Decision making

48Decision making and problem solving are the meat and drink of business life. Some decisions are made almost instinctively, but more complex decisions with many factors involved require the analysis of a finite set of alternatives described in terms of criteria which can be evaluated.
According to Wikipedia decision making might be regarded as a problem solving activity which is terminated when a satisfactory solution is reached.
Decision making is a reasoning or emotional process which can be rational or irrational, can be based on explicit assumptions or tacit decisions.


Decisions are often involuntary and following the decision, we spend time analyzing the cost and benefits of that decision. This is known as “Rational Choice Theory,” which encompasses the notion that we maximize benefits and minimize the costs.

Most decisions are made unconsciously, and using instincts learned from, and honed by, experience. Jim Nightingale, Author of Think Smart-Act Smart, states that “we simply decide without thinking much about the decision process.” In a classroom, instructors encourage students to consciously weigh the pros and cons before making a decision. But in the real world, most of our decisions are made unconsciously because it would take too much time to evaluate the pros and cons of each decision we make on a daily basis.
In business many forms of decision making are used. Some decisions are made individually, others by groups such as Boards. Some are made by consensus, some by formal vote. Usually the proposer will present the idea and field questions from the Board, who will then vote on the idea to reach a decision.

There are many decision models, principles and tools used in Business. Many complex decisions are debated by a team and become the subject of analysis, discussion, brainstorming and workshops.

Brainstorming

Brainstorming is a tool very often used in business for problem solving, and it is often credited with producing creative, radical ideas. It can be carried out in many ways, and can be useful for involving everyone in the team, no matter how senior they are. In fact, often the more junior team members, who are not mired in the detail of management on a daily basis, come up with the most effective ideas.

Brainstorming combines a relaxed approach to problem solving with lateral thinking. It is useful because conventional analytical processes often lead to limited imagination and ideas restricted by prejudgements or assumptions that certain things are not feasible or desirable.

Brainstorming provides an open environment with no preconceptions .Everyone is encouraged to contribute, to say whatever comes into their mind without any evaluation or consideration. Unconventional ideas are built on, there is no judgement, comment or criticism of the idea. The intention is to unlock unconscious ideas, and to evaluate them at this stage will stem the flow of creativity.

A careful brief needs to be given at the start of brainstorming meeting. It needs to clearly define the problem, requisites and parameters, but not constrain the freewheeling nature of the session and restrict ideas.

Ideas are thrown out which may spark even more ideas from others. People are encouraged to abandon their normal ways of thinking. Ideas do not have to be fully formed as thought through proposals, just thrown into the arena to be discussed and developed later.

In a group session a facilitator may be appointed, preferably not the manager, whose job is purely to record ideas thrown out, without comment. Usually this is done on a white board, so everyone can see what is written.

Sometimes the contributor of the idea will also write it down on a post –it note, to enable ideas to be grouped later. If you write ideas down as they come into your head, this also prevents blocking by other ideas, or forgetting while you wait your turn to speak.

Once the brainstorm part of the session is complete, the facilitator and manager will lead an evaluation of the ideas using conventional approaches, explore solutions further and perhaps group similar ideas. Some of these ideas can be developed into original, creative solutions to the problem.

Part of the success of brainstorming is due to the fact that the contributor does not have to present a reasoned solution with all details thought through. They just throw out the idea, and the management team will deal with the “how, when, and who” if the idea is worthy of further consideration.

It brings team members’ different experiences into play, and produces a rich seam of ideas that can be explored, which means that better solutions to the problems may be developed. It also helps with buy-in from team members for the solution chosen, it helps team members bond, and solve problems in a positive, rewarding environment.

Individual Brainstorming can also be effective, but ideas may not develop as fully because you don’t have the wider experience of other group members to draw on. But you don’t have to consider other people’s egos or opinions, so you can be freer and more creative and develop the idea further on your own.

Individual brainstorming is most effective for solving simple problems, to generate a list of ideas, or focus on a broad issue. Group brainstorming is often more effective for solving complex problems.

Sometimes the ideas that have emerged from brainstorming become the subject of SWOT and PEST analysis once they have been more fully developed

SWOT and PEST analysis

Two of the most commonly used tools are SWOT analysis, an acronym for
Strengths
Weaknesses
Opportunities
Threats

And PEST analysis, an acronym for
Political
Economic
Social
Technological

SWOT analysis deals with some internal factors so usually analyses a business unit, a proposition or idea. It is often used in competitor analysis.

A PEST analysis deals with external factors so usually analyses market potential, considering factors such as growth or decline, strategy, market attractiveness, business potential, business and strategic planning, marketing planning, business and product development.

Examples might be;-
A company looking at its product or market.
A strategic option, such as entering a new market or launching a new product.
A potential acquisition or potential partnership.
Completing a PEST analysis can be useful prior to completing a SWOT analysis.
In both SWOT and PEST analysis, it is important to clearly identify the subject of an analysis, as they are a four-way perspective in relation to a particular business or proposition.

Both are usually presented as a grid, with the relevant factors listed under the headings.

SWOT- subject definition -comparison to Competitor A

Strengths
Cheaper
Better customer service
Weaknesses
Not as technically advanced
Cost of customer service affects the profit line
Opportunities
Introduce more advanced model
Reduce cost of customer service-by efficiencies
Threats
New models
Drop in customer service

PEST – subject definition –Entry to New Market A

Political
Statutory/ Regulatory requirements
Government policy
Current/ future legislation
international legislation
ecological issues/ incentives
international trading policies
company /group policies
funding, grants and initiatives
lobbying/pressure groups
wars and conflicts
Economic
Labour rates
Domestic economic situation
Domestic trends
international economics and trends
local taxes
distribution costs
seasonality/weather
market and trade cycles
market routes and distribution
interest and exchange rates
Social
cultural aspects
health consciousness
population growth rate
age distribution
career attitudes
Emphasis on safety.
Technological
R&D activity,
automation,
technology incentives
rate of technological change

The analysis can be quantified to facilitate selection between several alternatives. This can be done by scoring and weighting the items in each of the sections and adding the score for each box.

Comments

Decision making — 137 Comments

  1. I love the brain storming part. I understand the SWOT and PEST analysis but i’m still trying to wrap my head around it’s terminologies. So i’m just going to read it again as I enjoyed it the first time. Thanks for a concise lesson. God bless you.

  2. By the first time when i saw a lesson which is similar to this in ” Teaching methodology” i liked it very much even though it couldn’t quench my thirsty towards
    it enough I really thank you for giving me the chance to review it once more.
    So interesting

    • thank you for the lessons and i know the swot and pest but your lessons is very clear detail.

  3. This is great work my tutor, have lent to solve complex problems in my organizatio…keep up the good work. Regards

  4. Dear
    That’s so interesting lesson and you can give some more new information about the bring storming that’s very interesting lessons thanks so much

  5. so interesting,brainstorming is really helping in solving problems and makes people to think twice before making a Decision

    Thanks for a good lesson.

  6. In my organization,the boss tries to solve problems by himself.I have learnt to involve others in complex problems then harvest the ideas for personal brainstorming especially for complex problems when I have enough time.Ownership of solutions can drive the team. Thank for good presentation

  7. Thanks alot ,i wish i could be given a full certificate to motivate others

  8. Thank you very much for your all encompassing “spot on” lessons! Management skills could be life and blood of the Industry — We really appreciate you ALWAYS!!Stay safe and blessed immensely…

  9. THIS LESSON WAS VERY MASSIVELY INTERESTING AS IT HAS TOUCHED ALL POINTS OF WORKING IN THE INDUSTRY WHICH ABIDE TO THE INCENTIVE OF PROFITABILITY TO THE FACILITY OR COMPANY AND MAKE SURE TO PASS THE FOLLOWING POINTS NOT BY WORD BUT PRACTICALLY ASSURED.

  10. WoW! I’m enjoying this program… Great thanks to the coordinator and team behind this kindda initiative.