We all inevitably have to make daily decisions at work and some of these decisions might be relatively unimportant, while others will be strategically important. For the important decisions it can be worth being aware of the 7 steps and stages in the decision-making process, so here they are below.
7 Steps to Decision Making
Step 1: Identify the Decision That Needs To Be Made
For many small decisions we experience, we almost without thinking, make an instant decision and act on that decision accordingly.
For much more important decisions though, we can definitely benefit from a decision-making process, i.e. one that is more structured and provides a logical way of dealing with the issue to be solved or dealt with.
To achieve this, we first need to identify what decision needs to be made and understand some other criteria. We need, for example, to clearly understand the:
- Problem or opportunity that needs deciding on – (to ensure that there is a clear objective)
- Scope – is the decision you make going to affect other people, the entire company etc.?
- Impact of the decision – how exactly will the decision impact your company’s income, ethical stance, and affect future business opportunities etc?
- Objective – what do you really seek to achieve as a result of the decision?
Example: Imagine that you are a buyer for a fashion company, i.e. you are in charge of buying items for the coming seasons. Your decision-making will need to factor in the store’s inventory, projected sales, trends, and budgets.
Step 2: Gather Information
The second step is data collection and gathering all of the necessary information required to make an informed decision.
You will need to collect data that will help you with this decision such as data on:
- Historical data
- Available resources (including financial)
- Market trends (including competitor trends)
- Customer feedback where it’s relevant to better understand the consumer decision making process.
Example: Building on the previous example, our fashion buyer could gather information on customer trends, and historical data from the last few years, in addition to looking at previous fashion buying decisions and actual outcomes (your company has made), market research, industry reports and data, and customer feedback.
Step 3: Identify Alternatives
Before just going with one solution when making a decision, the best decision-making process method is to first make a list of all possible solutions, before then making a final decision.
What alternatives exist, including new ideas and innovative and creative ideas that you can come up with?
You might want to start this step by brainstorming and thinking outside the box to consider all potential choices. Spread the net wide and write down as many ideas as you can.
Spread the fishing net wide (as it were) and then, once you have a list of all options and ideas, start honing in on the most practical and realistic choice.
Use creative thinking and strategic thinking to avoid overlooking possible solutions. A feasibility study can also be good to ascertain if certain choices are valid options or not.
Example: For our fashion business example, the alternatives might include:
- Expanding the current product line with new variations of existing products.
- Introducing a completely new product that meets a developing market trend.
- Co-creating a new product with another business.
- Deciding not to expand at all and to instead focus on improving existing products.
Step 4: Consider the Evidence
The next of the 7 steps of the decision making process is to consider the evidence.
By this, I mean that you need to thoroughly analyse each option and consider the advantages and disadvantages of each.
Try to analyse each option with an independent mind, i.e. try to be objective so that you can get a clear idea of the feasibility of each option and the real potential impact of each option.
Doing a SWOT analysis can be extremely helpful in this decision-making process.
Example: Sticking with the fashion buyer example, the buyer could do a SWOT analysis on each potential product line and the result might suggest something like this:
- Expanding the existing product line: Advantages: Build on your existing brand image and customer base. Disadvantages: Potential market saturation and increased competition.
- Introducing a new fashion range: Advantages: a chance to build a new additional customer base and generate new revenue streams. Disadvantages: Possible high initial costs and may be hard to break into a new market area.
- Partnership Idea: Advantages: Combined expertise, contacts, and resources. Disadvantages: Potential for conflict and too many decision makers and profit-sharing.
- Not expanding: Advantages: Less extra financial risk or resources. Disadvantages: Possible stagnation and missed opportunities for growth.
Step 5: Choose the Best Option
After evaluating all of the information you have gathered, there comes a time to make a choice on the best decision to make.
The decision you make should also be congruent ethically and morally. If you are making a decision for work, for example, your choice needs to fit in with the goals, ethics, and vision of the company you are working for.
With this in mind, and with an objective mind, make your choice based on all the steps you have made up until this point.
Example: As the fashion buyer, having done all of your analysis, ie. steps 1 to 4, you now make the choice to introduce a new swimwear range as it offers the highest potential for growth and aligns with your company’s long-term business goals. You did consider very carefully the risks and costs but the potential for market expansion outweighs the risks.
Step 6: Time for Action
The first 5 steps of the decision making process are now complete and it’s time to act on your decision.
Create a detailed and clear plan so that you have clear stages for executing the decision. Information you will want to detail can include:
- Allocating time and money resources
- Full planning – for all aspects of the decision fulfilment
- The important people who need communicating to – i.e., progress reports
Example: Our fashion buyer can now create a detailed plan that lists dates, times and costs for the new product launch, the marketing strategy, who will do what, and the production schedule.
Step 7: Review Your Decision
After the decision has been made and implemented, it is important to reflect afterwards, to learn from any mistakes (and to learn from things done well).
Use hindsight to -reassess your decision against actual results and identify any areas for improvement in the future.
One of the most important parts of the decision-making process is to refine and improve your decision-making skills.
Example: Let’s imagine that with our fashion buyer example, the buyer reviews her progress 6 months later. In this case, the new swimwear range sells well and the buyer now considers scaling up production or expanding into additional markets.
Key Performance Indicators (KPIs) can be very helpful for evaluating how effective a decision was.
Final Thoughts on the 7 Decision-Making Process Steps
If you are making very basic decisions such as when to take a lunch break, you are simply not going to need to follow these 7 step decision-making process.
If you are making an important decision though, this process is a great way to ensure you make a decision that is based on facts rather than on gut instinct.
Making effective decisions is a skill that you can develop through a 7 step approach, with the final re-analysis step at the end, invaluable for building your decision-making skills.
Types of Decision-Making Models
The model we have used is commonly known as the ‘Rational Decision-making Model’.
1. This Rational Decision-Making Model
This model follows the 7 steps we have already discussed and is one of the most popular models.
2. Intuitive Decision-Making Model
The ‘Intuitive decision-making’ model is very different in that it relies very heavily on a person’s instincts and gut feeling.
This model is sometimes a good choice when there is a very limited time to make a decision and where the decision-maker has a high level of expertise in the area.
In the military, these types of quick decisions are perfected through intense and repeated training in different scenarios.
Example: An experienced emergency room doctor makes a quick decision on how to treat a patient based on their symptoms and the doctor’s past experience.
3. Bounded Rationality Model
The ‘Bounded rationality’ model is more about providing a satisfactory solution rather than the very best and optimal one.
This model is based on the idea that many decision-makers will simply not have the expertise, access to necessary information, ability, and time to make the perfect decision.
Steps:
- Identify the problem.
- Set a threshold for an acceptable solution.
- Search for alternatives.
- Select the first alternative that meets the threshold criteria.
- Implement the decision.
- Review the decision and adjust if necessary.
Example: Bob is a manager who needs to hire a new employee but has limited time to review CVs or resumes. He sets criteria for a minimum level of experience and education and selects the first candidate who meets these criteria. Luckily for Bob, Anna who was hired, turns out to be a perfect match for the role.
4. Incremental Decision-Making Model
The Incremental Decision-Making Model involves making decisions through a series of small, manageable steps to facilitate gradual progress and adaptation.
Steps:
- Identify a small change or step that can be taken.
- Implement the change.
- Evaluate the results.
- Make further small changes based on feedback.
- Repeat the process.
Example: A company wants to improve its customer service. Instead of overhauling the entire department, they start by implementing a new customer feedback system and make adjustments based on the feedback received.
5. Vroom-Yetton Decision-Making Model
To explain this model in a simple form, this model provides a way for deciding on the level of participation that team members in the decision-making process should have. It helps determine whether decisions should be made by the leader alone or involve group input.
Example: Jean is a manager who needs to decide on the ideal approach for a new upcoming project.
She uses the Vroom-Yetton model to work out whether to make the decisions herself or whether to include the whole team based on the complexity of the project and the need for team buy-in.
6. Recognition-Primed Decision (RPD) Model
The RPD model is used as a rapid decision-making process for high-pressure situations.
It combines intuition and analysis, where the decision-maker quickly recognizes patterns and matches them with previous experience to make a decision.
Steps:
- Recognize the situation based on experience.
- Evaluate the situation mentally to determine if it matches a known pattern.
- Action the decision based on the recognized pattern.
- Adjust the decision based on the outcome and necessary adaption.
Example: A firefighter quickly navigates to the scene of a fire and immediately assesses the situation. Based on past experiences and his expertise, a decision is made on the best approach to control the fire and ensure safety.
7. Groupthink Model
While not a recommended model, understanding groupthink is important as it highlights the potential pitfalls of group decision-making where the desire for harmony and conformity in the group leads to irrational or dysfunctional decisions.
Example: A team in a travel operator decide to launch a new holiday destination without properly and thoroughly considering all potential risks, mainly because everyone is too scared to disagree with Mark, the highly enthusiastic manager. This results in a drop in sales and proves to be a mistaken launch.
In this example, the right decision-making process was not followed due to groupthink.
Conclusion
Understanding different decision-making models and the seven steps of the decision making process will help you to choose the right approach based on your situation, resources, and available time.
Whether you use a rational model for thorough analysis or an intuitive model for quick decisions, each model provides valuable tools for effective decision-making.
By recognizing the strengths and limitations of each model, decision-makers can enhance their ability to make informed, effective, and timely choices.
>> See the Decision-Making Training Materials for teachers and trainers
