Decision-Making Introduction
For better or worse, our decisions and those of the other members of our organization define today’s realities and tomorrow’s outcomes. In a world that is becoming increasingly knowledge based, more and more members of an organization are making impactful decisions every day; thereby extending decision-making’s importance from the executive suites to the desks of the vast majority of professionals.
Decision-making can be categorized based on the time frame in which associated actions will yield observable results. Near-term decisions are often supported by predetermined guidelines to enable more rapid decision-making while long-term decisions, clouded by the ever increasing uncertainty of changing conditions, rely more heavily on broad philosophical principles and decision-maker experience. The four general decision-making categories are:
Near-Term Decisions: decisions supported by policies, procedures, schedules, and regulatory guidelines
Category One: immediate actions taken in response to emergent conditions as directed by procedure. These decisions seek to seize advantage of momentary opportunities or avoid adverse consequences associated with rapidly changing conditions. Decisions of this type should be supported by procedural guidance whenever possible to improve consistency and predictability of response; thereby minimizing the organization’s risk exposure. Examples include: buying or selling of commodities when a target price is reached and actions taken in response to changing operating system conditions.
Category Two: day-to-day choices regarding activities and resource allocations. These decisions have immediate impact on the organization and may have unrecognized or less predictable long-range impacts. Decisions in this category are frequently supported by pre-established performance standards, policies, and schedules. Examples include: daily work scheduling and task assignment and procurement choices between vendors for a one-time purchases.
Long-Term Decisions: decisions made in the absence of procedural guidance and shaped by market trends, regulatory policies, and societal norms
Category Three: intermediate range decisions made in response to more slowly evolving trends where it is believed a particular desired outcome may be achieved in the days, weeks, or months ahead if a particular course of action is pursued today. Decisions in this category may have both near- and long-term impacts on the organization. While not directly supported by policies, procedures, or regulatory guidelines, these decisions often leverage guiding principles or intent to establish a target end state. Examples include: decisions made in response to slowly degrading equipment where failure is likely, vendor selection where contracts will be entered into for annualized periods, equipment leases other than hourly or daily rentals, monthly scheduling, and hiring and termination decisions for first line management positions and below.
Category Four: long-range or strategic decisions where defined near- and long-term actions seek to achieve results that will be years in the making. While influenced by the organization’s mission, vision, values and regulatory policies, these decisions are largely shaped by broader market trends. Subsequently, decisions in this category have the highest degree of uncertainty because of their long time horizon and the increasing uncertainty associated with market prediction over time. Examples include: construction of new facilities, major equipment replacements, expansion of product lines, mergers and acquisitions, and hiring and termination decisions for senior managers and executives.
Regardless of their impact time frame and the immediacy in which they are made, all decisions go through a similar process that begins with condition recognition and ends in action. Phases of decision-making include:
Identification Phase: condition evolution, condition recognition, condition reporting
Scope and Significance Identification Phase: condition scoping, condition resolution cost-benefit and risk assessment, action need determination, action response prioritization
Action Plan Development Phase: alternative development (including cost-benefit and risk assessments for each alternative), alternative selection, and communication and action plan development (for the selected alternative)
Action Plan Implementation Phase: communication and action plan implementation, follow-up condition monitoring, decision evaluation, and action plan adjustment
Organizational Capabilities and Cultural Development Phase: decision-making process training, performance expectations established and reinforced, questioning attitude developed and reinforced, decision-making self-assessment and lessons learned communication
The final phase, Organizational Capabilities and Cultural Development, is an enabler of decision-making. This phase occurs on an ongoing basis; creating an organizational mindset that enables both the recognition of decision opportunities and helps the organization learn and grow from its decision-making successes and shortfalls. Strong execution of the Organizational Capabilities and Cultural Development Phase is a hallmark of organizational excellence.
Focus of the Decision-Making Topic
Decision-making is a complex process that when done well enhances both strategic planning and tactical business execution. Articles within this topic area explore the four categories of decision-making, underlying concepts, and performance best practices and warning flags. The following articles, podcasts, documents, and resources cover those topics critical to effective decision-making.
Articles
- Evaluating Decision Options, part 1 of 3 by StrategyDriven Contributors
- Evaluating Decision Options, part 2 of 3 by StrategyDriven Contributors
- Evaluating Decision Options, part 3 of 3 by StrategyDriven Contributors
- Best Practice – There Can Be Only One by StrategyDriven Contributors
- Best Practice – Multidiscipline Teams by StrategyDriven Contributors
- Best Practice – Broad Commitment by StrategyDriven Contributors
- Best Practice – Identify the Target by StrategyDriven Contributors
- Best Practice – Ongoing Decision Evaluation by StrategyDriven Contributors
- Best Practice – Follow-up Assessments by StrategyDriven Contributors
- Best Practice – Identify the Decision-Maker by StrategyDriven Contributors
- Best Practice – Observe the Opportunity or Problem First Hand by StrategyDriven Contributors
- Best Practice – Never Let It Go Without Saying by StrategyDriven Contributors
- Best Practice – Establish Decision Execution Performance Measures by StrategyDriven Contributors
- Warning Flag – Logic Fallacies Introduction by StrategyDriven Contributors
- Warning Flag – The Gamblers Fallacy by StrategyDriven Contributors
- Warning Flag – Weak Analogies by StrategyDriven Contributors
- Warning Flag – ad hominem: Personal, Not Issue Attacks by StrategyDriven Contributors
StrategyDriven Podcasts
StrategyDriven Podcast – Special Edition
Documents
Whitepapers
Models
- Decision-Making Base Model
- Stakeholder Commitment Evaluation
- Opportunity and Problem Statement Development
- Decision Alignment Model
Resources
Books
- Great Escapes by Michael and Jerry Useem
- The Effective Executive by Peter F. Drucker
Sign up for our Email NewsletterDecision-Making – Evaluating Decision Options, part 1 of 3
Decision-making often involves trade-offs. Risk aversion suggests that all things being equal, decision-makers will select the option having the lowest risk. But because all things are never quite equal, decision-makers concede items they deem to be of lesser value to items they believe hold greater value with risk being one of the commodities considered.
Decisions involve a choice between two or more complex options. This complexity is a result of the multiple characteristics that define each option and will impact the probability of achieving a desired outcome. In making a selection, the decision-maker is attempting to choose the mix of characteristics that will most optimally achieve the desired result.
Decision-Making – Evaluating Decision Options, part 2 of 3
Once a decision’s requirements, important value-adding, and nice-to-have characteristics are defined and various options possessing these qualities evaluated, the total value of each alternative must be assessed in order to enable option selection that will most effectively achieve the desired results.
Decision-Making – Evaluating Decision Options, part 3 of 3
Alternative selection is the point in the decision-making process where art meets science and academic knowledge meets hands on experience. There is often no one perfect solution or one best solution. Rather, there will exist several alternatives within the acceptable value range from which the decision-maker will ultimately have to choose one option.
Decision-Making Best Practice 1 – There Can Be Only One
Effective decision-making provides the organization with a unified direction aimed at achieving a primary objective and possibly one or more secondary objectives. Regardless of the decision’s complexity or its immediacy, the probability of achieving a successful outcome is directly related to the organization’s ability to execute the decision in a deliberate and focused manner. It is for this reason that decisions and direction for their execution should come from one individual.
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