Every business is subject to intense competition in the market. A single decision taken in the spur of the moment may completely change the course of your business. This is the reason why market leaders lay strong emphasis on sound business decisions.
Every choice that one makes should be a result of intense scrutiny backed by strong market research and overall experience. Before taking a business decision, there are a few key things that must be kept in mind to avoid going down the wrong path; some elements that further enhance your growth rate must however be retained.
Let us understand what decision making is and the importance of taking the right decisions at the right time.
Decision Making and its Importance in Business
A decision is generally the best possible course of action chosen from a set of possible alternatives which can help fulfil the desired goals or objectives of an organization.
It is one of the key aspects which ensures that optimum growth is achieved in terms of the products and services offered by a company.
It is a continuous process essential for the smooth functioning of an organization. Since decision making involves the selection of an appropriate course of action from several possibilities to arrive at the most ideal solution, it is regarded by experts as a ‘Check and Balance’ system.
Decision making is generally considered a critical aspect of your business as it is backed by strong scientific knowledge, skills and experience of the best employees in an organization.
A decision may not provide the ultimate solution to any situation but instead may lead to the onset of new problems due to various financial, administrative and operational constraints. Solving one issue may cause others to surface, so decision making is indeed a never-ending process. Comprehensive decision making aligns the available resources to meet your organizational goals.
The Process of Making a Decision
Any decision that may have consequences cannot be made abruptly. It is a result of consistent efforts and diligent steps which lead to a meaningful output. The following steps are generally involved in making a decision:
- Gathering Information
- Choosing the Best Possible Option
- Executing Your Decision
Decision Making Techniques
Following is a list of the various techniques that have been verified by strong research and experimental evidence:
1. Cause and Effect Diagram
A cause and effect diagram, also known as a fishbone diagram, is a technique for determining the causes of underachieving targets and the various detrimental effects arising from them.
It is particularly useful in the development of remedial action to overcome the underlying issues. There are six main culprits of failure, known as the 6Ms – Man, Machine, Method, Material, Measurement, and Mother nature (the environment).
Every difficulty faced by a manufacturing unit can be broadly classified into this category. Thus, the problem is divided into a number of smaller causes that help one take proper decisions regarding the next step.
A cause and effect diagram consists of a straight line which meets a rectangle. The rectangle contains a brief description about the problem. Multiple branches are drawn from this straight line, each of which contains the description of a cause at its end.
After the entire diagram is constructed, one can draw suitable conclusions that can be used to make better decisions.
2. Mind Map
A mind map is quite similar to a cause and effect diagram; the only difference is that the underlying problem or objective is placed at the center. A non-linear graphic layout is drawn around this central framework which helps put down all ideas into one place. Each branch is then further divided into sub-branches that divide the big focus into smaller modules, which helps conceive an ideal solution.
The entire diagram resembles the neural network of your brain. Hence, it is referred to as a mind map.
3. Six Thinking Hats
This is one of the most powerful tools for decision making. Developed by Edward de Bono in 1985, numerous modern variations of the concept exist.
The basic idea of this technique is that every decision should be taken after looking at the problem from six different perspectives, each represented by a different hat color.
Each ‘thinking hat’ represents a unique style of thinking. These are as follows:
The White Hat represents a decision solely based on data and experimental evidence. The Red Hat is used for a decision taken entirely on emotions or your gut feeling.
The Black hat signifies a decision keeping in mind negative outcomes, while the Yellow Hat denotes an optimistic point of view.
The Green Hat represents a solution based on creativity and involves a lot of free thinking.
The Blue Hat is associated with process control, and generally addresses the decision making authority that decides which hat would work best for a particular problem.
4. PMI Chart
PMI stands for Plus, Minus, and Interesting. This strategy looks at the positive, negative and exciting aspects of a particular idea under consideration. Breaking down a problem into its advantages, disadvantages and challenges helps one come up with a better decision.
5. Affinity Diagram
An affinity diagram relies on the relationship between entities after dividing the central idea into smaller groups.
An affinity is highly useful when we do not have a complete grasp on the problem. Dividing the issue into such a diagram with relationship-based graphics inspires brand-new thinking patterns that provide an entirely different perspective.
A reframing matrix consists of a four-square grid where each represents a different perspective to the central idea. One of the most common approaches in a reframing matrix is the 4P approach.
6. Reframing Matrix
The four Ps refer to the Product perspective, Planning perspective, Potential perspective, and People perspective. Each decision is studied keeping one of the four perspectives as the central idea.
Once these approaches are analysed, it is possible to come up with a promising decision.
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