How to Master the Decision-Making Process? Main Steps, Types, and Tips

1. What is the decision-making process?

A decision-making process is a set of steps that a decision-maker goes through to identify the best alternative or course of action to address their needs based on assumptions of values, preferences and beliefs.

Business leaders today have access to more critical data than ever before. You may think this vast amount of available tools simplified the decision-making process. The truth is that sophisticated data means more decisions to make.

The decision-making process is a modern management tool for choosing the most feasible solution after recognizing the problem, gathering information, and examining alternatives. 

In a business environment, the decision-making process consists of several measures managers should take to determine the best solution for the organization's strategy and future and act in consequence.  

2. Crucial steps of the decision-making process

Implementing a systematic decision-making process helps you navigate smoothly through an otherwise increasingly frustrating environment. 

Take the following steps to achieve the best decision and prevent hasty decision-making.

Step 1. Determine the problem

The first step of decision-making is identifying the problem that needs a solution. This phase is crucial to define the decision you will make clearly. Misidentifying the problem leads to insufficient information and incorrect decision-making. 

Ensure you fully understand your problem and consider all the interrelated causes.

Step 2. Collect relevant information and data

The next step after identifying the problem is to start collecting data relevant to your decision. Before diving into the numbers and details, consider all the persons and teams affected by your decision. Bring everyone to the table, encourage teamwork, enable participants to contribute to the brainstorming, and research the best internal and external sources of information.

To make a valuable decision, you must assess all available information and resources. 

Step 3. Identify and generate alternatives

As you collect relevant information and pertinent opinions, you will identify several solutions to your problem. At first, this may seem like a step back. In reality, you are identifying more alternatives that force you to analyze deeper and examine the issue from different angles.

Narrow the list to the solutions that benefit you most, but wait to decide. 

Step 4. Weigh the evidence

Now that you have your list of realistic alternatives, it is time to evaluate their feasibility and risks. During this process, you must assess how the need from Step 1 is met and resolved by each solution. All solutions involve a risk. During this step, you weigh the pros and cons and how your decision impacts the business.

Note your alternatives in order of priority based on your personal and organizational values.

Step 5. Choose the best solution

At this step, you select your best alternatives and decide. Sometimes, the right decision merges two or more solutions evaluated during the previous phase. You should be ready to make an informed decision once you go through Step 1 to Step 4.

Be creative and encourage a thinking-out-of-the-box mindset. 

Step 6. Implement action

Once you reach a decision, it is time to take positive action to execute it. Create an implementation plan and communicate it to your team and those affected by your decision. The more informative you are about the risks and benefits, the more likely everyone will be on the same page. 

Put your decision into action and monitor its progress and results.

Step 7. Evaluate the results

Evaluating the results represents the final brick of your decision-making process building. During this phase, you must assess the outcomes outlined in Step 1. Monitor to what extent your decision helped you to solve the problem and meet your goals. 

If it failed and wasn't the best alternative, you may need to retake particular steps or begin the decision-making process again. 

3. What is a decision-making matrix?

By now, you learned that the decision-making strategy is critical for your company's successful planning. However, the process can get tricky when you face two or more seemingly equal options. What do you do: flip a coin? Ask a fortune teller? Roll the dice?

We have a better solution: the decision-making matrix.

A decision-making matrix is a technique that helps you evaluate and select the best solution between several options. This matrix is a powerful tool as it simplifies your decision-making process by reducing it to a list of choices and significant criteria to evaluate them. 

The process is simple: once you narrow your list to a few similar options, you analyze and score them. The highest-scoring item represents your decision because it encompasses your criteria. 

How do you make a decision using a matrix?

Let's imagine your company needs new offices. Take the following steps to create a decision-making matrix that serves your purpose:

1. List your options

The first step to creating your matrix is to list the options you will compare and evaluate.

If one of the options doesn't fit your initial criterias then, exclude it from the decision process (ie Office Building E). In this way, you eliminate decision fatique.

2. Determine the best criteria

Consider the most significant differentiating factors, list them, and add them to the matrix.

3. Weigh your chosen criteria

This is the step where you rank your criteria from the most important to the least important.

4. Score the options

The most typical scale is from one to five, where one represents a poor rating while five represents an outstanding rating.

Note that the rating you're using might be different. For example it could be a 60/40 is given to quality and price. In this case the Office Building Score formula might be (total quality score for all criterias / 1000 * 60) + (price of rent * 40).

5. Calculate your scores

Move through each cell of your table and multiply the score by the criteria weight (from the third step).

6. Make your decision

Insert a new column in your matrix and add your scores.

Sometimes, your decision may rely on more than just the matrix. For example, one option may have the highest score in the matrix (In this case office Building C), yet it may be one that have scored lower in score criteria that mattered most (for example office Building A, because the price difference was lower, and the surface bigger) for you to make your decision. Consider further discussions to determine which option makes the most sense for your business; the matrix is an excellent starting point to reach a conclusion.

4. Types of decision-making models

As a manager, you make decisions every day in the workplace. Sometimes, your resolutions are complex, with long-term implications, affecting the entire team or business. Still, most of the time, you must make low-impact, daily decisions with short-term consequences.

Based on these points of view, business decisions fall into three primary categories: strategic, tactical, and operational. 

Strategic decisions

Strategic decisions are made by the organization's upper management. They are less frequent and influence the whole business. Their impact is far-reaching and contributes to achieving the company's shared mission and vision.

Strategic decisions usually involve significant costs. They require considerable forethought, analysis of available data, and assessing many alternatives.

Tactical decisions

Tactical decisions relate to the detailed implementation of the executive's strategic direction. They are directed toward specific and more frequent actions, focusing on how work gets done.

The impact of tactical decisions is medium, and they fall into the mid-management level.

Operational decisions

Operational decisions happen frequently, daily or hourly, to put management's strategic and tactical resolutions into practice. They have a short-term horizon and focus on day-to-day execution, performance, and daily resource allocation.

Operational decisions are made by junior managers and supervisors based on facts and events.

While most decision-making processes consist of the same seven steps, here are a few distinct approaches that help you make an excellent decision. 

Rational decision-making model

The decision-making model is the most common way to choose the right option in the business environment. Rational decision-making provides discipline, structure, and consistency throughout the entire process. It involves collecting and analyzing multiple data while considering a wide range of different opinions. Rational decision-making is a highly accurate process. 

Use this model when your decision significantly impacts your team members; you aim to maximize the benefits and minimize the costs. 

Data-driven decision-making model

The data-driven decision-making (sometimes abbreviated as DDDM) requires leaders to anticipate problems, gather data, and take real-time actions to keep their business agile and competitive. This model uses insights, metrics, analytics, and data to make strategic and informed business decisions. 

The DDDM model is crucial for making decisions that align with the company's goals, strategies, and mission.

Intuitive decision-making model

Unlike the data-driven rational decision-making model, the intuitive decision-making model is based on intuition and gut feeling. This rapid and automatic process requires extensive experience to form strong instincts, patterns, and mental shortcuts to reach fast decisions in complex situations. 

An intuitive decision-making model is crucial for managers who need flexible, quick, and innovative solutions in our rapidly changing business environment. 

Creative decision-making model

Like the rational model, the creative decision-making model involves gathering data and insights. The difference here is that the creative decision-making model brainstorms new, innovative ideas rather than looking at what has worked in the past. 

This model combines analytical and creative thinking, improving the quality of the decision. 

Ethical decision-making model

In the business environment today, the ethical decision-making model focuses on values and moral principles rather than economic considerations. During this process, leaders make decisions following a specific code of ethics. They consider how their actions impact the well-being of the workforce, environment, and community. 

Making ethical decisions demonstrates your company is a trustworthy organization with high positive values.

5. Tips for improving your decision-making process

As you gain more experience, you will develop your personalized decision-making process. Use the tips below to craft a data-driven decision-making process:

• Be flexible with your ideas and solutions. 
  Flexibility allows you to find alternatives that satisfy several objectives. Many managers approach decision-making as a binary process. Be flexible and explore the myriad of options. Your flexibility may ensure the viability of your solution.
• Use active listening. 
  Involve as many colleagues as needed and use active listening when researching solutions. Listening purposefully helps you find multiple choices simultaneously. Multitracking leads to high-quality solutions and accelerates the decision-making process.
• Repeat the process when successful. 
  The decision-making process doesn't always have to be new or unheard of. You or another manager have already faced and solved a similar problem. When you learn about a viable decision, consider formalizing and reusing it for another successful decision-making process. 
• Define long-term goals and divide them into concrete milestones that help you control the process. 
  Thus, you can determine its effectiveness as you gradually reach your short-term objectives. Shift your focus to the future, adopt the perspective of an observer, and envision the goals and outcomes of your data-driven decision. 
• Encourage collaboration and communication. 
  Healthy competition among team members is natural and helps teams to evolve. On the other hand, some people may compete for credit, leading to biased decisions. Nurture an honest and inclusive communication environment that encourages both disagreements and cooperation.
• Be objective. 
  Sometimes, you are pressured to make a decision fast. You stress out and let your emotions decide for you. Take a step back from your strategy if, instead of using logic, you base your decisions on your feelings or emotions. Approach the decision-making process with an objective mindset and make appropriate judgments. 

6. Wrap up

We face a wide range of personal or professional decisions every day. From small choices, such as what to wear or cook for dinner, to more significant ones, such as changing our career or buying a new car, we always have to decide one way or another. 

Making the right decision can be time and energy-consuming. Some managers can handle the process smoothly. Others may become overwhelmed and unable to see a solution on the horizon. 

Leaders need an in-depth understanding of decision-making to improve their people management skills or remove these obstacles. 

A solid commitment to the seven steps for building the decision-making process leads to better choices, faster achievement of goals, and sustained organizational growth.