How to Make Decisions in Organizations

Posted on April 25, 2024 by Martin Hahn, One of Thousands of Career Coaches on Noomii.

Some assume that good judgment is like a good singing voice — you have it or you don’t. However, that’s not true. As with singing, it certainly helps to have the raw material.

Step 1: Define the Problem

Identifying or defining a problem is trickier than it may appear. People commonly emphasize the obvious and get misled by symptoms. Here is a classic example.Office workers were upset because they had to wait so long for an elevator. Tenants were threatening to move. The owners called in a consulting team and told them the problem was that the elevators were running too slow.

If you agree with defining the problem as “slow-moving elevators,” then the potential solutions are all expensive. You could ask the tenants to stagger their work hours, but that request could cause more animosity. Adding more elevators is too expensive.

The point is that the alternatives you identify and the decisions you make reflect how you define the problem. What the consultants did in this case was define the problem as “The tenants are upset because they have to wait for an elevator.”

The solution they chose was to have full-length mirrors installed by each bank of elevators so the tenants could admire themselves while waiting! The solution was inexpensive and satisfactory: The complaints virtually disappeared. In decision making, framing refers to the idea that how the decision maker defines (frames) the problem determines what the solutions will be and thus the quality of the decision. Never take the statement of the problem for granted.

How to Define the Problem The consultants’ clever solution to the elevator problem described above illustrates the first and most important step in defining problems: always ask, What triggered this problem? Luckily for the owners, the consultants did not jump to any conclusions. They asked themselves, What triggered the problem? The answer, of course, was the tenants’ complaints, complaints triggered by frustration at having to wait. The problem then became: How do we reduce or eliminate frustration with having to wait?

There are some useful hints to keep in mind here. Start by writing down your initial assessment of the problem. Then, dissect it. Ask, What triggered this problem (as I’ve assessed it)? Why am I even thinking about solving this problem? What is the connection between the trigger and the problem? That’s how the consultants approached defining the problem and how you should, too.

Step 2: Clarify Your Objectives

Most people are looking to achieve several aims when making a decision. For example, in choosing a location for a new plant, the manager typically wants to achieve several objectives, such as minimize distance from the company’s customers, get close to raw materials, and have access to a good labor supply.

● Have More Than One Objective Therefore, few managers would make a decision with just a single objective in mind. (There are exceptions. The great football coach Vince Lombardi once said, “Winning isn’t everything. It’s the only thing.”) However, for most decisions, most people do not have the luxury of focusing like a laser on one single objective. When deciding on a new laptop computer, you may want to get the most memory, portability, and reliability you can for the price. You’d buy the one that, on balance, best satisfied all these objectives. You’d avoid the trap of making your decision as if minimizing price was your only aim.

● How to Clarify Objectives Your objectives should provide an explicit expression of what you really want. If you don’t have clear objectives, you will not be able to evaluate your alternatives. For example, if Harold isn’t clear about whether or not he wants to stay close to New York, wants at least a 10 percent raise, or wants to stay in the widget industry, how could he possibly decide whether to stay with Universal Widgets or leave or which of several job offers were best? The answer is, he could not. How do you decide what you want the decision to accomplish for you? Here is a useful five-step procedure:

1. Write down all the concerns you hope to address through your decision. The idea here is to make a comprehensive list of everything you hope to accomplish with your decision. Harold’s concerns include the impact of his decision on his long-term career, enjoying what he’s doing, living close to a large urban center, and earning more money than he earns now.

2. Convert your concerns into specific, concrete objectives. Make your objectives measurable. Harold’s concerns translate into these objectives: getting a job that puts him in a position to be marketing director within two years; getting a job with a consumer products company; being within a one-hour drive of a city with a population of at least 1 million people; and earning at least $1,200 per week

3. Separate ends from means to establish your fundamental objectives. This step helps you zero in on what you really want. One way to do this is to ask “why.” Harold asks himself, “Why do I want to live within a one-hour drive of a city with a population of at least 1 million people?” Because he wants to make sure he can meet many other people who are his own age and because he enjoys what he sees as big-city benefits such as museums. This helps clarify what Harold really wants. For example, a smaller town might do if the town has the right demographics and cultural attractions.

4. Clarify what you mean by each objective. Banish fuzzy thinking. For example, “getting a raise” is a fuzzy objective. Harold, to his credit, wants to earn at least $1,200 per week.

5. Test your objectives to see if they capture your interests. This is your reality check. Harold carefully reviews his full list of final objectives to make sure they completely capture what he wants to accomplish with his decision.

Step 3: Identify Alternatives

You must have a choice (in other words, two or more options or alternatives) if you are going to make an effective decision. Wise managers, therefore, usually ask,

What are my options? What are my alternatives? Decision-making experts call alternatives the raw material of decision making. They say that alternatives represent “the range of potential choices you’ll have for pursuing your objectives.”

● How to Identify Alternatives There are several techniques for generating alternatives. Be creative; start by trying to generate alternatives yourself, and then expand your search by checking with other people, including experts.

Also, look at each objective and ask yourself how you could achieve each of them. For example, Harold might ask, “How could I get a position that would lead to a marketing director’s job within two years?” One obvious alternative is to take a senior marketing manager’s job, a job just a notch below director. However, remember that most managers satisfice. It’s rarely productive to spend the time required to find the optimal solution.

Step 4: Analyze the Consequences

The danger in making decisions is that you make them today, but you feel them tomorrow. Harold decides today to stay with Universal. Then he finds out next year that his prospects of promotion are almost nil because the company already has two Pittsburgh marketing directors. “If only I’d thought of that,” Harold says. The manager never wants to have to say, “If only I’d thought of that.”

Therefore, the next decision-making step is to analyze (think through) the consequences of choosing each alternative. One expert says, “This is often the most difficult part of the decision-making process, because this is the stage that typically requires forecasting future events.” Harold needs a practical way to determine what the consequences of each of his alternatives are. Only then can he decide which option is best.

How to Analyze the Consequences

The decision maker’s job is to think through, for each alternative, what the consequences of choosing that alternative will be for each of the objectives. Here is a basic three-step process to use:

1. Mentally put yourself in the future. For example, Harold imagines to himself, here I am one year later in Pittsburgh. Can I get the director’s job? No! They already have two directors. Looking into the future is a crucial analytical skill.

2. Eliminate any clearly inferior alternatives. For example, if Harold thinks through the consequences of each of his alternatives, it should be obvious that his prospects for promotion to marketing director are virtually nil if he stays with Universal Widgets. Therefore, why should he even continue considering this alternative? He crosses it off.

3. Organize your remaining alternatives into a consequences table. A consequences matrix (or table) lists your objectives down the left side of the page and your alternatives along the top. In each box of the matrix, put a brief description that shows the consequences of that alternative for that objective. This provides a concise, bird’s-eye view of the consequences of pursuing each alternative.

Step 5: Make a Choice

Your analysis is useless unless you make the right choice. Under perfect conditions, making the right choice is easy. Review the consequences of each alternative, and choose the alternative that achieves your objectives. But in practice, making a decision even a simple one like choosing a computer, sometimes can’t be done so rationally. Psychology and emotions can drive decisions and make the choice more difficult. And not having all the facts can produce choices that are less than optimal.