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Systematically Making the Best Decisions
Business management requires decisions to be made on a more or less
constant basis. Even a bad decision can be profitable for a company, but
not as profitable as a good decision would have been in the same
circumstances.
It’s important to make decisions the right way so that they provide
optimal results instead of just getting acceptable solutions all the
time. The worst thing to do is to not make any decisions at all and just
live in hope that things will work out alright in the end.
Decision making is more of a science than an art.
There is a process we can follow
to make ‘good’ decisions – those that produce the best outcomes, most if
not all of the time. It’s a process that can be applied to almost any
business decision and should be learned by everyone with management
responsibilities.
First let’s examine how bad decisions come to be made. There are many
reasons things don’t go as they should due to shoddy decision making,
but these are four of the main causes:
Too Narrow a Focus
A crisis situation arises and calls for urgent decisions to be made
about how to extricate the business from possible disaster. So what
happens next? Management focuses only on the way out of the mire and not
on what caused it in the first place. With a bit of luck the crisis
passes and soon it’s back to business as usual. The causes of the
original problem aren’t explored and the situation can easily happen
again.
No Search for Improvement
Decisions tend to be made in the context of their existing surroundings.
They are made to handle a given situation and not with the purpose of
creating improvements. If every decision were made with the intention of
improving conditions rather than just responding to circumstances it
would lead to better decisions being made.
Failure to Understand Positive Outcomes
When things go well we often give credit to external factors or simply
ignore the reasons why a positive outcome occurred. There’s always an
inquest into failures but little examination of the in-depth reasons
when things work out well.
Too Few Options Considered
Making decisions first requires considering the available options.
Identifying these options is an essential task that’s often given too
little attention. The process of
making good decisions begins with a search for the options involved so
that the best of all possible decisions can be made.
Because we’ve been making decisions all our lives we think we’re
reasonably good at decision making. What’s really true is that we’re
making too many decisions haphazardly, without a structure or process to
guide us.
This carries over into organizational management where decisions are
usually made in too short a time because of a desire to be doing
something about a situation. We often rely on the past as a reference
source without fully understanding the consequences of previous
decisions we’ve made.
However, there is a set of
questions to answer when making any decision that will help to ensure
the best possible results. These aren’t hard and fast rules to follow
but rather a structure to be used as required.
1. Why do we need to make a decision?
2. Who should make the decision?
3. What resources will be needed to make the decision?
4. What are the options we have to choose from?
5. What are the consequences of each of these options?
6. What is the value (positive or negative) of each consequence?
7. Which decision will give us the best value?
This seven-question process removes much of the hierarchical pressure
from decision making. There’s less chance that someone at the top is
going to impose a bad decision on the rest of the organization because
the process is essentially transparent.
Forget the classic ‘gut feel’ and ‘intuition’ methods of decision making
and instead look for answers to these seven questions every time a
decision needs to be made. By applying these questions to making
decisions a sequence is initiated that forces adequate consideration to
be given to each key step of the process.
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