Imagine that your company has been expanding rapidly over the past 12 months. Sales are up 50 percent, but costs and overheads have also increased, so your operating profit has fallen. Decisions need to be made – and fast! But first you’re going to need to consider your options…
We make decisions every single day. As we explore in this article and video, you’ll see that some decisions are simple, others are more complex.
Some of your decisions will be so routine that you make them without giving them much thought. But difficult or challenging decisions demand more consideration. These are the sort of decisions that involve:
- Uncertainty – Many of the facts may be unknown.
- Complexity – There can be many, interrelated factors to consider.
- High-risk consequences – The impact of the decision may be significant.
- Alternatives – There may be various alternatives, each with its own set of uncertainties and consequences.
- Interpersonal issues – You need to predict how different people will react.
When you’re making a decision that involves complex issues like these, you also need to engage your problem-solving, as well as decision-making skills. It pays to use an effective, robust process in these circumstances, to improve the quality of your decisions and to achieve consistently good results.
This article outlines one such process for combining problem-solving and decision-making strategies when making complex decisions in challenging situations.
A Systematic Approach for Making Decisions
In real-life business situations, decisions can often fail because the best alternatives are not clear at the outset, or key factors are not considered as part of the process. To stop this happening, you need to bring problem-solving and decision-making strategies together to clarify your understanding.
A logical and ordered process can help you to do this by making sure that you address all of the critical elements needed for a successful outcome.
Working through this process systematically will reduce the likelihood of overlooking important factors. Our seven-step approach takes this into account:
- Create a constructive environment.
- Investigate the situation in detail.
- Generate good alternatives.
- Explore your options.
- Select the best solution.
- Evaluate your plan.
- Communicate your decision, and take action.
Let’s look at each of these steps in detail.
This process will ensure that you make a good decision in a complex situation, but it may be unnecessarily involved for small or simple decisions. In these cases, focus on the tools in Step 5.
Step 1: Create a Constructive Environment
Decisions can become complex when they involve or affect other people, so it helps to create a constructive environment in which to explore the situation and weigh up your options.
Often, when you are responsible for making a decision, you have to rely on others to implement it, so it pays to gain their support. If it’s most appropriate to make the decision within a group, conduct a Stakeholder Analysis to identify who to include in the process. To build commitment from others, make sure that these stakeholders are well represented within your decision-making group (which will ideally comprise five to seven people).
To avoid groupthink, encourage people to contribute to the discussions, debates and analysis without any fear of the other participants rejecting their ideas. Make sure everyone recognizes that the objective is to make the best decision possible in the circumstances – this is not the time for people to promote their own preferred alternative.
Step 2: Investigate the Situation in Detail
Before you can begin to make a decision, you need to make sure that you fully understand your situation. It may be that your objective can be approached in isolation, but it’s more likely that there are a number of interrelated factors to consider. Changes made in one department, for example, could have knock-on effects elsewhere, making the change counter-productive.
Start by considering the decision in the context of the problem it is intended to address. Use the 5 Whys technique to determine whether the stated problem is the real issue, or just a symptom of something deeper. You can also use Root Cause Analysis to trace a problem to its origins.
Once you’ve uncovered its root cause, define the problem using Appreciation to extract the greatest amount of information from what you know, and Inductive Reasoning to draw sound conclusions from the facts. You can also use the Problem-Definition Process to gain a better understanding of what’s going on.
Step 3: Generate Good Alternatives
The wider the options you explore, the better your final decision is likely to be.
Generating a number of different options may seem to make your decision more complicated at first, but the act of coming up with alternatives forces you to dig deeper and look at the problem from different angles.
This is when it can be helpful to employ a variety of creative thinking techniques. These can help you to step outside your normal patterns of thinking and come up with some truly innovative solutions. Our Creativity Tools page has a comprehensive set of tools and techniques that can help you generate great ideas.
Brainstorming is probably the most popular method of generating ideas, while Reverse Brainstorming works in a similar way, but starts by asking how you can achieve the opposite outcome from the desired one and then turning the solution on its head.
Other useful methods for getting a group of people producing ideas include the Crawford Slip Writing Technique and Round-Robin Brainstorming. Both are effective ways of ensuring that everyone’s ideas are heard and given equal weight, regardless of their position or power within the team.
Don’t forget to consider how people outside the group might influence, or be affected by, your decision. You can do this by using tools like the Reframing Matrix, which uses 4Ps (Product, Planning, Potential, and People) as a way to gather different perspectives.
You can also ask outsiders to join the discussion, or use the Perceptual Positions technique to encourage existing participants to adopt different functional perspectives (for example, having a marketing person speak from the viewpoint of a financial manager).
If you have very few or unsatisfactory options, try using Concept Fans, to take a step back from the problem and approach it from a wider perspective, or Appreciative Inquiry, to look at the problem based on what’s “going right” rather than what’s “going wrong.” This can help when the people involved in the decision are too close to the problem.
When ideas start to emerge, try using Affinity Diagrams to organize them into common themes and groups.
Step 4: Explore Your Options
When you’re satisfied that you have a good selection of realistic alternatives, it’s time to evaluate the feasibility, risks and implications of each one.
Almost every decision involves some degree of risk. Use Risk Analysis to consider this objectively by adopting a structured approach to assessing threats, and evaluating the probability of adverse events occurring – and what they might cost to manage.
Then, prioritize the risks you identify with a Risk Impact/Probability Chart, so you can focus on the ones that are most likely to occur.
Another way to evaluate your options is to consider the potential consequences of each one. The ORAPAPA tool helps you evaluate a decision’s consequences by looking at the alternatives from seven different perspectives. Or you could conduct an Impact Analysis or use a Futures Wheel to brainstorm “unexpected” consequences that could arise from your decision.
Other considerations are whether your resources are adequate, the solution matches your objectives, and the decision is likely to work in the long term. Use Starbursting to think about the questions you should ask to evaluate each alternative, and assess their pros and cons using Force Field Analysis or the Quantitative Pros and Cons approach.
Weigh up a decision’s financial feasibility using Cost-Benefit Analysis. Our Bite-Sized Training session on Project Evaluation and Financial Forecasting can also help you evaluate promising financial alternatives using a range of effective techniques such as NPVs and IRRs.
Step 5: Select the Best Solution
Once you’ve evaluated the alternatives, the next step is to make your decision. If one particular alternative is clearly better than the rest, your choice will be obvious. However, if you still have several competing options, there are plenty of tools that will help you decide between them.
If you have various criteria to consider, use Decision Matrix Analysis to compare them reliably and rigorously. Or, if you want to determine their relative importance, conduct a Paired Comparison Analysis to decide which ones should carry the most weight in your decision.
Decision Trees are also useful when choosing between different financial options. These help you to lay options out clearly, and bring the likelihood of your project succeeding or failing into the decision-making process.
If your decision is being made within a group, there are plenty of excellent tools and techniques to help you to reach a group decision.
When anonymity is important, decision-makers dislike one another, or there is a tendency for certain individuals to dominate the process, use the Delphi Technique to reach a fair and impartial decision. This uses cycles of anonymous, written discussion and argument, managed by a facilitator. Participants do not meet, and sometimes they don’t even know who else is involved.