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Chapter 2 - The Seven Skills of Manageme... > A Professional Decision-Making Proce...

A Professional Decision-Making Process

You’ve probably heard managers referred to as “decision makers.” A good manager is exactly that. However, some managers dislike decision making, which is sad, since it’s a key part of their job.
 
Most managers who “pass the buck” are afraid of being wrong. They see any mistake as major failure. Usually they either lack confidence (or backbone, if you prefer) or work for superiors who can’t tolerate failure. However, some people simply don’t know how to go about making a good decision. They lack a framework for decision making. So here’s a six-step process for making business decisions (and personal ones, for that matter) in a rational way:
1. Define the problem. Most decisions relate to a problem or can be framed as a problem. This means that making the right decision depends on first defining the problem correctly. If your sales are falling, the problem could be low quality, high prices, poor performance by the sales force, or new competition. Each problem calls for a different solution. So start by asking, “What’s the problem?” Answering that question may require exploration.
2. Gather information. Good business decisions are based on good information. Once you define the problem, gather all the relevant facts. This often requires research, such as studying competitors, talking with suppliers, examining historical data, or hiring a knowledgeable consultant. However you go about it, get the facts!
3. Analyze the information. Having information is not enough, because different people can draw different conclusions from the same facts. Therefore, you may need to apply analytical tools to the facts. These tools, formal ways of analyzing information, often involve making calculations or setting up charts showing the connections between facts. You may even have a decision-support system. However you go about it, analysis helps you understand the facts and what they mean. (You’ll learn about ways of analyzing information in Part 2.)
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MBA LINGO
A decision-support system is a formal means of helping people make decisions. These often-computerized systems usually help in the analysis phase. This may consist of guidelines in a policy manual (for example, for employee discipline cases), checklists (such as the ones bank employees use when making lending decisions), or computerized models that help forecast future business conditions. As the name indicates, these systems support, rather than replace, the decision maker.
4. Develop options. When you have a decision to make, you need choices. For example, to increase sales in the face of new competition, you could improve quality or cut prices. You could hire more salespeople or pay your current salespeople differently. Options like these give you a basis of comparison and a better chance of finding a real solution instead of doing what seemed like a good idea at the time. In some instances, you may have only one option, but they should be rare if you carefully consider all possible solutions.
5. Choose and use the best option. Now comes the moment of truth: you must decide. If you followed the first four steps, you will probably make a good decision. And be sure that you do make a decision. Avoid “analysis paralysis”—that is, analyzing a problem forever instead of acting. Decision makers make decisions.
6. Monitor the outcome. You usually cannot just make a decision and then forget about it (much as you might like to). Generally, the only way to know whether your decision solved the problem is to follow up afterward. If your solution worked, great. If not, you may need to take corrective action; try another option; or even reexamine the problem to make sure you defined it correctly, gathered enough facts, and analyzed them properly.
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MBA MASTERY
If you like to decide based on feelings rather than facts, this decision-making process will be especially useful for you. Look at the six steps as a supplement or an alternative to going with your gut. Either way, use it. Businesspeople value facts and like dealing with people who are comfortable with facts. This process will help you avoid a reputation for being in denial or shooting from the hip. What’s more, it generally yields better decisions.

  

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