Making effective decisions as a manager is a very significant challenge in a fast-moving world. The expectation of managers to act under conditions of uncertainty or limited information is increasing, which has a considerable impact at every stage of the decision making process.
1. Be clear about the scope of the decision
How to proceed with making a decision can involve almost as many choices as the decision itself. Some decisions are routine – we all make these every day. Others involve strictly governed processes and predictable outcomes, somewhat like a recipe – individuals have little discretion in these decisions. Others are more complex, involving many inter-relating factors. The possible options and outcomes are unknown or uncertain, and may be subject to influence by multiple groups and individuals. It may be that only a broad goal can be identified at the start of the process, with no set way to achieve it. In the volatile world of modern business, such decisions are certainly becoming more common.
In some cases it may be vital to make decisions urgently and make timely interventions, in response to unexpected changes. When faced with a decision, it is necessary to define what needs to be decided at this point in time. Once you are clear on the scope of the decision, check whether you can identify methods for making similar decisions. Are there already rules or regulations in place that will dictate how and by whom this decision is made? If not, are there any guidelines?
2. Consider the potential impact of the decision and how this will be evaluated
Consider the scope of the decision and its potential impact. Who and what will be directly affected? Are there indirect implications for other stakeholders or services? Remember to consider how the decision relates to organisational and departmental objectives, since these may be helpful in delimiting acceptable options, and will provide some criteria against which decisions to evaluate. Will the decision help to progress the department or organisation towards meeting a particular objective? Would certain choices have a negative impact on the meeting other objectives?
3. Decide who needs to be involved in the decision making process
Consider whether making the decision is within your remit. Especially in larger organisations, this is rarely the case – there will be colleagues who need to be consulted, informed or influenced. Consider who these stakeholders are, and how you will go about gathering their contributions or making recommendations to them. Stakeholder Analysis methods could be helpful here. Do not forget to consider people whose work will be directly impacted, especially since you will be dependent upon their commitment to implement the decision.
Questions to ask yourself at this stage include:
• Which person has the formal responsibility for the decision?
• Who will be accountable for its success or failure?
• Does anyone have the experience or expertise to contribute to making the decision?
• Who will ensure that it is implemented properly?
• Who controls the resources necessary for implementation?
Tannenbaum and Schmidt’s Leadership Continuum, sometimes also known as the decision making continuum depicts a sliding scale of levels of managerial authority and delegation. In decision making it can be used to help you to evaluate the context of the decision and the level of delegation that is appropriate. Consider which position along the spectrum it would be most suitable to adopt for the current decision.
4. Define the issue to be decided and collect relevant information
The next step is to clearly define the matter in hand. You must know exactly what you have to decide, and also what does not need to be decided at the current point in time, so as to avoid ‘mission creep’. It is possible that you may need to refine your definition when you have gathered more information, but it is crucial to have a working definition before you begin to collect these details. Gathering relevant and accurate information will help you to evaluate the available options. Consider the specific elements required to make the decision, and then consider what information is actually available or easily accessed. In some cases, the available information may be limited and the time constraints tight . This is likely to shorten the information gathering stage.
In slower-paced situations, it is important to avoid ‘information overload’, which occurs when you become bogged down in analysing every bit of available information before making a decision. Often the answer will not become any clearer, and in the meantime you may have missed the opportunity to act at the time when your decision would have produced the best results. Meanwhile, excessive information gathering can produce an illusion of control by hiding uncertainties and leading to over-confidence. Information management systems, spreadsheets and graphs can be helpful here, but these can often over-simplify reality, excluding information which cannot be assigned a numerical value.
Bear in mind also, that while data describing past and present transactions and trends can form a useful starting point for the decision making process, future trends can only be predicted with some degree of uncertainty. For these reasons be careful not to rely too heavily on such figures.
5. Take account of uncertainty
It is important to accept that there will almost always be a degree of uncertainty about outcomes. Even if you are fairly confident that you understand the implications of your decision in the current situation, the long-term impact may be less clear. For example, rapid change could happen when reaching a tipping point. This means past results are poor predictors of the future. Often, there is a further degree of ambiguity when there is less information available at the time than you would prefer. Recognising and accepting uncertainty is important even if you cannot resolve it.
The actions you take will also be dependent on your own or your organisation’s attitude to risk. Your level of ‘risk aversion’ is the extent to which you prefer a more certain outcome, possibly with a lower payoff, over an uncertain outcome with a potentially higher payoff. Think about how prevailing levels of risk-seeking or risk aversion in your situation may affect your decision. Consider the best and worst case scenarios, and what the impact of these would be on your organisation. Always try to consider the ‘outside view’ – for example you might believe from an insider perspective that your organisation will be successful in its change project, but what is the historical rate of success for similar projects across your sector? Is your project plan stronger or weaker than similar ones?
6. Gather appropriate contributions
Depending on the spread of decision making responsibility in your context, other colleagues will be able to contribute to defining the decision, gathering relevant information, or making the decision.
Wide participation in decision making has advantages, including:
• Engagement, leading to a feeling of ‘ownership’ of the decision
• Confidence in the legitimacy of the decision
• Opportunities for challenging decisions
• Increased transparency.
Participation also brings risks. While a decision where more people have participated may appear more legitimate, teams can fall victim to ‘group think’. They may follow the lead of a particularly dominant individual, or may share a collective bias that leads them to gloss over dissenting views or ignore crucial signals. This is especially likely if the group is quite homogenous, for example if all members have similar job roles or backgrounds. At its worst, group think can be the result of a leader’s deliberate strategy, as they surround themselves with people who will not challenge their views. One method of preventing group think is the Stepladder Technique.
This is similar to the Delphi method but uses face to-face interactions instead of anonymous written contributions. Individuals are all asked to consider the problem independently and record their thoughts before joining the group one by one. They can then contribute their views before hearing those of others. Edward de Bono’s Six Thinking Hats technique could help the team to consider a decision from all points of view.
In order to get the best from a decision making team:
• Create a constructive environment where dissent is welcome
• Ensure full exploration of dissenting views
• Actively seek out information that challenges your recommendations
• Keep groups small to maximise effectiveness, since large groups can become unfocused
• Be aware of others’ motivations and interests
7. Use decision making tools which fit the situation
Decision making tools can be applied to help evaluate and compare alternatives. The choice of tool will depend on the situation.
If there is time available to evaluate options thoroughly, and the options can be appropriately quantified, the following methods could help:
• Kepner and Tregoe’s rational model encourages managers to determine which factors are most important in a decision and to weight options according to how well they meet requirements. For a complex technical decision, for which plenty of time has been allocated, this can be an effective and transparent process for reaching a conclusion.
• The use of decision trees to represent uncertainty, revealing the risks and rewards of alternative courses of action is normal. The division of the tree into branches shows the points at which choices can be made, and the possible outcomes of these choices. Assign probabilities to each outcome, as well as estimate how much value each would deliver. Then calculate the expected value of each choice.
The Plan-Do-Check-Act – ‘shortcut’ strategies, for use of limited time or the decision is less complex, include:
• Paired comparisons.
• PMI (plus/minus/interesting)
• The Pareto Principle
Finally, intuitive ‘hunches’ may be your brain’s way of communicating information that it has subconsciously received, based on pattern recognition. Knowing when to act on these hunches is a useful skill for managers to develop – in certain time-critical situations, for example, your intuition may be a crucial factor. The extent to which you can employ intuition may depend on your organisation or role. Remember that you will need to convince others of the validity of your decision, which could be more difficult if you are unable to rationalise your choice.
• Your place within the organisation
• The nature of your work
• The size of your organisation
8. Watch out for biases and common psychological traps
Our responses to situations are prompted by a complex array of factors influenced by our background, experiences and even hard-wired evolutionary responses. This can easily mislead managers into traps where they make sub-optimal decisions.
Common psychological traps that can impair our decision making include:
• Confirmation bias
• False analogy
• Availability bias
• Tunnel vision
• Sunk cost fallacy
• Loss aversion
The first step to avoiding these traps is being aware of them, but it’s unlikely to eliminate them. Including more people in the decision could help, since it is easier to spot biases in others’ thinking that to recognise them in your own. Crowdsourcing techniques can reduce errors in decision making, since they allow many people to pool their knowledge on an equal footing.
Chip and Dan Heath, in their book Decisive, propose a simple framework – the WRAP framework – for avoiding psychological traps:
• Widen your options – expand your set of choices as far as possible
• Reality-test your assumptions – collect reliable information and explore dissenting views
• Attain distance before deciding – avoid making decisions based on short-term or emotional factors
• Prepare to be wrong – what will happen if things do not go according to plan?
9. Communicate the decision and act on it
However you reach your decision, communicating it clearly is crucial. Your communications should:
• Be timely
• Include all stakeholders
• Explanations of decision making
• Clearly explain the consequences of the decision.
Force field analysis can help to identify and pre-empt any potential problems by identifying the forces expected to support or oppose change. This allows for strategies to be put in place to maximise the positive drivers and limit the negative forces.
10. Monitor and learn from the outcomes
One of the most important factors in improving your decision making is feedback. In some cases, feedback may be quick and clear. In others, such as long term investment decisions, it may take some time for the impact to become apparent. It may be ambiguous – the decision moved the organisation forward in some ways, but held it back in others. However long it takes for the lessons to become clear, they should not be ignored. Keeping a record could help you to continuously hone your decision making skills and also recognise traps in your own thinking.