Decision-Making Fundamentals

Every decision that we make (or don't make) shapes our future.

Everyone tries to make good decisions. However, it is easy to overlook an important factor, miss a desirable option, or base the decision on unreliable information. In addition, fear of making a wrong choice can cause us to postpone decisions, leading to missed opportunities. A structured decision-making process ensures that important decisions are made on time and are based on facts, research, and analysis.

This paper describes the basic components of all decisions and a step-by-step decision-making process. This process can be easily adapted for group use.

Components of Decisions

The most important aspect of structured decision-making is to recognize and analyze the basic components of decisions.

  1. Context - The context describes the situation surrounding the decision. For example, the deadline and who needs to be involved to ensure a successful result.
  2. Objectives - A clear understanding of desired outcomes guides decision-making and makes it easier, logical, and less stressful. (People often avoid making decisions because of a lack of clear objectives.)
  3. Options - Significant effort must be spent uncovering all available options, studying how each may be implemented and what results they will produce. Too often, people limit themselves to a few obvious choices, and do not explore unusual (breakthrough) ideas.
  4. Criteria - The criteria used to select the best possible options are determined by the context and objectives. Hard criteria are conditions which must be satisfied in order to have a useful decision, such as budget or time constraints. Soft criteria are conditions which require subjective assessment, and therefore can be more difficult to apply. Examples are level of organizational disruption and employee satisfaction.

Successful decisions are based on reliable information and verifiable data. Adequate time should be spent to thoroughly research the options and their implications. Decisions based on gut-feeling are difficult to defend and frequently encounter unexpected obstacles when implemented.

Decision-making requires time. The time and effort spent should be in proportion to the importance of the decision.

Following a step-by-step decision-making process and documenting each step, helps to clarify thinking and ensures sustained progress towards a good, timely decision.

Decision-Making Process

An effective decision-making process ensures that all four components are analyzed. Templates are used to simplify the work and remind us of important aspects of each component. The steps are normally completed in a sequential manner. However, it is acceptable to skip ahead and quickly jot down some information while it is fresh in one's memory, or to jump back and fill in new information that was overlooked initially.

Step 1: Determine the importance and the context of the decision

Use a worksheet to analyze the context. On the worksheet, list the following:

The context determines the possible consequences of the decision, the time period involved, and who needs to be involved in the decision process. Significant time and effort should be invested for important decisions.

Step 2: Determine the objectives for the decision

Draft an objectives worksheet and list the primary and secondary goals for the decision. This worksheet should include the desired outcomes and indicate which outcomes are to be avoided.

Step 3: List all options

Develop an options worksheet by listing all available options. Use brainstorming or other methods to identify as many additional options as you can. Make special effort to identify impossible, wild or unrealistic options, as these may lead to outstanding 'out of the box' solutions. Find ways to uncover new options that may not be obvious. To encourage creativity, all options should be listed without critique.

Once all available options have been listed, clarify each option and select the most promising ones for further analysis. (Be careful not to discard options too early in the process.)

Step 4: Explore promising options

The most promising options should be discussed and analyzed to determine how they may be applied and what results they will produce. Consider how options relate to one another, and whether some options have common components or make implementation of other options easier. In parallel with this analysis, identify options that need more research or clarification.

Several techniques are available for analyzing the options in order to understand their implications.

The options are analyzed to gain a clear understanding of their implications before applying the decision-making criteria. This is to ensure that options are not discarded prematurely and that an accurate analysis takes place.

Step 5: Establish decision-making criteria

Review your objectives as you develop the set of criteria that will be used to rate the options. Criteria may be clear conditions, which must be met in order to have a useful decision, or soft criteria, which require subjective or qualitative analysis. Assign an importance rating to each criteria.

Step 6: Evaluate the options against the criteria

When options and criteria have been established, a table is drawn with the options listed in the rows and the criteria listed in the columns. Each option is rated for each criteria and the value written in the corresponding cell of the table. Then, each criteria is given a numerical importance rating. The final matrix is generated by multiplying each option's rating for a criteria by the criteria's importance rating. An option's overall evaluation is then determined by the sum of this weighted rating for all the criteria.

This Options-Criteria Matrix is particularly useful for evaluating soft criteria. It is also called a Prioritization Matrix, Screening Matrix or Decision Matrix.

When there are a large number of criteria and options to consider, a spreadsheet or other decision-making tool can be used to simplify calculations, keep track of the analysis, and allow various scenarios to be generated and tested. (A free spreadsheet template can be downloaded from www.sorach.com/resource/download/ocmatrix.html.)

Step 7: Select the options to pursue

Examine the Options and Screening Matrix to determine if some of the options can be combined to create a better solution. Summarize the options selected for implementation and their implications.

Step 8: Analyze the risks

All decisions involve an element of risk. Force Field Analysis is useful for uncovering the risks involved or difficulties which need to be overcome when implementing the options. Strategies can then be developed to manage those risks.

Time Constraints

Frequently, time constraints require us to make decisions before we feel that we have all the information needed. By working through the decision steps on paper, you will know what information is missing, the possible consequences of a wrong decision, and the risks involved if the decision is postponed. This information permits you to decide whether to make the decision now, postpone it, or start implementing some options while collecting information and feedback to finalize the decision.

Conclusion

Structured decision-making requires analysis of the four decision components - context, objective, options, & criteria. The analysis must be based on reliable data. By following a step-by-step decision-making process and working on paper, you will have all the information needed to present and justify your decisions, as well as to start implementing them.

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