Shashank Shastri
One incident I'll always recall is witnessing a senior manager become paralysed while attempting to make a critical business decision. The team waited, the stakeholders became restless, and a potential opportunity was lost. From this, I gained an important lesson: managers have to understand how to make effective decisions, and not just some of the time. This learning is imperative.
Decision Making in Management: Process and Methods That Work
Every single day, a manager will make decisions that will affect the employees, the budgets, and the business as a whole. Some decisions will be made on a routine basis, and there will be those that have serious implications. If you are looking to launch your career as a manager or have recently completed a PMP certification, learning the processes and methods of decision-making will differentiate you from the rest.
What is Decision Making in Management?
This is the process that includes the selection from two or more alternative courses of action in order to achieve a specific organisational goal. This is not choosing an option at random, or the other methods described in this exercise. This is evaluating both sides, while also knowing the risks of the choices made. This is about adopting a process that is in line with the goals of the company.
Let's put this into perspective. For example, a business manager must decide to either focus on developing new products or building new marketing programs. This involves analysing costs, potential benefits, and risks associated with each choice. The decision directly affects the organisation's direction and success.
Peter Drucker stated, "Whatever a manager does, he does through decision making." This summarises the most important aspect of management. Every action a manager undertakes, including the distribution of resources, strategic planning, etc., relies on decisions.
Key Features of Management Decisions
Some features set management decisions apart from daily personal decisions:
- Goal Driven Decisions are made with a purpose, especially around the goals of the organisation.
- Process Decisions are made following a set process as opposed to a random collection of details.
- Alternatives Decisions are made from a selection of multiple alternatives
- Systems Decision will remain valid within a specific system
- Selectivity Decisions are made through selection, as opposed to the elimination of the irrelevant
- Engagement Decisions are made with a commitment to do something with the completed decision
- Optimism Decisions are made through a systematic process of weighing the evidence, control, and risk
Categories of Decision Making in Management
Familiarity with the categories of decisions allows you to understand why specific decisions are made in a specific way. The table below provides a useful outline.
| Decision Type | Who Makes the Decision | Time frame | Level of Difficulty | Example |
|---|---|---|---|---|
| Organizational | Top Management | Long Range | High | Growth of Market |
| Personal | Single Manager | Variable | Medium | Changing Jobs |
| Routine | Lower Management | Short Range | Low | Ordering of Supplies |
| Strategic | Top Management | Long Range | High | Reorganisation of the Company |
| Programmed | Any Level | Immediate | Low | Approval of Leave |
| Non Programmed | Senior Management | Long Range | High | Response to Crisis |
Organisational decisions serve the benefit of the organisation. When an executive acts in an organisational capacity, they are making organisational decisions. Personal decisions occur when an executive moves their position to a different organisation or when they leave the organisation.
Decisions made in a routine fashion adhere to a set of policies or procedures while strategic decisions tackle new issues and require a leap of executive reasoning. The difference is important because they both require different tools and different approaches.
The Decision-Making Process: Six Key Steps
It's my belief, and experience, that following a set process not only facilitates but significantly enhances the quality of the decisions made. The six steps I outline below are integral to the outcome of any decision made.
1. State the Problem
To begin the process, a problem must be stated. This is the most important step, as there are so many problems that may require your attention. Stating the problem is only the first step. The most important part of the problem-stating practice is the quality of the questions posed in order to ascertain the most suitable answers. The right answer may be to not answer the question at all, or to go to another question. Many managers get this step wrong and end up solving the problem because they not only posed the wrong questions, but they posed too many of them.
2. Organise and Collect the Facts
Information cannot be "free". Enough information must be organised to allow the decision to be made at all. The classification of information is set as a control mechanism. The control to be applied is determined by the strategy that most protects the interests of the decision-maker. The right context of the information will guide us to know what assumptions not to work with and what assumptions are not to be assumed at all.
3. Consider Alternatives
Finding alternatives solution to the problem is a daunting task. The thoughts required to be created in the mind of the individuals who are required to participate in the solution-finding process will require them to be innovative and think in a way that nothing else, but that process, will help identify potential alternatives and provide the potential alternatives with a means to provide the consequences of complete inaction. The last question is the most important, and is the best guide in providing the pathway to the alternatives that may not be visible.
4. Choose the Most Suitable Option
Selecting the most suitable alternative requires the evaluation of each option against defined criteria. Judgement on each option is required on the possible risks to be incurred, the required resources, and the time factors. Managers tend to either rely on their instincts or prefer rational, analytical methods. Integrating the two is the better option.
5. Turn Decisions into Actions
A decision means nothing without implementation. Present your choice clearly to stakeholders who'll execute it. Involve the working group in planning, preferably during the alternative development stage. This participation improves quality and secures cooperation.
6. Always Monitor
After implementation, decisions should be regularly monitored. Monitor the performed work and critique the decisions made. The results will provide lessons to improve decisions in the future. Your level of expertise will improve as you learn from your results.
Fundamental Tools and Techniques in Decision Making
Today's managers have a wide array of tools and techniques available to them, and the effective selection of the most appropriate technique for the situation at hand greatly enhances the outcome. This is what professional advancement, such as obtaining your PMP certification, provides you: access to these time-tested techniques.
Decision Matrix
A decision matrix is essentially a method of defining and interpreting the myriad of values composing system performance. The individual components are assessed and reported according to certain preset criteria. When assessing a number of choices against a number of criteria, this matrix approach proves to be highly effective.
Decision Tree Analysis
Decision Tree Analysis involves mapping the decision-making process. Several possible steps are arranged based on the expected results, and flowchart outcomes help visualise the results and the risks associated with each.
Pareto Analysis
Prioritisation based on problem-solving is the analysis of a Pareto chart. Typical results are produced with only a fraction of the total effort. Constructing a Pareto chart will highlight the most effective use of your decision-making resources.
SWOT Analysis
SWOT Analysis is an acronym for Strengths, Weaknesses, Opportunities, and Threats. This technique helps an organisation understand its internal and external factors. With this technique, an organisation is guided on its tactical framework.
T-Chart
The T-Chart is a basic decision-making technique that focuses on the positives and negatives of the options available. In this technique, it is ensured that all the factors, whether positive or negative, are thoroughly considered. A T chart is a deceptively simple technique that helps an individual clear his or her mind.
Factors That Affect Your Decisions
Decision-making is affected by several distinct elements; an understanding of these elements will help circumvent the challenges:
Bias
Bias is a view or preference that prevents impartiality. It stems from personal experiences, and it is a natural phenomenon. It's a subconscious mechanism of an individual, and it has a profound influence on the decision-making process.
Emotions
Legitimate emotions often play a deciding role. The influence emotions have on choices varies from individual to individual. In order to set a target and remain objective, it's necessary to recognise the influence emotions play.
Information Quality
The strength of a conclusion or decision depends on the quality of the information. Good and sound information leads to good conclusions or decisions. Information of poor quality will lead to a poor decision.
Time Pressure
A certain amount of time will result in a sense of urgency. In some situations, the need to act quickly will result in a decision. However, impulsive decisions can give rise to a loss of advantage, or some decisions should be delayed.
Organizational Culture
The social setting in the organisation, the social pressures of the structure, the leadership style and the dominant role of the so-called experts can lead to decisions that are not of optimal quality.
Rational vs. Intuitive Decision Making
Regarding the decision to act, there are two sides to every decision and its actions.
Rational Decision Making
Rational decision-making tends to be more time-consuming. However, the benefits can be significant. However, the likely benefits can be significant. The fact that they can be significant means they can be time-consuming. In the decision, the likely benefits can be significant. In the decision, the likely benefits can be significant. In the decision, the likely benefits can be significant. With plenty of available data to draw from, these types of approaches are best suited to financial and consulting organisations.
Intuitive Decision Making
Intuitive decision-making is about instinct, gut feelings, and personal history. The process is spontaneous and not visible to an outside person. Because there is no need for systematic analysis, this process speeds up decision-making. Intuitive decision-making works for creative people and for all situations that do not have data for a systematic analysis. Instinct, and not concrete analysis, is the basis for risk assessment.
Good decisions blend analytics and intuition approaches.
Improving Decision-Making Skills
Improving decision-making is about effort and practice. Skills in leading projects develop with time and repeated effort in making those difficult decisions.
Begin with a review of your previous selections. What do you reckon went right about the choice? Where do you reckon you erred? Consider the lessons learned. The experience you have augments your decision-making capability. Each choice you make represents an opportunity to experience a lesson about your decision-making process.
On important decisions, get the opinions of other people. The person making the decision still has the responsibility, but they have the tools and perspectives available to make better decisions. A project management plan is most often completed from multiple perspectives and not done individually.
Know the different project risks that relate to your choices. Once you know possible risks, you can develop different approaches to deal with issues that arise. Risk management is the first step in preparing to deal with the issues when your chosen approach meets obstacles.
Finally, be flexible enough to change your mind when needed. There is value in being committed to a decision, but being inflexible in the face of overwhelming evidence is a waste of resources. The best managers know when to change direction.
Shashank Shastri is a PMP trainer with over 14 years of experience and co-founder of Oven Story. He is an inspiring product leader who is a master in product strategies and digital innovation. Shashank has guided many aspirants preparing for the PMP examination thereby assisting them to achieve their PMP certification. For leisure, he writes short stories and is currently working on a feature-film script, Migraine.
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