In the Analysis of Business Problems Course at LBS we were made to understand that our ability to think through a situation and make use of available facts in coming up with a rational and not just intuitive decision per time is very important. Effective executives know that there is a systematic approach to decision-making
“Decision making is a process fraught with power play, politics, personal nuances, and institutional history. Leaders who recognize this make far better decisions than those who persevere in the fantasy that decisions are events they alone control.” David A. Garvin.
Let’s do a quick walkthrough the steps involved in decision making:
Step 1: Identify and Define the Problem
e.g., Maintaining energy costs within budgeted levels?
There has been an increase in energy costs over the past six (6) months hence the need to explore potential cost-optimization strategies.
Step 2: Gather relevant information
Information gathered in this scenario could be a trend analysis of electricity and diesel costs over the past 2 years as well as the average consumption per month in comparism with the revenue generated. Energy costs per kilowatt hour and diesel cost per litre over the same period will also be useful considerations.
Step 3: Identify the alternatives
A list of possible and desirable alternatives can be analyzed. For example, we could replace the post-paid meter with a pre-paid meter system, allocate energy costs per square meter, bulk-diesel purchases for economies of scale, outsource the power management system to a third party
Step 4: Weigh the evidence
Look at each of the alternatives with a view to achieving the objective of cost optimization in step 1 and note the pros and cons of each alternative.
Step 5: Choose among alternatives
Weigh all alternatives in step 4, after a cost-benefit analysis.
Step 6: Take action or select the best alternative
Step 7: Review your decision & its consequences
We could start off with a pilot and reassess after the first 3 months to see if our objective has been met.
Making effective decisions is the responsibility of executives
#MEMBA 11
