Decision-Making Skills

A Management Tool

What is decision-making?

Decision-making is a problem-solving process where you are required to make a choice on one solution based on many solutions gathered from the information you have acquired.

What do we mean by information in a decision? 'Information is anything that changes the degree of uncertainty,' according to Dr Peter Clayton in a lecture held on 27 August 2001 at the University of Canberra.

Decision-making is 2/3rd of problem-solving. The last 1/3rd of decision-making is making the choice.

What is the difference between decision-making and choice-making?

There is suppose to be a difference between choice-making and decision-making. Choice-making is a part of decision-making, but it is considered the act of deciding on something based on choices you have found in your information gathering work.

What is the aim of decision-making?

The aim is to increase alternatives and reduce uncertainty by gathering enough information and then decide on the best alternative action or solution which will help to achieve the goals of an organisation.

Should decision-making be performed in a group or as an individual?

You may do the decision-making in a group situation for increased support from others. But remember, the individual or a group can solve any problem set before them.

The problem with decision-making in a group:

  1. Time-consuming
  2. Possible disagreements
  3. Groupthink common approaches (original thinking requires eccentric individuals to think outside of the group).

The problem with decision-making for an individual:

  1. Restricted to own source of biased information.
  2. Decisions are made too quickly.
  3. Solutions could be too creative and not practical enough.

A good rule of thumb on whether to make a decision on your own or in group is to look at how the solution will affect other people. If it doesn't affect others, you should make the decision yourself.

Who should make the decision?

Basically anyone can make a decision. However, the best decisions are made when you have spent enough time gathering information, or when you ask someone experienced and in an authorised position to make an informed decision.

In an organisation, there are two types of decision-makers. Supervisors concentrate more on the practical decisions affecting the day-to-day activities of the organisation. Executives concentrate on making a few very good decisions affecting the entire organisation:

"Effective executives do not make a great many decisions. They concentrate on what is important. They try to make the few important decisions on the highest level of conceptual understanding. They try to find the constants in a situation, to think through what is strategic and generic rather than to 'solve problems'..." (1)

The types of decisions made in an organisation

Programming decision

A decision based on policies that are followed before a decision is made.

Non-programming decision

This involves making a decision based on no rules at all or are based outside normal parameters.

Operational decision

This is a short-term decision based on very specific information affecting the operational matters of an organisation.

Strategic planning decision

The strategic planning areas of management requires long-term decisions based on diverse information sources.

When do I need to decide?

It depends on how important the decision is. The more important the decision, the more time you need to spend gathering information before making a quality decision. If you have to make a very important decision, always ask for the help you need from others and especially if the problem will affect other people.

The worse time to make a decision is when you are pressured to make an urgent choice on certain alternative solutions, and you don't have enough time to gather enough information, or you cannot find a good alternative, or the consequences are serious. If you have to be placed in this difficult circumstance, try to give yourself time out to gather information (including additional training to "balance" yourself and thus be more effective and efficient as a decision-maker) or get more people to work together on the problem.

Sometimes putting off a decision is a decision in itself! This kind of decision can be useful because at least half of all problems tend to resolve themselves (e.g. a computer crash) without you doing anything! For example, the famous Napoleon of Bonaparte was known to delay decision-making on problems until 24 hours later. By doing this, nearly half the problems tended to be solved on their own. So you need to decide whether to make a decision or not. (2)

Perhaps the best method is to do it, leave it for a while, and come back to it before making a final decision.

Sometimes you may not have to make a decision because you are not the best person to be deciding. The best person is usually the one closest to the problem. So get people to ask the relevant person to make a decision.

Also ask, whether the person asking for a decision is trying to avoid responsibility in making the decision on his/her own. You need to ask what the situation is and then you have got to decide how it may affect you and the organisation if you make the decision.

How to make a decision

In a group or as an individual, you:

  1. Investigate the situation and define the problem. This can take the most time to do.
  2. Specify the "boundary conditions" which the answer to the problem must satisfy.
  3. Gather information to see the big picture as well as the specifics until you can see quality solutions.
  4. Part of this gathering of information should also involve a brainstorming session to get all sorts of ideas together. Don't discuss or evaluate them. Just write them down.
  5. The next step is to evaluate all the ideas.
  6. Decide or let the group vote on the best solution. Make the "right" (rather than what is acceptable) decision based on this information.
  7. Plan the implementation process (for a major decision)
  8. Then implement the solution.
  9. Then follow up the results (for major decisions). In other words, get feedback to help you test the validity and effectiveness of the decision/action against reality.

Other management experts will simplify this to:

  1. Gather information
  2. Consult with people (for ideas).
  3. Communicate with the people (the results and the solution).
  4. Implement the decision.

But again this is up to you to decide how to interpret the process.

Action is important in decision-making

Action (or implementation) is a necessary part of any decision-making we do:

"...implementation procedures cannot be divorced from those of model building (problem solving and decision-making)." (3)

Cognitive limitations in the decision-making process

According to Ronald N. Taylor in Psychological Aspects of Planning, the human brain has limits as to how well it can make a decision. In other words, the more complexity there is in the decision-making process and therefore the more information that has to be stored, processed and recalled quickly in memory, the greater the decline in mental ability by the decision-maker.

This limit in the human brain is often called "bounded rationality". Break this limit for your particular brain and we enter the "irrational" thinking world.

The ability for the brain to handle complex decisions depends on short-term memory. Short-term memory is required to quickly store, manipulate and recall a certain amount of information.

Psychologists have made extensive experiments to test this short-term memory capacity of the brain. Apparently, psychologists have discovered that humans were capable of storing only about seven chunks of information in short-term memory. But as soon as this part of the brain is loaded with information for storage and processing, the ability for this short-term memory to handle other information tends to decline.

To get around this problem, the brain will apply its own stored set of patterns called beliefs held in long-term memory to the contents of short-term memory. It does this because it wants to simplify (i.e. categorise and show links to existing beliefs) the information in short-term memory and so give it meaning (i.e. turn it into a familiar pattern) until the person accepts it in his/her own belief system and thus free up the short-term memory to handle more information.

As Taylor writes:

"To explain the influence of short-term memory on information storage capacity, Posner has proposed that a decision maker rarely stores a pure representation of information; rather he is an active information handler who applies his knowledge of the nature of the information to reduce his memory load. This form of manipulating information tends to reduce cognitive strain." (4)

And in M. I. Posner's article titled Immediate Memory in Sequential Task published in the 1963 edition of Psychological Bulletin 60:346-54:

"As a shield from cognitive strain in planning decisions, decision makers may adopt approaches to planning that reduce cognitive strain by permitting the problems to be formulated in a more simplistic manner." (5)

Even if the information is a sequence of random pieces of information, the brain will attempt to see a pattern in the information:

"Using randomly generated sequences of binary digits, Feldman reported that even people who knew they were dealing with a random process still insisted that they found patterns." (6)

So the chances of imposing the biases from the person on information held in short-term memory are certainly quite feasible:

"Attempts to categorize information to deal with large information loads and to reduce cognitive strain can lead to perceptual biases." (7)

However it is necessary to have some bias thinking in order to handle and process a large amount of information quickly enough. If we want the bias nature of the brain to produce quality decisions, it is important for the person to have processed a large amount of a broad-range of information in his/her life (preferably at a young age) and have the capacity in later life to consider the views of others as part of the participation process to ensure all decisions are of a high quality.

Whatever the biases imposed on information and whether or not they produce a quality decision, generally the more efficient the person in finding meaning or a pattern in the short-term memory and so handle other information storage and processing requirements quickly enough, the more intelligent is the person. And this in turn makes the person a better decision maker.

NOTE: To deal with the heavy short-term memory load requirements of the brain, decision-makers are known to use computers as a way of recording and organising all the relevants pieces of information needed to make a good decision.

"...more intelligent managers were able to handle information much more efficiently and to diagnose information value much more accurately than were less intelligent managers." (8)

What to avoid in decision-making

  1. Inappropriate sample size or insufficient information.
  2. Do not always rely on your memory or the knowledge of the same old group you are familiar with (known as recall) for information. Gather all information outside yourself and the group for a truly original and quality solution.
  3. Don't try to find evidence to support your view. Look for all alternatives.
  4. Clinging to what worked in the past if the past solution will not work in the present or future. However, if the solution was a quality solution in the past, there is a good chance it will work now and in the future.
  5. Being overconfident. Try to be humble, interesting in learning new ideas, and look forward to a quality solution.

Useful tips

  1. You have to know which decisions you are in charge of. Don't make decisions if there is a better person who can make the decision.
  2. Whatever information you gather, consult with everyone (especially if it will affect people in some way). Refine the information until you get solid data from which you can make a decision.
  3. Whatever decisions are made, it should affect you in the same way as everyone else.
  4. To get commitment from people, you consult with them (i.e. identify who will be affected, talk to them and listen to their opinions and views).
  5. The decision is not about being firm and quick. You need time and adequate information to make the right decision.
  6. If you still can't decide on something, flip a coin! But you must give a commitment to a decision.
  7. Communicate your decision to everyone so that it can be implemented. Brief people in a group rather than individually. Give everyone a final opportunity to ask questions.
  8. Backup your briefing and decision in writing. Some people's memory are not always perfect.
  9. Check the decision has been implemented.