Decision Making

by Ian Moore

In a nutshell

1. Using decision-making techniques

This topic covers a range of decision-making techniques, all of which are worth learning, so that you can choose the particular techniques, or combination of techniques, that suits any specific decision you have to make. So, to get the best practical use from this topic

  • Read the description of a technique
  • Practise a simple form of the technique in a variety of situations
  • Practise the more advanced forms of the technique (if there are any)
  • Repeat the process, using another technique

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2. Group decision making

A group adds a lot of richness to the techniques, but the different opinions can make it more difficult to reach agreement. The following approaches work well for gaining consensus within a group.

  • Involve all or some of the potential stakeholders. These are the people who will be affected, so having their buy-in at the beginning is a great advantage.
  • Get people to put all their ideas on Post-its and put them on the wall.
  • When using the decision tree technique, allocate error percentages to the percentages.
  • Allocate a certain number of votes to each person.

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3. What stops us making decisions?

There are many reasons why people fail to make decisions:

  • Not having good decision-making techniques
  • Lack of confidence
  • Lack of information
  • Too much information to keep in mind at one time
  • Disagreement between group members
  • Trying to make one big decision that could, and probably should, be split into smaller decisions
  • Ignoring the benefits that reaching a decision brings, in terms of no longer expending energy on it.

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4. Intuitive decision making

The human brain can process huge amounts of information unconsciously, without this ever rising into consciousness. This is why intuitive decision making can be extremely powerful and should not be underestimated.

  • The problem with intuitive decision making is that it can seldom be quantified and so analysed.
  • ‘Group think’ can be extremely pervasive and a group’s intuitive decision making should be taken with extreme caution.
  • If something has always happened a certain way in the past, we are much more likely to assume it will happen the same way again, which may well not be the case because we have not noticed what has changed.
  • You can use a coin to show you what you intuitively want.

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5. Pros and cons

The simplest and probably the best-known way of making decisions is to draw up a table of pros and cons.

  • You can simply add up the numbers of each.
  • You can assign a value, on a scale of one to ten, to each pro and con.
  • Assuming that ‘all strengths are weaknesses, and all weaknesses are strengths’, you can take each item in the ‘pros’ and ‘cons’ columns and map it to three items in the opposite column.

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6. PMI

This technique is called Plus/Minus/Interesting and can be thought of as an extension to the ‘pros and cons’ technique, but with another column for ‘interesting’.

  • On a piece of paper draw three columns with the words ‘Plus’, ‘Minus’ and ‘Interesting’ at the top.
  • For the decision you are trying to make, write down words or phrases as they occur to you in the relevant columns.
  • If you are starting to feel stuck, stop and then look at the ‘pluses’ to see what ‘interesting’ ideas these generate. Also look at the ‘minuses’ and see what ‘interesting’ ideas are generated. You may also like to try considering some interesting ideas and see if any new interesting ideas are generated.

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7. SWOT

The objective is clearly defined and then four factors are taken into consideration: strengths, weaknesses, opportunities and threats.

  • Strengths and Weaknesses are internal factors.
  • Opportunities and Threats are external factors.
  • Strengths and Opportunities are helpful factors.
  • Weaknesses and Threats are unhelpful factors.

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8. PEST

This technique helps to identify the effects and consequences of external factors on a decision by looking at political, economic, social and technological influences.

  • The model is often extended to include legal and environmental influences.
  • It can be further extended to include educational and demographic influences.
  • It can be used in conjunction with a swot analysis.

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9. Pareto analysis

In many situations, changing 20 per cent of the situation can resolve 80 per cent of the problems. If we can identify a small number of changes we can make which will make a large difference, we can then have a large impact with a small amount of effort.

  • Create a list of the factors that may be responsible for causing your desired outcome.
  • Create a second column with an approximate percentage estimate of each factor’s contribution to the outcome.
  • Starting with the largest percentage and working downwards, create a running total of the percentages. When you have reached about 80 per cent then stop. You have now identified the most significant factors.
  • Once you have established the 20 per cent (or so) of the factors that have the most (80 per cent) significance, you can them implement decisions/actions involving those factors, while ignoring the others.

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10. Decision trees

A decision tree is a visual tool for analysing decisions. In using it, you generate a tree-like graph of decisions and their consequences. In the simplest form of this technique

  • Squares represent decisions
  • Triangles represent end points
  • When the graph is completed, you can then add probabilities for each of the individual branches and from the overall probabilities of the end points
  • You then add some percentages to reflect either our preferences or an estimate of some factor that you would like to consider (for example cost, estimated likelihood and so on).

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11. Force field analysis

This is a framework for looking at the forces that influence a decision.

  • There are two types of force: helping forces drive movement towards the decision, while hindering forces resist movement towards the decision.
  • Having spent some time trying to think of all the forces in play, we then assign to each force a strength between 1 and 5, where 1 is weak and 5 is strong.
  • We can then add up the strengths of the forces to give a helping:hindering ratio.
  • If the result is negative, but you actually want the decision to go ahead, you can now look for ways to increase the helping forces and decrease the hindering forces.

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12. Cost benefit analysis

At its simplest, a very basic cost benefit analysis just lists all the costs associated with a decision and all the benefits (in monetary terms). If the costs outweigh the benefits, then don’t do it. If the benefits outweigh the costs, then do it.

  • Most research into the effectiveness of cost benefit analyses suggests that people consistently underestimate the costs and overestimate the benefits.
  • Over the period that it takes to implement a decision, costs and benefits need to be converted into some common form, so that they are comparable. Usually this is ‘current value’.
  • A good cost benefit analysis will take into account factors other than money, such as reputation, which will tend to be even harder to quantify.

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13.Combining techniques

Taken individually, each technique will improve your decision making. Once you are used to all the techniques, combining them will improve your decision-making dramatically.

  • If SWOT works well for you, try using the ‘pros and cons’ technique to elaborate on the items in your SWOT table.
  • Try using PEST to add different perspectives to your SWOT.
  • If you are used to using cost benefit analyses, try using decision trees to improve the percentage likelihoods of outcomes.

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14. Five tips for better decisions

  1. Intuition is not always right.
  2. Reduce the amount of data.
  3. Try to remove emotion from your decision making.
  4. When trying to make a decision, reverse the question, and see if that makes a difference to your decision.
  5. Think about what your decisions would be if the consequence were bigger or smaller.

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15. After the decision

Once a decision has been made, it is important to get feedback on people’s feelings. This is often ignored in business environments.

  • Have you considered the risk implications?
  • Have you got buy in?
  • Have you identified all the stakeholders? Quite often, stakeholder needs may be very simple and easily satisfied by incorporating them into your decision. If this is not the case then you need to be able to get them on board.

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