How to Make Good Decisions

By Todd Rainey

 People make decisions every day, and the results of these decisions can have tremendous consequences. Whether deciding between whole or skim milk, or determining whether to expand a business into Japan, it is important that a decision be properly thought through. Here, we will review an example of a decision-making model used by many business managers.

Step 1: Identify and State the Problem

Surprisingly, it is easy for people making decisions to mis-represent the nature of a problem when trying to solve it. For instance, a business owner trying to cut down on the expenditures on gas may be temped to stat the problem as "the price of gas is too high," but in reality, the price of gas isn't the problem - the amount of money being spent on it is. If, for instance, a more efficient transportation model could come up, the price of gas could increase while the amount spent on transportation could decrease.

Identifying a problem then requires trying to find exactly what needs to change. This means that the problem stated ought to be one over which you have control, and also be terminal. A terminal problem is a problem which has a direct impact on the well-being or goals of a person or organization. For businesses, a common terminal problem is a high expense, and for people, a common terminal problem is a lack of time or health.

Step 2: Establish a Decision Paradigm

Often, problems are multi-faceted. When trying to solve the problem, some aspects of a solution may trade off with one-another. Before committing to a course of action, then, a decision criterion establishes the goals to be implemented in the solution. For instance, sometimes a person wants a solution that is quick, while others want a solution that is effective in the long-term. A decision criterion establishes how to weigh such options against one-another in the event that they come in conflict with one another.

In order to establish a decision paradigm, it is important to establish the paradigm as clearly as possible. Rather than to state that a solution must lower costs, one should state whether the solution ought to lower costs per activity, or fixed costs, as well as which takes priority should one need to take priority over the other. In this way, the eventual decision will be much easier to make.

Step 3: Gather Information About Alternatives

Once a paradigm has been established for the clearly stated problem, it is time to gather information about the alternatives, or decisions available as solutions. Gathering information can consist of online research, personal interviews, brainstorming, etc. At this step, no course of action is being implemented, so it is important to keep an open mind and refrain from discriminating against a given option.

When gathering information about alternatives, be sure to list out not just the alternative itself but the means by which it is implemented, relevant requirements for implementation, and any other pertinent information.

Step 4: Weigh the Alternatives With the Paradigm

This step consists of using the information gathered in step 3 and using it to determine how each alternative fits into the paradigm established in step 2. When weighing the alternatives this way, rank each option in order of their effectiveness for each individual step of the paradigm. The most important part of step four is objectivity - rather than looking at the alternatives and simply choosing one because it "seems about right."

Step 5: Implement the Best Alternative

To implement the best alternative, choose the alternative which was found to be the best in step four and carry it out as effectively as possible. Often, an alternative is more effective if it is implemented more quickly, so be certain to plan out the steps necessary to carry out the action needed.

Implementing an alternative consists of more than simply acting out a plan. During implementation, be sure to take notes in order to find out whether an action is working out as effectively as expected. Take track of lessons learned during implementation in order to better evaluate whether to implement the alternative again in the future, if applicable. This way, the decision-making process will be even more effective the next time it is used.

Conclusion

The ability to make a good decision comes from a clear understanding of the nature of a problem and its potential solutions. A decision-making model which breaks down the goals and information of one's options will provide a more effective platform by which a decision can be made easy. Consider the following examples of problems to be solved by this method:

1. The United Nations plans to reduce the poverty rate by fifty percent between 2010 and 2020.

2. A government running a budget deficit wants to operate on a net income.

3. A small business wants to open a new location.

4. A household wants to eat healthier food.

5. A student has three tests tomorrow, and only limited time to study.