Decision-Making Techniques and Tools for Leaders and Managers
The art of effective decision-making is something every successful manager must master. It’s an essential part of running a business and drives organizational performance.
According to a survey of 750 companies conducted by the consulting firm Bain, a correlation of 95% was found between better decision-making and financial results. The data showed that companies who excelled in formulating and executing decisions gained 6% higher returns than their competitors.
In many organizations, managers implement decisions, but only about 60% of managers believe that their decision-making skills are sufficient. That’s why managers need the right decision-making techniques and tools. Without them, not only does the business flounder, but the bottom line suffers as a result.
The “Why” Behind Decision-Making Techniques and Tools and How To Make a Sound Choice
Chocolate or vanilla? Free membership or a paid membership? Dine in or eat out? These are the types of regular decisions we all face in our lives, although simplistic in nature.
While we are quick to make some decisions, others require more thought and consideration. No matter what decisions you’re facing, it’s always beneficial to understand strategies to improve your decision-making process.
How To Make a Good Decision—A Step-by-Step Approach Before You Use Decision-Making Techniques and Tools
Many factors influence the decisions we make in our lives. We often form opinions and choose a course of action from mental processes influenced by biases, logic, emotions, and memories. Therefore, decision-making is a mixture of intuition and rational thinking.
While we aren’t in control of all aspects of our brains’ decision-making mechanisms—many are unconscious—we can utilize strategies to ensure we are improving our decision-making skills.
The best strategy for making the right decisions lies in a step-by-step approach. Using a step-based process can help you make more deliberate and informed decisions, increasing your chances of choosing the most satisfactory outcome in your final decision.
At this point, you may be able to come to a conclusion without using decision-making techniques and tools—at least at first. Try this first to see if it works for you.
Step 1—Identify the Problem
The first step to a better decision-making model is to identify the problem causing you to make a decision. When we first face a problem or issue, pinpointing it and the choices that have to be made to resolve the problem are difficult.
In this step, you want to analyze the current situation and paint a picture of what’s happening. Start with the impact the issue has on a particular situation and the consequences of not solving the problem.
Step 2—Summarize the Problem
After you’ve examined the scenario and can clearly explain the situation, summarize what you’ve analyzed into a simple problem statement by filling in the blank: “The problem I’m trying to solve is _______.” This puts your issue in perspective and provides a clear path on how to solve it.
Step 3—Ask Why This Is a Problem
Finally, ask yourself why this is a problem and do so repeatedly until you land on an obvious source. Once you have a firm understanding of the issue at hand, you can now gather information. A good rule of thumb to follow is to consistently gather more information than you’ll use as a decision because a decision is only as good as the information you have available to you.
Every strong decision is strong in proportion to the surplus of details you choose. Once you’ve done your research, you’ll now be able to identify some apparent alternatives to choose from, which will result in an informed decision.
Step 4—Weigh Your Options and Possible Outcomes
After figuring out the alternative solutions you find valuable, you need to weigh the options using the evidence you’ve gathered. Always keep in mind the benefits and consequences you will face in the light of each alternative and think about maximizing the potential benefits.
Step 5—Act on Your Decision
Finally, an essential part of any decision-making process is acting on that decision and truly believing it’s the best decision possible. Make sure to follow through with the choices you make and reassess if need be down the road. You should also consider possible alternatives as part of a contingency plan.
Decision-Making Techniques and Tools To Make the Best Choice
As a manager, one of your top priorities is to find ways your team can assist in helping the organization achieve its objectives. Not every methodology will work for your business, but using all available techniques and tools can add more options to your arsenal. Here are some decision-making techniques and tools to take your management decision-making skills to the next level.
5 Decision-Making Techniques
If you’re averse to using decision-making tools, or you want a more personalized approach with several viewpoints to make your decision, you should find one of these five decision-making techniques helpful.
1. Take a Process-Oriented Approach
People often think of decisions as events, but this is rarely the case. Instead, decisions are part of a process. As a manager, this means you’re tasked with establishing a decision-making process.
Your first step in developing an effective decision-making process is ensuring the right questions are asked. You then train your team to analyze the problem and viable craft solutions. By following a structured and step-by-step process, you create an effective plan for obtaining team and business goals.
2. Involve Your Team
Decision-making shouldn’t be done in a vacuum. Team members and stakeholders should always be involved in your business decisions. Your team members will help you make better decisions by bringing various points of view to the problem, brainstorming, and stimulating creative problem-solving.
Team decision-making pools collective knowledge and experience from all members, which helps uncover and overcome implicit biases of the group.
3. Foster a Collaborative Mindset
You need to consider two mindsets to instill collaboration in your team:
- Advocacy: This mindset views decision-making as a contest. Individuals seek to persuade others of their ideas, defend their position, and downplay any weaknesses.
- Inquiry: This mindset navigates decision-making collaboratively with a problem-solving orientation. Individuals test and evaluate assumptions by presenting balanced arguments, considering alternatives, and being open to constructive criticism.
Team members feel encouraged to speak up and share their points of view with an inquiry-driven mindset versus discouraged and dismissed with an advocacy-driven mindset. Strive for your team to make decisions with an inquiry-driven mindset. By using this mindset in your decision-making method, your team members will feel empowered to think critically.
4. Create and Uphold Psychological Safety
The only way to ensure your team members feel comfortable sharing their ideas and unique perspectives is to create an environment of psychological safety. Psychological safety is the most important dynamic of any high-performing team.
When team members feel psychologically safe, they are comfortable sharing their ideas, and that’s how you get new information and perspectives out. This enables innovation. To boost your team’s psychological safety, you need to give fair consideration and respect when listening to your team members’ ideas. This, in turn, will help them feel more engaged.
Leadership training programs at Unicorn Labs can help you foster a workplace that prioritizes psychological safety, as well as many other tenets of successful leadership, such as conflict resolution, team empowerment, effective communication, and more.
5. Reiterate the Goals and Purpose of the Decision
Always remember and believe in the goals and purpose of the decisions you’re making. The goals that you want to achieve will be clearly stated before and during the decision-making process. This will help you relate your decisions to your objectives.
When making decisions about important and complex issues, revisiting your goals and purpose is crucial to ensure that your team is motivated and aligned with the organization’s goals.
4 Decision-Making Tools
If you’re tasked with a more difficult decision that techniques can’t resolve on their own, you may have to turn to decision-making tools. The upside to these is that they help you visualize decisions, create a pros and cons list, use certain metrics, and hopefully, come to the decision.
Thankfully, you don’t have to worry too much about a learning curve or new technology to master these tools. Most are steeped in tradition and have been around for decades. They’re tried and true, and today, many of the world’s largest companies still rely on them. So whether you’re a veteran manager or a first-time manager, you can turn to these tools for assistance in decision-making and even strategic planning.
1. Decision Tree
A decision tree is a type of flow chart that demonstrates a pathway to an informed decision. It starts with the problem and branches into two or more choices. Then those choices branch into two or more outcomes. Through a decision tree, you can visualize the feasibility of each decision, and even assess the odds of a particular outcome.
Over time, decision trees have become more advanced, even using algorithms and machine learning. But interestingly, you can just make one on a whiteboard. It’s as complex or as simple as you want it to be, making it a versatile tool.
2. Decision Matrix
A decision matrix is another decision-making tool that places values in columns and rows for a given problem. Not only can it help you solve a problem, but it also places weight on certain decisions and helps you prioritize them.
For example, let’s say you want to open a new business location. The columns would feature five potential locations. The five rows would have weighted considerations based on importance. Let’s say that they’re rent, foot traffic, ability to find workers, the square footage, and the floorplan. You would assign a value of 1 through 5 for the importance of each and then rank each location. Add up all the numbers, and you would find the most ideal location for your business.
It’s easy to use, and if you’ve never used one before, you can find plenty of templates online.
3. Pareto Analysis or Pareto Chart
Aligned with the 80/20 Rule, the Pareto Analysis allows you to put a number of input factors into decision-making processes. Based on the ideas and research of an Italian economist named Vilfredo Pareto, it’s both a decision-making technique and tool.
It functions somewhat similarly to a decision matrix as well, so the concept shouldn’t be too far off. First, you identify the problem, then come up with the causes of the issue. Next, create values for each problem based on the negative impact of your business. Organize the problems into groups and develop a measurement for equally comparing each problem, such as the frequency of a problem, the time, or the cost.
Once you’ve completed these steps, tally the number of times each happened and divide by the total number of incidents to create percentages. Finally, put together a vertical bar chart with the problems on the horizontal axis and the number of occurrences on the vertical axis.
By doing all of these steps, you can visualize your biggest issues, what demands your attention first, and what problems you can solve later. The Pareto Analysis or Pareto Chart seems complicated, but it’s not nearly as difficult as you think once you put it together.
4. SWOT Analysis
The final stop on our tour of decision-making techniques and tools is a SWOT Analysis—something that’s often already in the lexicon of most managers. This acronym stands for strengths, weaknesses, opportunities, and threats. It’s primarily used for strategic planning, but you can also use it to prioritize the decision-making process.
As the name implies, you simply list your company’s strengths and weaknesses and counter them with opportunities and threats. In terms of decision-making, it can help you decipher potential issues, create quick victories, consider how your strengths align with opportunities, and prioritize what decisions you need to make first.
How to Empower Your Team to Make Decisions on Their Own
Decision-making techniques and tools are ideal for those tough decisions that aren’t so obvious, but sometimes it’s the conspicuous option that doesn’t stick out as much as you’d think. One of the most common alternatives to the best decision is empowering your team to make decisions on their own—with or without decision-making techniques and tools.
When team members clearly understand how their contributions affect the team, they feel empowered to act and make decisions within their roles. Empowering your team gives them room to speak up and share more collaborative feedback.
As team members feel empowered and are comfortable sharing ideas, you will start to see a leadership culture’s formation. In a high-performing team, leadership is fluid and something all team members can empower to make decisions for themselves instead of being told what to do by their managers.
Team members understand that they can rely on each other for help, and given any problem, they can work together to find a solution and make the most strategic decision. Empowering your team members to make their own decisions enables them to find autonomy in their work and helps them increase their productivity. That’s something every manager can get behind.