away by emotions or situations.
Deeply understand the different decision making tools
There are two decision making tools used by teams which are Multivoting and Nominal Group Technique. These decision making tools fully assist in identifying the important items on a list based on a particular situation at hand. The question of how a team selects the right tool amongst the two different decision making tools has often arisen in debates and different structures. Whatever be the case, experts recommend that the multivoting should be tried in the following two cases:
- If you are seeking to identify the most important items on a list; and
- If you are seeking to reduce a long list of ideas, and to pick out the best alternative with a high degree of team agreement.
These very experts also recommend that you try the Nominal Group Technique in the following two cases:
- If you need a more structural approach to prioritizing the items on the list; and
- If you need a more structural approach to generating and clarifying a sizable list of issues or ideas.
Decision making tools: Multivoting
Multivoting represents an important group decision-making technique which is aimed at significantly reducing a long list of items down to a manageable number through a well-organized and structured series of votes. Before using multivoting, a brainstorming session must have been conducted to generate a list of items too extensive to be fully addressed at once. Multivoting provides a quick way for a team to come to an agreement. It helps to figure out the highest priority items on a list thus calling for immediate attention. Multivoting is highly beneficial as it reduces a list, identifies important items, and prioritizes the list.
The 5 steps to an effective multivoting decision making tool
Step1: This process begins with brainstorming and developing a large list of items. At such levels, if there exist another idea generating method, it can as well be used in order to come up with a list of possible decisions to address the issue at hand.
Step 2: In order to avoid confusion of item designations with the vote tally, a well-known letter should properly be assigned to each item.
Step 3: This is the voting step whereby each team member selects one third of the items by simply listing their letters. Each member is recommended to cast out all allotted votes and must cast only one vote per idea. If confidentiality is not an issue, the voting can be done by a show of hands or otherwise through paper ballot.
Step 4: At this step, we are called to tally the vote by allocating at the side of each item its checkmark. Depending on the number of members the team has, make sure that you eliminate all those items that have one quarter votes. An example here could be the presence of 10 members in a team, all items that received from 3 and below votes should be eliminated.
Step 5: The whole process should be repeated and then an average taken for the final decisions.
Decision making tools: Nominal group technique
This is a weighted ranking method that allows a group to effectively prioritize after generating a large number of issues in the midst of a transparent structure which offers to everyone an equal voice. In this decision making strategy, there is little to no communication between the group members during the process. This method should be used when creating an effective list of options in a ranking manner. This method fully neutralizes the dominance of the loudest person which can lead to a final result which is not the first priority of everyone.
The Nominal group technique turns to be best in cases where we are dealing with emotional issues, and when the group is stuck. It easily ranks items in priority order, and reduces the number of issues that often arise during group decision making.
The procedure on applying the nominal group technique
It is an easy process which encloses 2 parts with part one having to define the issue and collecting deas while part two has to do with the selections made by the teams.
Start by properly introducing and clarifying the main issue to be addressed by the team members. It is always advisable to write it down on a chart pack where each team member can properly see and reflect on it. Make sure that all the unclear terms have been properly defined to the hearing of all. At this stage, you can allow for clarifications but remember to prevent the group from getting into a discussion about it.
Time should be allocated for each team member to remain silent and write personal ideas on how to resolve the issue at hand on a piece of paper. Always remember that this is a personal contribution so silence should be maintained and everyone remains seated until the work is over.
When the time allocated for personal ideas is over, make sure that you collect the team’s ideas while preventing side communication. Once the ideas have been collected, each idea should be read aloud and if there is need for correction/clarification from the author, this should be immediately made. On reading, you can combine like ideas if both originators agree otherwise let go.
For each separate idea, allocate a letter to it in order to avoid confusion during the vote tally. Make sure that the ideas are ranked independently.
After ranking ideas independently, collate the rankings and add the rankings. When this is done, rewrite the list in ranking order after which you carry out a sanity check.
Tips to help you make right decisions for your company
Decision making in management of a company is vital for maximizing profit. The following tips will be of great help for this task:
- Always start by figuring out if the decision to be made is yours or someone else’s. After, check on the degree of importance of the decision and its deadline.
- As a manager of a company when a complex problem is posed and a decision is needed, you have to start by carefully brainstorming and putting down in writing all the alternatives that come to your mind. Still in this process, it is wise to buy external expertise to assist you in this decision making which can greatly affect the profitability of your company.
- Eliminate all alternatives you are not feeling comfortable with in order to remain just with the best which you shall instantly apply without thinking again.
An effective systematic approach for making decisions
In going the systematic way of decision making in business, always make sure that you eliminate the overwhelming factor out of decision for it can turn to be detrimental. In business as well as other life domains, we are often called upon to take decisions, some of which are quite complex and difficult. Such decisions involve uncertainty, alternatives, complexity, high-risk consequences, and interpersonal issues. In such decisions, there are often many unknown facts. Their complexity comes from the interrelated factors to be considered. The impacts which are often obtained from such decisions can turn to be highly significant. In taking such decisions, you have to predict the different ways in which the people will react. Therefore, you have to put your decision making-skills at work.
Fully investigate the situation in details
The first and most famous systematic approach to resolving a problem or an issue by taking a decision is to familiarize yourself with the situation itself. This can be done by investigating all that is related to the issue; this will lead you to the source of the problem thereby allowing you to fully resolve it. In the process of investigating, you can as well encounter a similar case which was previously resolved and for sure this will give you elements of answer to your problem.
Generate several alternatives and explore the best options
He who explores several alternatives will likely end up with the best option that will lead him to taking the best decision. At first glance, you’ll have an impression that generating several alternatives through brainstorming will render the resolution of the issue complex yet it is not the case. You do not have to worry much about this because several alternatives will only push you to go deeper in search of the best alternative. It will also permit you to look at the situation from different angles.
Brainstorming has always been the best method of generating ideas in such cases. It is widely used in the world and its efficiency is not doubted. In taking any decision, make sure that you consider the way others will be affected by it. Always remember that you are free to invite competent outsiders to take part in your decision making process. Whenever you notice that you are satisfied with the good selection of realistic alternatives, it’s time to judge their risks, feasibility, and net profit. After you have carefully evaluated the different alternatives and picked out the best, it’s time to make your decision.
Not very different from other skills, decision making in business can also be improved with time and experience. With time as you familiarize yourself with the above discussed planning tools and techniques in decision making, you’ll turn to be more effective and filled with greater confidence.
The worst decision is not taking a decision at all out of fear of making a mistake. We should not regard mistakes from the negative axis but as a way to improve our skills and experience. It was noticed that risk takers often turn to make better decisions with good analysis. Nevertheless, not all risks are worth taking since some can bring down your business and drive you out of the market arena.
With this in mind, before you take any risk, make sure that you have carefully evaluated the risk and have concluded that it is the best thing to do at that time. In order to guarantee the right decision-making processes for the future well-being of your company, make sure you hire highly competent professionals with the ability to take instant decisions as need arises after calculating the risks involved. Above all, always make sure you maximize your knowledge about a situation before taking any decision.