Decision-Making Process

In everyday life, we constantly make decisions. In some cases, these decisions are automatic, whilst in others, making a decision can take longer, and be both more challenging and more complex as a process.

Decision-making characterises some of the most important events in life: for example, choosing who to marry, which house to buy, what career to undertake and whether or not to quit smoking are all decisions that require you to take into consideration various different elements that need evaluating and that are based in the future (reflective).

Instead, whether or not you drink another beer before driving, what pizza you order on an evening with friends or choosing whether or not to run away from danger all require quick and effective decision-making (impulsive).

In trading, a scalper that opens and closes trades in seconds reflects an impulsive system; as well as a panic selling phase. Instead, position traders and investors act according to a reflective system.

Decisions, when taken by individuals, imply voluntary and intentional behaviour that follows reasoning. Typically, decision-making is put in place to solve a problem. In psychological terms, however, there is a certain difference between deciding and solving a problem. In problem-solving our decision act is always bound to the goal we want to achieve. In decision-making, the decision act is represented by the reasoning of choosing the most suitable alternative within a series of options.

So, in formal terms, the decision-making process can be considered as the result of mental (cognitive and emotional) processes which determine the selection of a course of action among different alternatives. Each decision-making produces a final choice.

Making decisions usually requires evaluating at least two options that differ in features and elements. The selection of one option at the expense of another requires that the person put in place an overall assessment of the different alternatives, using specific methods of research, processing of information and decision-making strategies.

In most cases, making decisions means thinking in conditions of uncertainty: we cannot predict with certainty the future success of the available potential alternatives, but in the best of cases all we can do is assess the likelihood of certain outcomes.

Researchers in the fields of psychology and economics generally agree on the importance of two fundamental human motivations: the desire to reduce uncertainty and the desire to gain an advantage (Bentham, 1948); these motivations are fundamental in making decisions.

Contrary to the first theories, which saw decision-making which linked decision-making with rational choice, today it is known that human decisions are based both on emotional and rational motivations (Cabanac, 1992).

Decision-making is, therefore, strictly connected to probabilistic reasoning. “Probabilistic reasoning” is inductive inferential reasoning that allows us to estimate the probability that a given event within certain conditions can occur.

Defining the Business Decision-Making Process

In general, the decision-making process helps managers and other business professionals solve problems by examining alternative choices and deciding on the best route to take.

Using a step-by-step approach is an efficient way to make thoughtful, informed decisions that have a positive impact on your organisation’s short and long-term goals.

The business decision-making process is commonly divided into seven steps. Managers may utilise many of these steps without realising it, but gaining a clearer understanding of the best practices can improve the effectiveness of your decisions.

1. Identify the decision. To make a decision, you must first identify the problem you need to solve or the question you need to answer. Clearly define your decision. If you misidentify the problem that needs solving, or if the problem you have chosen is too broad, you will knock the decision train off the track before it even leaves the station. If you need to achieve a specific goal from your decision, make it measurable and timely, so you know for certain that you met the goal at the end of the process.
2. Gather relevant information. Once you have identified your decision, it is time to gather the relevant information for that choice. Do an internal assessment, seeing where your organisation has succeeded and failed in areas related to your decision. Also, seek information from external sources, including studies, market research, and, in some cases, evaluation from paid consultants. Beware: you can easily become bogged down by too much information, facts and statistics that seem applicable to your situation but that might only complicate the process.
3. Identify the alternatives. With relevant information now at your fingertips, identify a possible solution to your problem. There is usually more than one option to consider when trying to meet a goal. For example, if your company is trying to gain more engagement on social media, your alternatives could include paid social advertisements, a change in your organic social media strategy, or a combination of the two.
4. Weigh the evidence. Once you have identified multiple alternatives, weigh the evidence for or against said alternatives. See what companies have done in the past to succeed in these areas, and take a good hard look at your own organisation’s wins and losses. Identify potential pitfalls for each of your alternatives, and weigh those against the possible rewards.
5. Choose among alternatives. Here is the part of the decision-making process where you have to, you know, make a decision. Hopefully, you have identified and clarified what decision needs to be made, gathered all the relevant information, and developed and considered the potential paths to take. You are perfectly prepared about which to choose from.
6. Take action. Once you have made your decision, act on it! Develop a plan to make your decision tangible and achievable. Develop a project plan related to your decision, and then set the team lose on their tasks once the plan is in place.
7. Review your decision. After a predetermined amount of time, which you defined in step one of the decision-making process, take an honest look back at your decision. Did you solve the problem? Did you answer the question? Did you meet your goals? If so, take note of what worked for future reference. If not, learn from your mistakes as you begin the decision-making process again.

Decision-making can determine the difference between success and failure. Decision-making cannot be taken lightly; it is a huge responsibility. When making a decision, it is better to take the necessary time and not rush into it, research, investigate and examine the issues; always consider the options and different solutions.

Sometimes decisions will be urgent and will need to be taken at the moment. Taking urgent decisions does not mean not following a process. Experience will make decision-makers confident. It is always better to make a decision than to let a problem get larger.

These are some common mistakes that should be avoided while making decisions.

Decisions should be made quickly, efficiently and in the best interest of the company. Being unable to make a choice can only worsen a situation. Avoid not making a decision when it is needed. Some decisions are easy to make, whilst others take time. Just make sure a decision is made.

Do not postpone making a decision

Being under pressure and not analysing a problem are not reasons to postpone making a decision. Allow for enough time to gather information, analyse the situation, choose a course of action and formulate a solution. Following the steps one by one towards making a decision is simple. Do not be afraid to do so.

Reliable information is crucial to making decisions

Not having access to the correct information and the proper sources can certainly create problems. Avoid bad decisions by checking the accuracy of your information and sources. Do not be fooled.

Know the cause of the problem before making a decision

Be sure to differentiate the symptoms from the cause of the problem. Knowing the cause will always facilitate a better decision.

Always analyse the problem

Identify, isolate and select what information is useful and accurate, and what is not. Every problem has different variables, observe them and analyse them, follow a procedure, define the objectives and be sure to figure out the limitations before making a decision.

All decisions need follow-up

After making a decision it is important to implement it with a follow-up. Implementing a decision is just the first step in solving a problem. Following up will guarantee that the execution is properly done and the problem is solved.

Following these simple recommendations will help in the decision-making process. Someone has to make decisions and take the lead.