You are now at a crossroads. This is your opportunity to make the most important decision you will ever make. Forget your past. Who are you now? Who have you decided you really are now? Don’t think about who you have been. What are you now? Who have you decided to become? Make this decision conscientiously. Make it carefully. Make it powerfully.
Anthony Robbins
Decision-making is about the process of making choices among alternative courses of action. One can distinguish between two types of decision-making – strategic decision-making, and tactical and operational decision-making. Strategic decisions are fewer, have long-term implications and are usually the concern of top management. Tactical and operational decisions, on the other hand, are more frequent, have shorter time-horizons and are usually the concern of middle management.
This article discusses two main approaches to decision-making – the analytical approach which is the traditional approach; and the creative approach which requires venturing into the unknown to produce bold, creative and innovative solutions.
The analytical approach
The traditional approach to decision-making is usually referred to as the rational decision-making model. According to Lahti, it is based on an economic view and is considered in terms of goals/objectives, alternatives, consequences and optimality. The model assumes that complete information is available and that there is one correct solution to the problem. It is a logical, systematic and analytical. It involves generating a list of alternative courses of action, and choosing from the alternatives a particular course of action that provides the maximum utility i.e. the optimal choice.
Drucker outlines the following six sequential steps in the decision-making process:
● Classifying the problem;
● Defining the problem;
● Specifying the answer to the problem;
● Deciding what is “right”, rather than what is acceptable, in order to meet the boundary conditions;
● Building into the decision the action necessary to carry it out; and
● Testing the validity and effectiveness of the decision against the actual course of events.
In attempting to identify the problem, it is important to determine whether the problem is a generic one, or whether it is exceptional or unique. If the former is the case, then there would be precedents in terms of rules, principles or policies. However, an exceptional or unique occurrence has to be dealt with by developing new rules, principles and policies. Care therefore has to be exercised in ensuring that a generic situation is not treated as exceptional or unique and vice versa. In addition, because symptoms and effects are more apparent, they are often mistaken for the problem and the cause. It follows that an incorrect classification of a problem, or treating symptoms and effects as the problem and the cause, is likely to produce an inappropriate solution. Such an occurrence can have serious implications for an organization.
Once the problem is classified as generic or unique, the next stage is the search for possible solutions. This requires a consideration of the objectives of the decision, the minimum goals to be achieved, and the boundary conditions to be satisfied. One of the shortcomings of effective decision-making is the tendency not to generate enough alternatives from which a solution is being sought. In addition, according to Drucker, there is a temptation to only consider alternatives that are perceived to be acceptable rather than to start from what is “right”. Since compromises invariably have to be found, the failure to take a holistic view when considering alternatives may lead to the wrong compromises being made, the best course of action being overlooked and a suboptimal solution arrived at.
In considering alternatives, Hammond, Keeney and Raiffa argue that making wise trade-offs is one of the most important and difficult challenges to decision-making. The difficulty is not so much the volume of trade-offs but rather the basis of comparison for the various objectives to be achieved. Some of these objectives are quantitative while others are qualitative.
In the past, reliance was placed on instinct, common sense and guesswork, and there was no clear, rational and easy-to-use trade-off methodology. The authors have developed a model – even swaps – that provides a practical way of making trade-offs among a range of objectives and across various alternatives. Even swaps are a form of bartering in that the decision-maker is forced to consider the value of one alternative in relation to another. However, hard choices have to be made on the values that are set and the trade-offs that have to be made. Once these value judgments are made, there is a consistent basis for making sensible trade-offs.
Drucker argues that a decision taken without an effective action plan to execute it, including the assignment of responsibility, is at best a good intention. In order to convert a decision into action, the decision-maker needs to identify the people who are required to know of the decision, the specific actions that have to be taken, those responsible for taking them, and the timeframe within which the actions are to be completed.
The monitoring and reporting on the execution of a decision are also critical to its successful implementation and these have to be built into the decision-making process. Feedback is necessary to ascertain whether the decision is a sound one and whether there are likely to be teething problems that have to be resolved as quickly as possible. In addition, it is in the feedback stage that important modifications to the decision are usually made since the assumptions made may not be in conformity with the reality of the situation. Caruth and Handlogten liken this stage to the nurturing of a plant. If a seedling is put into the soil without ensuring that there is the right amount of sunlight and moisture, the plant is likely to die.
The rational decision-making model arguably is a sound basis for making decisions. The approach adopted can be justified in terms of an independent evaluation. However, it suffers from the following main disadvantages:
● It is a conservative approach to decision-making. Managers who are risk-seeking are unlikely to favour this approach which may not yield the desired level of outcome;
● It assumes that complete information is readily available whereas in reality this is not necessarily so;
● It uses historical data in arriving at a decision that has future implications. However, there is a significant degree of uncertainty and risk about the future. To this extent, there appears to be a mismatch;
● It is devoid of emotions although its effective implementation requires a high degree of cooperation, motivation, commitment and support from subordinates;
● Those who are required to implement the decision are usually not involved in the decision-making process and therefore the level of commitment and dedication may not be the same as if they are involved; and
● It is a linear, sequential and quantitative process. However, human behaviour and thinking do not generally follow such a pattern.
The creative approach
Given the shortcomings identified above, the rational decision-making model may not be suitable for all types of decisions. In particular, problems that require unique solutions may require a more innovative approach. An alternative approach involves creative thinking that ventures into the unknown in order to produce bold, creative and innovative solutions to problems.
As the article “Inspiring Innovation” (HBR Review of August 2002) argues, innovation is facilitated when the status quo is challenged and people are encouraged to think creatively. The article contends that “each act of innovation is a unique feat, a leap of the individual – or collective – imagination that can neither be predicted nor replicated”.
Gunn argues that bold decisions are the precursor to great outcomes. He gives the example of Henry Ford who, by insisting that Ford’s automobile must all be black and of Model T, nearly brought the company to bankruptcy. Fortunately, at the very last minute, he chose to break free of the past and embrace the unknown.
Gunn concludes that “analytic tools and frameworks are useful in bounding the decision…but when it comes to exploring the unknown, they are no substitute for the human mind’s creativity and inventiveness”.
In order to encourage creative thinking, decision-makers themselves need to demonstrate a willingness to be more creative and to foster an environment that encourages creativity. Creativity is likely to thrive where people with creative minds are hired and where there is a diverse workforce staffed by more generalists rather than specialists. In this way, employees can generate and try as many ideas as possible without fear of making mistakes.
The environment should also promote flexibility rather than rigid rules since the latter stifles initiative and creativity.
Gunn further argues that very often, decision-makers get bogged down trying to answer the “what” and “how” questions.
When one considers the more fundamental “why” and “where” questions, more creative solutions can be found. Creativity appeals to one’s inner wisdom and common sense and is insight-driven rather than analytically driven.
Sometimes delaying to make a decision can result in better decision-making since solutions evolve with the passage of time.
This delay allows the subconscious to be at work and brings out wisdom and common sense that sometimes produce solutions superior to those derived from acquired knowledge. Occasionally, a manager may be confronted with a problem for which the best course of action is to do nothing but to simply watch and wait.
The problem may very well be temporary and may disappear within a reasonable time.
Next week, we will continue our discussion on decision-making. Meanwhile, I leave with you with the following words:
To put the world in order, we need to first put the nation in order; to put the nation in order, we must first put the family in order; to put the family in order, we must first cultivate our personal life; we must first set our hearts right.
Confucius
