What is the decision-making process: definition, steps

An average adult has to make roughly 35,000 decisions – every single day. Of course, all these are different in terms of importance and energy consumption. There is a huge gap between picking a chocolate bar in a supermarket and choosing a university for admission, you must agree. Nevertheless, it is obvious that in the 21st-century humans bear enormous overload. To lessen tension and burnout it is better to act according to an algorithm – for either decision making in business or private life.

What is the decision-making process?

“Unless a decision has degenerated into work, it is not a decision; it is at best a good intention” © Peter F. Drucker

Every time we face a choice, in fact, we compare alternatives. “To obtain credit or to hold on?”, “To expand now or to wait for more favorable conditions?”, “To buy these jeans or the other pair?” – examples of uncertainty are countless, indeed. To somehow cope with the challenge, we consider possible benefits and evaluate threats – for every option. We can, therefore, judge what option seems to be a “winning” one and – proceed with actions.

This simple logic mirrors the essence of a decision-making process definition. That is – to define several alternatives of resolving and to choose the best one, taking into account external factors, resources available, time, possible outcomes, and – personal opinions.

Let’s talk a little about decision effectiveness criteria. Certainly, if one benefits from consequences – earns a higher profit or increases the quality of life – the selection can be deemed as accurate. But what if outcomes happened less favorable than foretold? Does this inevitably indicate that you acted mistakenly?

It is nearly unmanageable to forecast precisely. Information is asymmetrical, plus – there are many things beyond our control, like natural disasters or changes of political regimes. With an attempt to oversee everything one may end up being stuck in procrastination and eternal preps. Think of not what will by 100% bring the result – but what will increase the likelihood of getting it. Powerful decisions are ones that:

  • were made by sequential steps
  • weren’t formed in an unreasonable rush
  • didn’t bear too many variables
  • were thoroughly worked out
  • and – were converted into actions.

How many steps are there in the decision-making process?

“What are the steps in the decision making process”, “How many steps are in the decision making process” – we google all sorts of search queries, wishing to notice a remarkable and all-purpose decision making recipe.

“Queries on decision-making tips seem to be on demand in Google”

The reality is, no one can guarantee an approach that will fit pretty any case. Effective executives know that although major decisions should be taken pragmatically, under certain circumstances – experience, background, and (dare we say it) wisdom play a more important role than facts & numbers. Walt Disney, Bill Gates, Jack Ma, Steve Jobs are the most apparent examples of how entrepreneurial intuition leads businesses to the very next level.

Nevertheless, the majority of issues we face can still be decomposed into shelves. All you need is to follow simple steps.

7 step decision-making process

“Decision-making ladder”, source

  1. Identify the problem

What is the first step in the decision-making process? You shall invariably start with a clear understanding of what functions incorrectly, otherwise, further steps have simply no point. It is essential to acknowledge the issue. Avoid unconstructive claims like “Everything happens worse than expected”. Use fact-based statements, i.e:

  • sales underperform by 25% from predicted in the Q1
  • EBITDA growth ratio has slowed down by 2% compared to the previous year
  • the revenue we earn is 1.5 times lower than the market average.
  1. Collect evidence

After the issue is manifest, investigate probable causes and current conditions. The worst thing you can do is wishful thinking. Make sure your data sources are reliable and up to date. At this point, analyze numbers and facts alone. Act like Sherlock Holmes – avoid value judgments or premature conclusions.

  1. Determine alternatives

If it seems to you that there is just one solution, you’ve probably gone the wrong path. To avoid lopsided consideration of the problem, use multiple practical tools:

  • SWOT tables
  • scenario planning
  • Porter’s 5 Forces matrix
  • Mind mapping
  • SOAR analysis, and others.

A good idea is to schedule brainstorming sessions or interview experts. The idea is to come up with 2 or 3 realistic scenarios to differentiate them further.

  1. Weight pros and cons

At this stage, compare advantages and disadvantages. Use informational insights you’ve learned on the 3d step. The method may vary – some prefer discussions, while others rely on math. If you belong to the second club, think of the expert scoring table.

Compile the list of factors concerning every alternative. Group these into two sections – benefits and threats. Ask in-house professionals or industry experts to independently assess factors’ relevancy according to the given grading scale.

“The example of expert scoring table”, source

  1. Choose from alternatives

After you’ve collected individual answers, apply statistical analysis – calculate the means and variances. Compare cumulative marks for benefits and threats. The option with the highest “score” will be the most beneficial resolution.

For more preciseness – multiply individual marks with significance coefficients. For example, if you consider a “faster project delivery” factor is more beneficial than a “better employee retention”, charge 0.3 and 0.1 coefficients to them, respectively. Don’t forget that the sum of all coefficients must be equal to 1.

An expert scoring table is advisable if you take into account the views of dozens of people. For small teams, fact-based negotiations will fairly be enough. Remote teams shouldn’t ignore assisting collaborative means – online whiteboards, pre-designed templates, video conferencing tools, etc.

  1. Act

The stumbling block for many people is converting paper plans into real actions. To initialize the process, check the box:

  • we’ve assigned process owner or arranged responsible parties
  • we’ve performed risk assessment
  • we know timeframes
  • we’ve allocated resources
  • we have a budget.

Develop tasks, delegate duties, and don’t forget to assess how the process goes regularly.

  1. Review the decision

After the 1st month, it’s time to perform the assessment of the first results and work on bugs. Remember, this is not about how smooth things happen, but how quickly and efficiently your team responds to modifications. Keep the route yet be agile. If you see reality diverges from the initial plan, it’ll be better to reconsider further steps in decision-making process.

One last thing. The decision-making process strong point lies in its hierarchy. It is critical to keep consistency and not to jump over several steps at once.