DECISION MAKING AND SOLVING BUSINESS PROBLEMS (Part 2)

Systematic Approach to Decision Making

In business, the quality of decisions taken goes a long way to determine the success of the business. In other to increase the chances of making a good decision, Managers and decision makers should use the Systematic Approach to Decision Making. The steps involved in the systematic approach to decision making are as follows:

1. Understand the Situation: this is the first stage in the decision-making process: A clear understanding of the situation is important because it will affect the whole decision-making process if the situation is not understood. This stage is about gathering relevant information about the situation. This might include getting facts and figures derived from past data and data for future projections. The data needed might be qualitative, quantitative, or both.  In the process of getting data, only relevant data must be needed. Irrelevant data will just be a waste of time and might derail the decision-making process.
2. Define the decision problem: In every business decision-making scenario, it is important to know what the problem is. Without in-depth logical reasoning, it is possible to select one of the selection criteria as the problem. For example, if a company is not making a profit and the decision-makers think the reason is the cost of raw materials, they will assume the problem is the cost of raw materials and that will be the problem they will try to solve by looking for alternative ways to get cheaper materials but if they see not making a profit from a holistic point of view, then they will consider other reasons eating into the profit. Other reasons affecting profit might be the cost of maintenance, overproduction that leads to expiration or rejection of some of the goods, the inefficiency of the labor force…etc.
3. Be guided by objectives: the objective of the decision process will determine how important some of the selection criteria are to the decision-making process.
4. Determine Alternatives: In the business decision-making process, there is usually more than one way to go get something done, if it is just one solution then we have a decision by default. It is important to consider every possible outcome/ alternative to make the best decision.
5. Develop Selection criteria: When all the possible alternatives have been outlined, we need to list out advantages/arguments for each of the alternatives.
6. Use criteria to analyze alternatives: After the selection criteria for each alternative have been listed, then we also need to use the selection criteria to analyze the alternatives. Note that having a long list of selection criteria does not necessarily mean that that’s the best option. Sometimes, the weight of one selection criteria on the entire project might go a long way to influence the decision taken.
7.  Take and communicate a decision: after the alternatives have been analyzed using the selection criteria, the process will determine the best alternative which will determine the decision taken. Deciding a result of your analysis is the essence of the decision-making process.
8. Develop an action plan: After a decision has been made, an action plan has to follow. This will ensure the execution of the decision taken.
9. Evaluate the impact of the decision: It is important to evaluate the impact/ result/ effect of a decision on a business/ project. It will provide a guide to making similar decisions in the future. If there were mistakes in the decision-making process, the evaluation will outline where the problem is and will prevent such from happening in the future. If it was a success, it will form a guideline for making such decisions in the future.

Follow these steps correctly and you will most likely end up making the right decision in every situation.