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Reading Room – Decision Making

Decision Making in business is a common subject of mine. This blog is about strategy, and strategy is about knowing how and when to make the right decisions. In addition, I have been quoted on the NCR Silver blog on this topic, and one of my Udemy courses is a framework for making group decisions in business.

In summary: there are some key rules that must be recognized in decision making:

  1. There is always more than one option
  2. Every decision for change incurs a loss
  3. Every decision for change incurs a gain

My course explains the process for understanding these options and evaluating them in the business context.

Decision making is an under-discussed and yet well-studied part of effective business management, and today’s reading room is a small compilation of decision making ideas and methods.

Decision Trees for Decision Making – Harvard Business Review

This is the original article revealing the new technique of decision trees. As the expression of decision tree has become quite popular, it is useful to go back to the original research to see how this method was developed. Note in particular the recognition that no decision is made in isolation, either of what has come before or, indeed, of what will happen later.

Decision Matrix, Definition and Examples – Business News Daily

The approach here is similar in content to my framework (mentioned above). The tool used and the execution is slightly different. While my approach wants to discuss options in a neutral tone resulting in both a qualitative and quantitative analysis of each, the decision matrix focuses on quantitative results, using the numbers to determine best options.

Pareto Analysis – Eugene O’Loughlin YouTube Channel

You are probably familiar with the Pareto Principle, which assumes that 20% of labor produces 80% of results, or variations on how the categories for division of effort and output. Using the Pareto Analysis in decision making is a first step to help determine where the real problem actually lies, as it is not always what immediately exhibits the problem.

Paired Comparison Analysis – Free Management e-books

This site has a good explanation of this method at work. The Paired Comparison Analysis also seeks to use both qualitative and quantitative considerations in choosing options. With this model, you build a table in which you directly compare solution options against one another, to select which is most effective.

PEST Analysis – NetMBA Knowledge Center

A PEST analysis looks at factors external to an organization to help determine what option to choose. The four factors are Politics, Environment, Social trends, Technology. Most of this is beyond a company’s control, and this analysis wants to help a business understand how they must position themselves.

 

One note on SWOTs: people have occasionally asked me about the SWOT analysis as a decision making tool. My suggestion is to use the SWOT analysis as part of a greater study, or strictly as part of competitive environment considerations. Used in isolation to make business decision, it risks not analyzing dependencies and consequences in enough detail.

 

2 Comments

  1. J. Ryan Willaims on November 15, 2018 at 11:40 am

    Thanks for this breakdown, Rebecca. Our application development clients often have major technical decisions to make based on budget, market desire, integration options, etc. I would love to see in a future post some illustration of how these various assessments can help clarify and expedite such decisions.



    • Rebecca on November 15, 2018 at 12:26 pm

      Yes, and each one must be evaluated on its own and then against other decisions, how does each decision impact the next one.

      Great idea, that can be done!