By understanding the different types of decision-making factors, we can make better decisions at work and be better managers. So, what are the 6 main factors involved?
What are the six factors that influence decision-making?
The six main factors that influence decision-making are decision type, environment, ethics, emotions, individual differences, and barriers. Together, they affect how quickly people decide, what information they consider, how they assess risk, and whether they make decisions alone or with others.
6 Decision-Making Factors
The way you approach making decisions can depend on the factors that surround the decision you need to make, and I like to categorize these factors into 6 groups:
- Decision types
- Environment
- Ethics
- Emotions
- Individual differences
- and Barriers
Below, I will explain each of these 6 in detail.
1. Decision Types
i) Routine or Strategic
Routine decisions are decisions you can make with little effort, as they are recurrent.
| Examples |
| For example, in your personal life, a routine decision can be what to have for breakfast if you have breakfast every morning, and your choice is usually limited to, let’s say, cereals or eggs. You might decide to have cereal when you go to work and don’t have much time to prepare food, and maybe eggs on weekends when you can spend more time preparing and eating breakfast. You don’t usually need to spend much time analyzing your options to make this type of decision. |
Strategic decisions, on the other hand, are those that you make only occasionally or once, require a certain investment of resources, and can change the course of your life or your business.
| Examples |
| For example, in your personal life, a strategic decision can be buying a property (you will need to consider many variables, such as the location, and your choice can have a big impact on your life afterward). |
| At work, it can be deciding whether to develop a new product or not, which can affect the future of your business. |
This type of decision usually needs more time and consideration to make.
ii) Minor or Major
A minor decision is something that will not have a great impact on your life or business if you get it wrong.
| Examples |
| For example, which type of toaster to buy is a relatively minor decision, as toasters are usually inexpensive appliances and there is a limit to their functionality. Also, you can easily buy another one or return it if you are not happy with your new toaster. |
| At work, which type of printing paper to buy may be a minor decision. |
Minor decisions are those that you can make relatively quickly.
On the other hand, major decisions are life-changing, like the strategic decisions we discussed earlier.
| Examples |
| Buying a house can change your life and it is not an easy decision to undo if you change your mind after you have completed your purchase. |
| Likewise, deciding to launch a new product for your business can require significant investment, so you want to take your time before you make a decision. |
iii) Individual or Group
Individual decisions are taken by one person only.
| Examples |
| For example, if you take a vacation by yourself, you will not need to consult anyone else. If you take a vacation with your family, instead, you may need to consider everyone else’s input and needs. |
| Likewise, in business, if the organization has an authoritarian leadership style, a leader may make a decision unilaterally, and everyone else will follow. Instead, in different situations, the decision might require the involvement of a group rather than being made by an individual. |
A group decision needs to follow a different path, as you will need to have a system in place to listen to everyone else’s input and take it into account.
iv) Urgent or not
Urgent decisions need to be made quickly; if the decision is not urgent, you can take more time pondering the alternatives.
| Examples |
| For example, if your furnace or heating system breaks down in winter, you may need to quickly decide who to call to fix it. However, deciding where to go on vacation is something that you can usually plan with plenty of time. |
| In the work environment, if, for example, there is a potential data breach, the security team has to act fast and decide quickly on the best course of action (hopefully, they will have prepared a plan in advance so they can quickly put it in place should this event occur). On the other hand, a team manager who is considering whether to upgrade the team’s computers when they are still functional but starting to get obsolete has time to consider their options. |
2. Environment
The environment refers to the culture and society around you, as well as the economic and financial environment.
i) Culture and values of organization and/or society
So, for instance, a company that values learning and experimentation can make it easier for its employees to make innovative decisions.
On the other hand, a company that highly penalizes employees for making the wrong decisions can make them more wary and unlikely to be innovative in their decision-making.
ii) Level of risk
Risk is a big factor in influencing how we make decisions. When making a decision, you need to:
- Evaluate risks against rewards
In many instances, whichever option you choose involves some risks. So, part of decision-making is to evaluate risks against benefits or rewards.
- In doing so, consider any opportunity costs and possible uncertainties
Opportunity cost is the value of the best alternative you give up when you choose one option over another.
| Decision-making factors example |
| For instance, let’s use the example of Maria, who was faced with the choice between launching a new product or not. If she does not launch a new product, it will cost the company nothing in terms of investments. However, it may cost the company dearly in terms of the extra money they could have made had they launched the new product. Uncertainties need to be evaluated as well and compared with the risks, the benefits, and the opportunity costs. So, for instance, if the uncertainties are too many, Maria may decide against launching the new product. On the other hand, uncertainty may be high, but the rewards may be much bigger than any potential losses, and so Maria might decide to launch the new product. |
The result of this process must be to achieve the best possible outcome for you and the other parties involved.
To know what the best outcome is, you first need to set a goal, so you know exactly what you want to achieve.
iii) Certainty vs Uncertainty
Risk implies the possibility that more than one outcome might occur (e.g., success or failure).
So, risk is higher in situations with high uncertainty. However, to help you make a decision, you can try to figure out what the probabilities of each outcome happening are.
3. Ethics
In the decision-making process, there are also certain ethical considerations that are worth factoring in.
You might want to consider, for example, if an option under consideration meets the following ethical standards:
- Is it legal?
- Is it fair?
- Is it morally the right thing to do?
| Examples |
| For example, let’s imagine a senior developer who is working on a project for a client who has requested an application with specific features. While developing the application, the developer discovers a shortcut that could expedite the project completion by two weeks. However, this shortcut involves using a piece of open-source code that is not licensed for commercial use. The developer could use the unlicensed code, deliver the project early, and impress the client, but it would be against the law and could potentially lead to legal issues for the company they work for. On the other hand, if the developer sticks to the original plan, the project will take longer to complete, but it will respect the licensing laws. If the developer makes their decision ethically, they will follow the rules and respect the rights of the open-source code creators, even if it means the project takes longer to complete. |
4. Emotions
The decisions we make are not only driven by rationality but also by our emotions. Sometimes, it is not easy to separate the two and tell exactly how influential emotions are in our decision-making process.
i) Emotion-specific influences
Different emotions can really impact the decision-making process in different ways.
For instance, research has found that anger can make us more prone to risk-taking, while fear can make us more risk-averse.
Likewise, associating positive emotions with an option can make us more prone to choose that option over others.
| Example |
| For example, if we had a great time in the past during a trip to Japan, we might be more likely to choose Japan over a different country to do business with. |
ii) Minimizing negative emotions
When a decision elicits negative emotions, we may try to minimize them.
One way to cope with negative emotions is to try to deal with the decision to the best of your abilities, as negative emotions are a sign that the decision is important.
Other times, a person may instead try to postpone having to make a decision in an attempt to minimize the negative emotions.
Alternatively, people may try to avoid making that decision by having other people make it for them.
iii) Regret
An emotion that is often talked about when it comes to decision-making is regret.
You might regret the choice you made or how you made the decision (for example, too quickly and without thorough consideration).
Unfortunately, it is usually too late to do something about it, but you can learn from your regrets, and what you learned from your mistakes can inform your future decision-making processes.
iv) Emotional attachment
If you are emotionally attached to the status quo, you may end up trying to resist change even when change may be positive.
Likewise, any time you are emotionally attached to something, this can heavily influence your decision-making.
| Example |
| For example, let’s imagine a fashion designer who has put their heart and soul into designing an innovative and exciting new line of clothing. The marketing team, however, has found out that the company’s customers prefer a more traditional style. The designer, though, is so enamored with their creation that they push for their new line to be put on the market. The line, when put for sale, flounders as the marketing team predicted. In this case, emotional attachment clouded decision-making and led to a bad decision. |
5. Individual Differences
We are all different as individuals in the way we make decisions, and this is the result of many factors, such as:
i) Values
These are your own cultural and moral values and beliefs.
For example, when buying a car, you may go for the slightly more expensive one but with more environmentally friendly credentials, if you value the environment over everything else.
Or you may go for the car with the most beautiful design if you value aesthetics more than anything else.
ii) Experience
This is about your previous life experience that will influence the way you make decisions.
iii) Personality
Your personality can influence many things, including:
- How you perceive a decision
- How much control do you want to take in a situation
- How thorough you are in seeking information
- How willing are you to consult others when making decisions
iv) Systematic vs intuitive thinking styles
Many people tend to prefer one style over the other. Most of us use both, but we generally tend to prefer one or the other to a certain extent.
The systematic thinking style involves proceeding in small steps and analyzing as many details as possible.
The intuitive style prefers to focus on the whole and to proceed by making associations.
For example, imagine you need to choose a new piece of software to manage your customers’ data.
A systematic approach might entail the following steps:
- defining the problem and identifying the requirements for the new software
- researching different software options
- comparing their features, costs, and reviews
- organizing your findings in a spreadsheet and using a weighted scoring system to rank each option.
An intuitive approach might entail relying on your intuition and expertise (i.e., gut feelings and past experiences).
A systematic approach ensures that all options are thoroughly considered, reducing the risk of overlooking a potentially better solution.
On the other hand, an intuitive approach allows for quicker decisions, which can be beneficial in a fast-paced business environment.
However, it also carries the risk of bias or oversight due to the reliance on personal experience and feelings.
v) Attitude to risk
Our attitude to risk is influenced by our personality, and by other factors such as emotions and fear of losses (i.e., we are more inclined to take risks to prevent losses than we are to secure gains).
6. Barriers
We will discuss later (if you are using the training materials) in more detail the barriers that can stop us from making decisions effectively:
i) Biases
Many types of bias can negatively affect decision-making (e.g., confirmation bias, overconfidence, anchoring, and escalating commitment), and we will discuss them soon (if you are using the training materials).
ii) Framing
This refers to the way an idea is presented, whether by others or by yourself, based on the way you approach an idea.
| Examples |
| For example, if you present a new investment and say that it has an 80% chance of high returns, people are more likely to accept it than if you present it as having a 20% chance of low returns. In both cases, the probability of high vs low returns is the same but highlighting the 80% success chance as opposed to the 20% failure chance makes the investment more attractive. |
| Likewise, if, for example, a bar of chocolate is advertised as being 80% sugar-free, it sounds healthier than if you say it contains only 20% sugar. However, the percentage of sugar is the same in both cases. |
iii) Amount of information
Having too little information can make it harder to make decisions effectively.
Likewise, having too much and maybe irrelevant information can make it difficult to make decisions, as it can cloud the issues.
iv) People
When making decisions, it is important to involve the right people.
Sometimes, the people involved may have vested interests in one of the outcomes, or they may have conflicts of interest, or emotional attachment to one of the options.
Also, sometimes you may want experts to be involved in decision-making.
However, other times, you may need a fresh pair of eyes to look at the options from a different perspective.
So, choosing the wrong people to make a decision can lead to negative outcomes.
For workplace training, you can also use these decision-making activities for employees to help participants practice considering different perspectives, evaluating options, and making decisions with others.
v) Interests
As we have just mentioned, some people may have vested interests in choosing one of the options, which can impair effective decision-making.
vi) Emotions
As mentioned earlier, emotions can have a big impact on decision-making, and they can sometimes be a barrier to achieving the desired outcomes.
vii) Limits to rationality
This is also referred to as ‘bounded rationality’.
The idea of bounded rationality comes from a theory (by Herbert Simon, an American economist) according to which there are limits to how rational we can be.
This is due to the limits of our human minds (for example, limited memory and processing capabilities or emotional burdens) as well as limits in the environment (such as information available, time limits, or costs that need facing).
So, we often end up settling for the choice that is good enough (satisfactory) as opposed to the best choice.
Bounded rationality cannot be completely overcome, but we will explore some tools that can help you make better-informed decisions.
FAQs
What are the main factors that affect decision-making at work?
The main factors are the type and urgency of the decision, the workplace environment, ethics, emotions, individual differences, and barriers such as bias or limited information. The importance of each factor depends on the situation and the potential consequences.
How can teams make better decisions?
Teams can make better decisions by clarifying the goal, considering risks and trade-offs, involving the right people, checking for bias, and agreeing on how the final decision will be made.
Teaching Decision-Making Skills
Looking for more critical thinking and decision-making guides?
For trainers and HR teams: If you are running a workplace session on decision-making, our editable Decision-Making Training Materials include slides, trainer notes, participant resources, and practical activities on risk, uncertainty, bias, and the factors that influence choices.
If you enjoyed this post on decision-making factors that affect how you manage your team, you might also be interested in the training course materials below for teaching decision-making skills:
View the Decision-Making Teaching and Training Materials
