Decision Making

Many of the problems we encounter in everyday life involve making choices and decisions. To buy or not to buy? Which one to buy? How much to buy? Which train to take? All these are types of choice and decision that contribute to decision making processes. These questions may involve steps as extracting information, processing data and finding methods of solution. The only real difference is that the question asks for a decision to be made.

Decision-making is regarded as the cognitive process resulting in the selection of a belief or a course of action among several alternative possibilities. Every decision-making process produces a final choice, which may or may not prompt action. Decision-making is the process of identifying and choosing alternatives based on the values, preferences and beliefs of the decision-maker.

Common decision making examples in workplace, are

• Identifying a faulty machine as the source of disruptions in the production process.
• Facilitating a brainstorming session to generate possible names for a new product.
• Polling staff to gauge the impact of extending retail hours.
• Conducting a comparative analysis of proposals from three advertising agencies and selecting the best firm to lead a campaign.
• Soliciting input from staff members on an issue important to the company’s future.
• Surveying customers to evaluate the impact of a change in pricing policy.
• Implementing the shutdown of a designated plant with excess manufacturing capacity.
• Generating a list of options for a new regional sales territory.
• Evaluating the impact of several possible cost-cutting measures.
• Comparing the leadership potential of different team members and choosing a project manager.
• Researching possible legal or logistical problems associated with a new company policy
• Brainstorming possible themes for a fundraising campaign.

Decision-Making Process

Stages in the decision-making process

• Defining the problem, challenge, or opportunity
• Generating an array of possible solutions or responses
• Evaluating the costs and benefits, or pros and cons, associated with each option
• Selecting a solution or response
• Implementing the option chosen
• Assessing the impact of the decision and modifying the course of action as needed

You will not always find yourself going through all six steps in an obvious way. You might be responsible for one aspect of the process but not the others, or several steps might be merged together. But someone should still go through each step in some way or other. Skipping steps usually leads to poor outcomes. Remember to develop strategies to ensure that you have not overlooked important information or misunderstood the situation, and be sure to uncover and correct for any biases you may have

Leadership and Decision Making

Leaders who can demonstrate an ability to identify all the options and compare them in terms of both costs and effectiveness have an advantage over those who can’t. Organizational culture and leadership style together determine the process for decision-making in any given company. Some may use a consensus-based approach, while others depend on a manager or management group to make all major decisions for the company.

Many organizations use a mixture of centralized and consensus-based styles. How an individual employee participates in the decision-making process depends on his or her position within the overall structure of the company.

As you prepare to apply for a given position, it is important to read the job description carefully and to thoroughly research the company so you can understand which decision-making skills your prospective employer is looking for—then you can emphasize these skills in your resume, cover letter, and interview.

Decision-making techniques

Decision-making techniques can be separated into two broad categories: group decision-making techniques and individual decision-making techniques. Individual decision-making techniques can also often be applied by a group.

Group

• Consensus decision-making tries to avoid “winners” and “losers”. Consensus requires that a majority approve a given course of action, but that the minority agree to go along with the course of action. In other words, if the minority opposes the course of action, consensus requires that the course of action be modified to remove objectionable features.
• Voting-based methods:
  • Majority requires support from more than 50% of the members of the group. Thus, the bar for action is lower than with consensus.
  • Plurality, where the largest block in a group decides, even if it falls short of a majority.
  • Range voting lets each member score one or more of the available options. The option with the highest average is chosen. This method has experimentally been shown to produce the lowest Bayesian regret among common voting methods, even when voters are strategic.
• Delphi method is structured communication technique for groups, originally developed for collaborative forecasting but has also been used for policy making.
• Dotmocracy is a facilitation method that relies on the use of special forms called Dotmocracy Sheets to allow large groups to collectively brainstorm and recognize agreement on an unlimited number of ideas they have authored.
• Participative decision-making occurs when an authority opens up the decision-making process to a group of people for a collaborative effort.
• Decision engineering uses a visual map of the decision-making process based on system dynamics and can be automated through a decision modeling tool, integrating big data, machine learning, and expert knowledge as appropriate.

Individual

• Decisional balance sheet: listing the advantages and disadvantages (benefits and costs, pros and cons) of each option, as suggested by Plato’s Protagoras and by Benjamin Franklin.
• Simple prioritization: choosing the alternative with the highest probability-weighted utility. This may involve considering the opportunity cost of different alternatives. See also Decision analysis.
• Satisficing: examining alternatives only until the first acceptable one is found. The opposite is maximizing or optimizing, in which many or all alternatives are examined in order to find the best option.
• Acquiesce to a person in authority or an “expert”; “just following orders”.
• Anti-authoritarianism: taking the most opposite action compared to the advice of mistrusted authorities.
• Flipism e.g. flipping a coin, cutting a deck of playing cards, and other random or coincidence methods – or prayer, tarot cards, astrology, augurs, revelation, or other forms of divination, superstition or pseudoscience.
• Automated decision support: setting up criteria for automated decisions.
• Decision support systems: using decision-making software when faced with highly complex decisions or when considering many stakeholders, categories, or other factors that affect decisions.

Decision Making Bias

Biases usually affect decision-making processes. Common biases in decision-making are

• Confirmation bias: People tend to be willing to gather facts that support certain conclusions but disregard other facts that support different conclusions. Individuals who are highly defensive in this manner show significantly greater left prefrontal cortex activity as measured by EEG than do less defensive individuals.
• Premature termination of search for evidence: People tend to accept the first alternative that looks like it might work.
• Cognitive inertia is unwillingness to change existing thought patterns in the face of new circumstances.
• Selective perception: People actively screen out information that they do not think is important. In one demonstration of this effect, discounting of arguments with which one disagrees (by judging them as untrue or irrelevant) was decreased by selective activation of right prefrontal cortex.
• Wishful thinking is a tendency to want to see things in a certain – usually positive – light, which can distort perception and thinking.
• Choice-supportive bias occurs when people distort their memories of chosen and rejected options to make the chosen options seem more attractive.
• Recency: People tend to place more attention on more recent information and either ignore or forget more distant information. The opposite effect in the first set of data or other information is termed primacy effect.
• Repetition bias is a willingness to believe what one has been told most often and by the greatest number of different sources.
• Anchoring and adjustment: Decisions are unduly influenced by initial information that shapes our view of subsequent information.
• Groupthink is peer pressure to conform to the opinions held by the group.
• Source credibility bias is a tendency to reject a person’s statement on the basis of a bias against the person, organization, or group to which the person belongs. People preferentially accept statement by others that they like (see also Prejudice).
• Incremental decision-making and escalating commitment: People look at a decision as a small step in a process, and this tends to perpetuate a series of similar decisions. This can be contrasted with zero-based decision-making (see Slippery slope).
• Attribution asymmetry: People tend to attribute their own success to internal factors, including abilities and talents, but explain their failures in terms of external factors such as bad luck. The reverse bias is shown when people explain others’ success or failure.
• Role fulfillment is a tendency to conform to others’ decision-making expectations.
• Underestimating uncertainty and the illusion of control: People tend to underestimate future uncertainty because of a tendency to believe they have more control over events than they really do.
• Framing bias: This is best avoided by increasing numeracy and presenting data in several formats (for example, using both absolute and relative scales).
• Sunk-cost fallacy is a specific type of framing effect that affects decision-making. It involves an individual making a decision about a current situation based on what they have previously invested in the situation. An example of this would be an individual that is refraining from dropping a class that they are most likely to fail, due to the fact that they feel as though they have done so much work in the course thus far.
• Prospect theory involves the idea that when faced with a decision-making event, an individual is more likely to take on a risk when evaluating potential losses, and are more likely to avoid risks when evaluating potential gains. This can influence one’s decision-making depending if the situation entails a threat, or opportunity.
• Optimism bias is a tendency to overestimate the likelihood of positive events occurring in the future and underestimate the likelihood of negative life events. Such biased expectations are generated and maintained in the face of counter evidence through a tendency to discount undesirable information. An optimism bias can alter risk perception and decision-making in many domains, ranging from finance to health.
• Reference class forecasting was developed to eliminate or reduce cognitive biases in decision-making.

Decision Making Tools

Decision making moves in sequential stages: understanding the problem, generating solutions, narrowing down solutions, and then deciding which solution to implement. To facilitate this process, a leader needs to use a number of decision-making tools. Decision making tools for teams which are widely used are

Force field analysis – The force field analysis tool is primarily used to develop a full understanding of the forces, both for and against, that are acting on a problem or goal. Its main strength is that it forces people to think about the positives and negatives of a change situation, and what they can do to make that change permanent.

Creating a force field analysis involves steps, as

• Identify the problem and the goal – A force field analysis begins with identifying what the problem is and what would happen if the problem was removed.
• Identify the driving forces – The next step is to identify the nature and the strength of the forces acting in favor of a solution. This might include the proponents of a plan, its benefits, a need to reduce customer complaints, and so on. Stronger forces are indicated by larger arrows.
• Identify the restraining forces – Next, the restraining or opposing forces are identified. These might be antagonists, problems on the factory floor, costs, and so forth. The stronger the force, the larger the arrow used to represent it.
• Decide how to proceed – The final stage is deciding whether to add more driving forces in order to overwhelm the restraining forces, to remove or weaken the restraining forces, or to do both simultaneously.

The force field analysis and the cause-and-effect diagram are good initial problem-defining tools.

Brainstorming – The brainstorming technique was introduced by Alex Faickney Osborn in his book Applied Imagination in 1930. It is used as a tool to create ideas about a particular topic and to find creative solutions to a problem.

Brainstorming Procedure – The first and foremost procedure in conducting brainstorming is to review the rules and regulations of brainstorming. Some of the rules and regulations are – all the ideas should be recorded, no scope for criticism, evaluation and discussion of ideas.

The second procedure is to examine the problem that has to be discussed. Ensure that all the team members understand the theme of brainstorming. Give enough time (i.e., one or two minutes) for the team members to think about the problem. Ask the team members to think creatively to generate ideas as much as possible. Record the ideas generated by the members so that everyone can review those ideas. Proper care has to be taken to ensure that there is no criticism of any of the ideas and everyone is allowed to be creative.

Brainstorming Rules – Rules to be followed for brainstorming are

• Ensure that all the team members participate in the brainstorming session because the more the ideas that are produced, the greater will be the effect of the solution.
• As the brainstorming session is a discussion among various people, no distinction should be made between them. The ideas generated by other people should not be condemned.
• At the time of building people’s ideas, consider each person’s ideas as the best, because the ideas generated by each individual may be superior to the other person.
• While generating ideas, always put more trust on quantitative ideas rather than qualitative ideas. As a facilitator you can tally these generated ideas with the team’s performance.

Nominal Group Technique (NGT) – The nominal group technique was introduced by Delbecq, Van de Ven, and Gustafson in 1971. It is a kind of brainstorming that encourages every participant to express his/her views. This technique is used to create a ranked list of ideas. In this technique, all the participants are requested to write their ideas anonymously and the moderator collects the written ideas and each is voted on by the group. It helps in decision-making and organizational planning where creative solutions are sought. It is generally carried out on a Six Sigma project to get feedback from the team members.

NGT Procedure – All the members of the team are asked to create ideas and write them down without discussing with others. The inputs from all members are openly displayed and each person is asked to give more explanation about his/her feedback. Each idea is then discussed to get clarification and evaluation. This is usually a repetitive process. Each person is allowed to vote individually on the priority of ideas and a group decision is made based on these ratings.

Multi-voting – Multivoting, which is also called NGT voting or nominal prioritization, is a simple technique used by teams to choose the most significant or highest priority item from a list with limited discussion and difficulty. Generally it follows the brainstorming technique.

Multivoting is used when the group has a lengthy list of possibilities and wants to specify it in a small list for later analysis and discussion. It is applied after brainstorming for the purpose of selecting ideas.

Multivoting Procedure – The procedure to be followed for conducting Multivoting, is

• Conduct a brainstorming process to create a list of ideas and record the ideas that are created during this process. After completing this, clarify the ideas and combine them so that everyone can easily understand. The group should not discuss the ideas at this time.
• Participants will vote for the ideas that are eligible for more discussion. Here the participants are given freedom to vote for as many ideas as they desire. Tally the vote for each item. If any item gets the majority of votes, it is placed for the next round.
• In the next level of voting, the participants can cast their vote for the remaining items in the list.
• Participants will continue their voting till they get a proper number of ideas for the group to examine as a part of the decision-making or problem solving process. When the group holds a discussion about pros and cons of the project, the remaining ideas are discussed.
• This discussion may be completed by a group as a whole.
• Continue proper actions by creating a choice of the best option or discovering the top priorities.

Effort/impact matrix – An excellent way for teams to decide what course of action to take is to determine and compare the impact of any action to the effort, or expense, involved. This is known as the effort/impact matrix, and normally involves a matrix, or grid, with following comparisons

• Little effort/Little impact – When only a little amount of improvement accrues from a small amount of effort, that action is deemed to be low priority and should be delayed until a more convenient time.
• Little effort/Great impact – When a little amount of effort produces a great amount of improvement, that action is deemed to be a top priority and should be given immediate attention.
• Great effort/Little impact – When a great amount of effort produces only a little amount of improvement, that action is deemed low priority and should be shelved until all other action options have been completed.
• Great effort/Great impact – When a great deal of impact will come about but only from a great deal of effort, that action is deemed to be a long-term objective and will require a champion to keep it alive.

Voting – Voting, or majority rule, is a quick way for teams to make a decision, especially about an issue that does not require unanimous agreement. Unlike multi-voting, this involves a straight “one member, one vote” approach with a majority count deciding the action to be taken. The inherent danger in this approach – especially in newly established teams – is that some members might disagree with the outcome of the vote, which may lead to conflict. Mature teams are less likely to argue about results reached in this manner.

Consensus – Consensus, as its name suggests, implies general team support for the proposed course of action. Ample opportunity is afforded to all members to discuss issues fully and to express and resolve concerns. When issues have been discussed, the leader will ask for consensus. If indecision still exists, another round of discussion could take place, where lingering doubts are resolved. The leader will ask again for consensus, which typically would be reached.

Unlike majority rule, no voting takes place and, while the decision may not be to everyone’s liking, it’s something that dissenting members can live with, so they don’t fight it. But, if after two or three rounds of discussion, there are still people unwilling to go along with the majority position, consensus is unlikely to be reached and the team might have to turn to another decision-making tool.

Developing decision making skills

• Don’t delay – Simple decisions are fun. You can tick them off your to do list and feel like you’ve accomplished something along the way. When the stakes increase and you’re faced with making a critical business decision, don’t delay because it’s difficult. Dedicate a focused block of time each day to work through the pros, cons, risks and realistic outcomes of your decision. Consider the second and third order effects of your decision during this session.
• Shelve ego and emotion – Decision making can be difficult because you become too personally invested in how a decision will make you look and feel. Can you objectively solve the problem? Yes! List potential causes and put your emotion and ego on the back-burner. You will make better decisions by focusing on the facts instead of personal deficiencies. If you need help with anything in your business, from marketing through to customer service, you have options.
• Ask an expert – The decision you’re making has likely been made in the past. While the problems you’re trying to solve are unique to you, it’s highly probable that someone else has solved the same issue at a larger scale. A neutral third-party to help you make decisions will keep you objective. Work from a proven playbook instead of trying to reinvent the wheel.
• Question your data – You will never have complete data to make your decision. This is OK. It’s still your responsibility to seek the right data. Relying on a friend’s opinion as a trusted data source may land you in hot water. Instead, use qualitative and quantitative customer feedback if you’re making a decision that impacts your customers. Use industry trends, research reports and ask experts in your field if you’re making a strategic move. Seek trustworthy data and your decision making ability will skyrocket.
• Plan for doomsday – Understand the underlying risks of the decisions you make. Know your risks and you will rest easy when making decisions. When you get a decision wrong, don’t beat yourself up. Instead, reflect on why it failed, then write it down to make sure you don’t make the same mistake twice.