Decision making is deciding on a choice that is neither right or wrong but must be a wise decision to benefit the business.
Peter F. Drucker, management consultant and author that contributed to the philosophical and practical foundations of the modern business corporation, says, “It is at best a choice between ‘almost right’ and ‘probably wrong’ — but much more often choice between two courses of action, neither of which is probably more nearly right than the other.”
The two main resources used in decision making are time and money. A person can have either a lot of time but not enough money, or a lot of money and little time. The boss should determine what alternatives are best for the business by focusing on the resources available.
An individual can follow the steps to making decisions based on Drucker’s list of The Practice of Management.
- Define the problem.
- Analyze the problem.
- Develop alternative solutions.
- Decide on the best solution.
- Make the decision effective.
- Monitor the solution.
(Herbert A. Simon gives us two basic types of decision making.)
- Programmed decisions
- Nonprogrammed decisions
There are certain tools that can be used to make analytical decisions. The first tool is the Critical Path Method that involves two main resources: time and cost. The tool dealing with probabilities of decision making is the Program Evaluation and Review Technique. Both tools are often used together in today’s decision making which is known as PERT/CPM.
- Determine the tasks necessary to complete a project and how long each will take.
- Determine the sequence in which the different tasks need to be performed.
- Construct a diagram showing the time sequences of the various activities.
The diagram can estimate the time it will take for the project. With excessive planning using the PERT/CPM chart a business’s decision making process will use its main resources wisely. If the chart is difficult to understand and create for an individual that is not well skilled in PERT/CPM the decision tree is another visual tool that can be utilized. The decision tree is used when comparing projects against each other. This visual tool can become complex when comparing more than two projects but, in turn, the tree can determine many goals.
Decision making is a risky business because in each decision there can be hidden traps. Three authors of Harvard Business Review determined the main hidden traps.
- Anchoring Trap – others can purposely anchor you to their self-serving figures and impressions simply by mentioning them to you.
- The status quo trap – Even the rebels among us might not want to change our own present state of being — only the status quo of others.
- The sunk-cost trap – old investments of time or money that are now irrecoverable.
- The confirming evidence trap – we might seek opinions from people we know will agree with us.
- The framing trap – making a decision is to frame the question. Everything else goes wrong if the problem is defined incorrectly in the beginning.
- Estimating and forecasting traps – Overconfidence, Prudence, Recallability.
Anyone can be a decision maker depending on the decision that needs to be made. Individuals with stronger leadership skills tend to make decisions but these decisions might not necessarily be best for the business/groups. Group decision making is very helpful when the issues are complex because each scenario is processed by different individuals. The leader/decision maker needs to analyse the Strengths, Weaknesses, Opportunities, and Threats (S.W.O.T) of the company. Decision making is a rather long process but with the information provided, a decision maker can make wise decisions for bettering their company.
For more information/tips on decision making links are provided below.
Herrick, D. F. (2003). Media management in the age of giants: Business dynamics of journalism (2nd ed.). Ames: Iowa State Press.
Stephan Ben Francisco, majoring in Journalism at the University of New Mexico.