Effective decision making ultimate guide signpost

Effective Decision Making: The Ultimate Guide [2021]

Decisions, decisions, decisions…

Life is full of them.

When we get them right, we get more done. Life is fruitful and easy.

But, when we get them wrong…

Well, life can suck.

So much so that panicking about making the right choice is not uncommon. 

Moreover, if a decision has big consequences many people are scared to commit to a course of action. 

What if you choose the wrong school for your child? What happens when you miss out on something? Perhaps you can’t see the wood for the trees?

There are so many unknowns it’s enough to send you into a flat spin.

However, the good news is effective decision making can be learned by anyone.

It takes time to master the thought process. But, once you do, you can apply it anywhere and in any situation, creating an awe-inspiring impression wherever you go.

Your productivity will skyrocket. Those feelings of fear and confusion will be a distant memory.

So, without further ado, if you’ve ever asked how do you demonstrate effective decision making, here’s the ultimate guide to take your skills to the next level. (TL to RN? There’s a 1-page infographic in the resources library. Get the password by filling in the form at the bottom of the page.)

Effective decision making ultimate guide signpost

How to make decisions

Effective decision making isn’t about intuition.

And neither is it about knowledge. 

It’s about a way of thinking and one that anyone can learn.

Indeed, a logical system of thinking is so crucial to making smart choices that the late Peter Drucker, the founder of modern management theory made it part of his widely quoted effective decision-making definition:

An effective executive makes … decisions as a systematic process with clearly defined elements and in a distinct sequence of steps.

Peter F. Drucker, Harvard Business Review

Drucker didn’t entertain the idea of making a decision based on intuition.

And neither should you. (Unless you particularly enjoy those cold sweats?!)

Effective decisions are made using a systematic process. Not on subjective guesswork.

Phew! 

But, making successful decisions is not only about avoiding personal stress.

There are other vital reasons too.

Why is effective decision making important. Decision path

Why is effective decision-making important?

Good decisions are key to productivity and positive impact. 

Whether the choices we make are at home or at work, there’s no escaping this fact.

A successful decision sets you up for the next stage of whatever it is you need to do and wherever it is you need to do it. 

It’s essential for an easier life!

On the other hand, a wrong choice can have the opposite effect. 

At home, bad decision making can mean lost opportunities, wasted money or disappointed friends and family.

At work, it can result in organisational failure, loss of output or financial distress.

Moreover, avoiding a decision altogether results in lots of uncertainty and no action. You put yourself in the position where you have to react to whatever comes your way, instead of being in control.

Whichever way you look at it, not making an effective decision is highly stressful for everyone involved.

Whereas making a good one? Well, it’s a great way to improve your life and potentially that of others!

But, not all decisions are made equal. 

To ensure you give each one the time and effort it needs, you need to be able to recognise the different levels.

3 types of decision making you need to know coloured steps

3 types of decision-making you need to know

When decision making at home and work, whether for a business or in a personal or consumer capacity, it helps to understand the nature of the choices you have to make.

No single decision has the same scope, importance, or impact. 

Some decisions have large significance, use a lot of information, and have a deep effect on our lives. 

Other choices may be smaller, more personal, and day-to-day in their nature.

These factors help determine the degree of risk you’re willing to take in making your choice. 

The varying nature of the decision itself results in organisations classifying types of decisions in distinctive ways.

For example, use of the terms like ‘policy decisions’, ‘programmed decisions’, or ‘routine decisions’ is common.

However, all these classes of decision fall under three broad categories – strategic, tactical and operational. 

Strategic

Strategic decisions have a large impact and long-term implications.

They are major decisions that contribute to achieving long-term goals. They need to be fully considered and they need to be right.

This type of decision requires careful thought and analysis, with every single step of the decision-making process considered in detail. 

Such decisions may include what type of organisation you’re going to be, which markets your business will compete in, or indeed more personal decisions about retirement or career.

Tactical

Tactical decisions are the choices required to implement the broader strategic decisions. 

Examples of tactical choices are developing marketing plans, choosing resources and suppliers, or deciding on a healthy eating plan to help you reach your long-term wellness goals.

Operational

Operational decisions are day-to-day decisions made as a matter of routine. 

They are short term, often repetitive and can be made without too much thinking time.

Such decisions may be choosing whether to put a logo on an invoice, what stationery to order or what to have for dinner.

Often these choices are made using reasoning and intuition without too much extra thought. 

But, it’s important to keep long-term goals at the back of your mind to make sure any decision works towards them.

Once you understand the type of decision you need to make, it’s easier to see any potential risks involved.

And this means you’re already on your way to becoming a better decision-maker.

what makes an effective decision maker

What makes an effective decision maker?

A successful decision maker isn’t born, they’re made.

Through a thorough understanding of the decision and intimate knowledge of the desired outcome, they identify and mitigate the risks involved in achieving it.

To do this, they need a systematic thought process. 

But, it also requires teamwork. The ability to involve others and persuade them to do what you need them to do is part of the process. 

After all, a decision isn’t a good one if it doesn’t work. It’s merely a good intention. 

And intentions alone won’t make the impact you need.

Moreover, decision making under differing conditions requires you to adapt your style to fit the circumstances.

For example, making a choice on the spot is hindered by needing to ask everyone for their opinion.

So, it’s useful to know what type of decision maker you are and recognise how you can adapt your style to fit the scenario.

types of decision maker

Types of decision-maker

People approach decision making in many ways, depending on their unique personalities. 

Rowe and Boulgarides, the academics responsible for Decision Style Theory, identified four types of decision making styles. 

The styles vary depending on how much uncertainty is tolerated and whether someone focuses more on the task or on the social dynamics of a group when making a decision.

The squares below represent the four different decision making styles with their unique combinations of uncertainty and focus.

styles of decision making matrix

P: Directive style

This style has a low tolerance for ambiguity.

For someone with a directive style, completing the task is all that matters. 

Decisions are made on clear facts and on rules and procedures. 

Consequently, it’s not a good style for any type of conflict resolution where you need to be flexible.

Directive style is used when coordinating time-sensitive tasks with cause and effect relationships because it prevents discussion over simple issues. 

For example, “It’s late. Go to bed!”, usually works with my children.

However, not if they’re upset – it makes them worse. 

And sometimes, there may be a valid reason for the intrusion. But, if I don’t ask, I won’t know.

The lack of empathy is the risk to be aware of with this style.

A: Analytical style

This is the style for people who love data and can put up with a large degree of ambiguity.

But, it is ultimately focused on getting the task done. 

Every aspect of a problem is dissected in minute detail, giving a thorough solution to a problem. 

It’s a really good style to use when looking at companies’ past performances to decide which one to add to a stock portfolio; when deciding between different medical treatments, or working out how to grow your customer base using data from previous ad campaigns. 

However, too much data results in too much wasted time!

And if a situation is forever changing, don’t even bother with it. You’ll be analysing forever and not acting on it 

Both factors are needed for an effective decision.

conceptual decision making style

E: Conceptual style

This is the style of a creative thinker and has a social focus.

Never afraid to try something new, the conceptual decision-maker uses fresh ideas and is willing to consider many possibilities. They evaluate information from different perspectives and use intuition, along with data, to help guide their choices. 

Someone with a conceptual style tolerates ambiguity well and visualises the potential effects of the decisions they make.

This is a good style of decision making for strategic issues such as deciding to open a brick and mortar store for your online business, or which school to send your children to. 

However, the sheer quantity of ideas that pop up mean sometimes it’s easy to forget that decisions need action too.

Don’t get too caught up in the thinking part! 

I: Behavioural

The behavioural style focuses on relationships first and foremost. The task itself is second place to group unity.

Indeed, the main driver of making a choice is how the effects of the decision will affect others. This style doesn’t like ambiguity.

Behavioural decision makers use information from others to guide their choices and they feel better with a team consensus. They also use intuition and evaluate information emotionally.

However, they must be careful not to be people pleasers just to avoid conflict.

Examples of the behavioural style include asking the whole family what they want for dinner during the upcoming week, or asking your employees when they want a bonus paid.

what is the most effective decision making style

What is the most effective decision-making style?

It’s whatever style fits the scenario!

Sometimes it’s too easy to pigeon-hole people into one of the four profiles above because we default naturally to one type, 

However, there are many times when you need to use different approaches. 

The best style is the one that works best for its context. 

Be aware of your own style leanings and adapt accordingly.

Whichever style you use, for bigger decisions there’s often lots of information to consider. A systematic thought process helps prevent any associated anxiety and clarifies your thinking. 

simple guidelines for effective decision making

Serial over-analyser? Simple guidelines for effective decision-making

When making more complex decisions, many people are swamped by information and can’t see the wood for the trees.

Others suffer analysis paralysis by overthinking, then fail to reach a solution.

Some people think making decisions is easy but miss out on many important factors, resulting in a bad decision.

Whatever the issue, it can be resolved by using a systematic step-by-step thought process. 

Only by using a system can you begin to filter your information and ensure you have all the relevant information you need to make an effective decision. (I’ve highlighted the steps in a useful 1-page infographic in the resources library. Get the password for the library by filling in the form at the bottom of this page.)

What are the steps to effective decision making?

Situation analysis

The key to a strong decision is in your situation analysis.

This is an intimate knowledge of what a decision is about and what realities it must meet. 

At this stage, there’s no point in developing alternative courses of action, as is often advised, because we don’t know what those courses of action need to achieve.

This is what we need to find out. 

The good news is that situation analysis is a learned skill and any actions resulting from it enable your decisions to be balanced and ultimately successful.

There are three steps to an effective situation analysis.

decision making classification blackboard
Step 1: Classify the decision

This first step examines whether your event has happened before, either to you or to someone else.

In other words, is the event generic, or is it unique to you?

Generic events are situations that have been previously resolved. 

So, there will be lessons learned from the decision that was taken. These can help you.

On the other hand, if you treat the situation as a unique event – the first time it’s happened – you’ll be liable to make any similar mistakes.

This leads to disjointed, frustrating and often futile decisions.

According to Peter Drucker treating every situation as if it’s unique is one of the most common errors in peoples’ decision making processes.

He also argued that almost all problems are generic events. 

So, there is likely a rule or a principle already in place to help you with your situation. All we need to do is to use it! 

However, asking this simple question is a step often missed by many decision making models. 

Altogether, Drucker recognised four different types of events to use when classifying decision making scenarios:

1. A generic event

The problem you’re trying to solve is a symptom of a larger issue. 

For example, you have a flat tyre on your vehicle. 

When dealing with this solely on its own merits, you’d pump up the tyre. 

However, a day later it’s flat and you have to pump it up again. 

This happens a few more times and you begin to see a pattern. You research if this has happened to others.

The overriding problem then becomes apparent – you have a puncture. 

Therefore the real solution is to change the tyre or fix the puncture. 

Your initial decision to pump up the tyre doesn’t fix the generic problem. And keeping on pumping it up is going to be frustrating! 

The key is to ask yourself why the tyre is flat – this is the generic event – you’ve got a punctured tyre. 

But, it’s learning about the reasons for the flat tyre, based on others’ experiences and knowledge, that lead you to the solution.

2. The event appears unique but is generic

Here, you think the problem is unique to you but in reality, it’s previously happened elsewhere. 

Perhaps you must decide whether to buy or rent your first house. For you, it’s the first time ever making this decision. 

But, it’s a choice many people make every day. 

The points for consideration are already out there and the experience of others can help you. You are not alone.

Find out what they did, what factors they considered and what mistakes were made.

And bingo, you’re on your way to making an effective decision!  

3. An unlikely and exceptional event

These are uniquely rare events. 

Druker used the example of the 1960s thalidomide tragedy in his academic paper on the topic.

The thalidomide drug was supposed to be “completely safe”. 

So, it was prescribed to pregnant women. 

However, tragically it was later discovered to cause birth defects. But, at the time, these defects were thought to be an unlikely consequence.

This event hadn’t happened before. The solution had to be well-considered and trailblazing once it was realised tragic consequences could be the first of many similar issues as the field of pharmacology developed.

And this makes the event not unique but the first incident of a much bigger problem.

4. The first manifestation of a new recurring problem

Truly unique events are rare. 

But many are the first occurrence of a new problem.

And this turned out to be the case with thalidomide as a pioneering new drug.

The pharmacology industry was hoping to put more new drugs into the pipeline.

So, a generic solution was needed to prevent further similar instances: the rigorous drug approval and monitoring systems of the United States Food & Drug Administration (FDA).

And they’re still in use.

To begin your decision making process, you must decide which type of event your situation falls into. It’s likely it’s generic. 

So, look for previous assumptions and solutions used by people in similar situations. 

This stops much time-wasting and assists your decision-making process. You’ll make a more effective decision as a result.

decision making definition pink car
Step 2: Define the decision

Once you know what type of event you’re dealing with, it’s easier to understand what the decision is about.

However, it’s here the danger lurks!

Why?

Because we need to make sure the type of event we think it is, matches up with what is really happening.

It’s easy to superimpose the details of a previous event onto our own. 

Although the generic event may be the same and can be used as a guide when making decisions, the specific detail will vary.

For example…

after a spate of accidents in the 1960s, US Congress realised road accidents were increasing.

It assumed drivers and roads weren’t safe enough because these were a common factor in many previous accidents.

So, the American automobile industry was tasked with improving highway engineering and driver training to reduce road accidents.

Indeed, the industry was successful in decreasing the ratio of accidents per 1000 cars. It had assumed that because previous accidents had been caused by bad roads and/or lack of driver training, this was the case again.

But, it wasn’t.

Despite, the ratio of accidents per 1000 cars dropping, the total number and degree of severity of the accidents increased.

The industry as a whole hadn’t recognised that in the real world, many of the vehicles involved in the accidents weren’t being used as intended. 

And it was this that was causing the accidents. 

The solution was to make cars safer to be abused! 

Once this angle was considered, accident numbers plummeted.

To prevent these types of issues, effective decision makers identify what they expect to happen and then check regularly to see if it does.

If they don’t see what they expect to see, they rethink.

So, be guided by observation and don’t force the data to fit your preconceptions.

Keep an open mind and don’t be afraid to redefine your decision based on what you see.

Only then should you move on to step 3.

decision making specification notebook
Step 3: Identify the specifications

What are the goals for your decision?

I need to choose a school for my daughter. My goal is to make sure she leaves school with the best possible start when looking for a job. 

So, I think she needs brilliant grades.

To get these results, I send her to a school with a fantastic reputation for academics. 

I’m very happy with my decision.

However, it soon becomes clear that my daughter is not an academic superstar. 

She’s highly creative and excels in drama, art and creative writing. But she struggles with more numerate subjects, and her grades reflect this.

I didn’t know this before.

So, the conditions, or specifications, on which I based my original decision have changed. But, my goal to give her the best start has not. 

Realistically, my daughter may not achieve brilliant grades across the board, and she’s now unhappy in school because she’s behind her more academic peers. 

And she knows it. It’s undermining her confidence and she’s not making the best use of her talents. 

I need to abandon my original decision.

But, that didn’t make it wrong initially – I didn’t know she wasn’t an academic superbrain. And I didn’t know she’s a highly creative person.

However, I do now. 

Jobs require confidence. And the best one for her will be one that makes use of her talents.  

This means letting her continue to struggle in a school not suited to her is inappropriate because I will fail to achieve my goal of giving my daughter the best start. 

I must find her a new school where she can use her strengths and thrive.

Anyone can make a wrong decision. 

But, an effective decision maker continually re-evaluates their goals and the conditions on which their decision is based, and knows when to call it a day. 

It’s thinking through these changes in the decision specifications that can be the most difficult part of the decision making process. 

However, it’s essential to ensure your decision is effective in the scenario you’re dealing with.

If your specifications no longer fit, you need to change them. Continuing to re-evaluate is essential.

Take action on a laptop

Step 4: Take action!

Turning a situation analysis into a coherent plan of action can be time-consuming. 

A decision isn’t made until each task has become someone’s responsibility. The flaw in many potentially good decisions is there’s never any action commitment!

To take action properly, we need to answer four questions:

  • Who needs to know about the decision to make it happen?
  • What actions have to be taken, who by, and when?
  • What resources are required? 
  • Are those who need to take the action competent to do it? If not, what needs to change?

Questions 1 & 4 are often overlooked, leading to bad decisions. 

For example, if your decision involves changing an order, then whoever is responsible for ordering needs to know of the change. 

Moreover, there’s no point in making an elaborate plan if those who must carry it out can’t do it! And expecting someone to do something they can’t, whether through lack of training or otherwise, is hoping for a miracle.  

Communication and knowing your people are vital effective decision making skills.

Perhaps you have more than one goal to achieve?

Then start with the most important one before considering each one in turn. 

Think about where these goals need to be achieved and what individual tasks are required to achieve them.

Then co-ordinate these tasks in time and space by plotting them on a Gantt chart, so you can see how they fit together. 

To do this, work backwards from your objective. 

Estimate how long each individual task will take and allow enough time for completion.

Then, decide who is responsible for each task. 

Think through each task methodically, as if you were doing it yourself, calculate the time involved and write down any resources you need.

It’s also useful to consider any measures and rewards for good performance. 

But make sure these match your chosen course of action. 

After all, there’s no point in pursuing a plan of action if the performance incentives for your people work against it and not towards it!

For example, if your business is a service, is counting the cost-savings of your staff an appropriate performance measure? Perhaps a better measure could be happy customers, measured by feedback.

Repeat this process for each goal.

Don’t worry if there’s more than one way of doing things. The next step is about evaluating the alternatives. 

So, just pick one and run with it. You can always switch it out later.

Once you’re happy with your coordinated task plan, it’s time to evaluate those other options.

Identify the alternatives

Step 5: Identify the alternatives and consider the consequences, trade-offs & risks.

Now you have a course of action, it’s time to consider others and explore your options. 

There’s always more than one way to skin a cat and there are different pros and cons for each.

Start with the course of action for your most important goal. Working backwards, find the tasks that have other options, and switch out the original one for the new one.

There are many questions you can ask yourself to help to do this.

For example, can you hit your goals using a different location, at a different time or with different people? What challenges do these changes give you? Is anything made easier?

Are there other resources available to you that you haven’t used? Have you received new offers of help? What happens if there are other personnel changes?

Anticipate the outcome and the logical consequences of each change by thinking through what could go wrong and how likely it is that it will. 

After all, just because something could happen, doesn’t mean that it will

But, if it does, you want to be prepared.

Every option you assess will have different risks involved. Highlight them and think about any mitigation you need. Do you need more resources to do this? 

Perhaps you can’t mitigate a risk. Does this make this related course of action unviable? 

Reducing any uncertainty in these areas will help form a more workable plan.

Once you’ve done this for each option, you’re now in a strong position to choose the best plan for your circumstances and to make an effective decision.

Get feedback

Step 6: Get feedback

Many excellent business managers build documented feedback into their decision making process to allow monitoring and reporting on progress. 

And they absolutely should.

But, these types of feedback are not what I’m referring to here because they’re too abstract.

As a former Army Officer, I learned quickly that the only form of reliable feedback is from physically seeing your decision being carried out. 

This is not because I didn’t trust my soldiers, far from it. It was because I learned not to trust abstract communication.

Remember playing that whispering game at school where you whisper something to the person next to you and the whisper is passed along the line and becomes highly distorted by the end?

That’s what I’m talking about.

There is no substitute for seeing for yourself what parts of your decision are working and what’s not. 

So much is lost in translation between the front line of your decision making and your planning HQ. 

And in the digital age, when we rely on remote online feedback, going out and looking is more important than ever. 

This observation is equally valid at home too! 

Do you give direction to your children, leave them to it and ask them via Alexa if they’re ok? Or do you check up in person occasionally?!

You must see for yourself whether your original assumptions are still valid, or whether reality has moved on. If the latter, you’ll need to update your decision because it may no longer be appropriate.

Effective decisions are grounded in reality and an effective decision maker can’t hide from it. 

The systematic decision making process described is a highly effective decision making technique. 

However, for a tactical decision,  it may be too in-depth.

In which case, let me introduce you to the 3Cs decision making model. It’s a condensed version of the above system, and is also a good prompt for the longer process.

What are the three C’s of effective decision-making?

  1. Clarify

Clarify the problem you need to solve. This is your situation analysis.

  1. Consider

Consider any possible alternatives and the consequences of each. 

  1. Choose

Choose the best alternative and take action!

There you have it. The seven steps condensed into three! But, never forget to add the feedback.

Not checking on the progress of your decision is one way of stopping a good intention from becoming a successful decision.

Moreover, sometimes you’ll hit barriers that will stop you in your tracks. These need to be overcome. And they can be.

Decision making barriers tablet

How to smash through decision-making barriers you’re powerless to change 

There can be many roadblocks that will try and stop you from being productive by making a great decision. 

However, you’ll find that by using the systematic process as previously described, many of these barriers will become temporary hurdles on your track to greater things.    

Such barriers and their systematic solutions include:

1. Inability to change. 

A rigid mentality from those at the top can make implementing any decision ineffective. Focus on what you can do and identify alternative ways of reaching your goal

2. Lack of solid data.

Ambiguous or incomplete data makes reaching a good decision hard because it’s easy to draw the wrong conclusions. Focus on what you know. Flaky data is worse than not having any. You may already have the solution you need.

3. Lack of time.

Decisions made in haste are often incomplete and rarely take all the necessary information into account. Knowing why the decision is being made will help. Remember, if it’s a generic problem, there may already be a solution.

4. Risk-taking appetite.

There needs to be a balance between taking too much risk and too little. Calculated risks are necessary to achieve your goals. Always consider your risk tolerance and mitigate what you can.

5. Authority.

Do you have the authority to make the decision? If not, you’ll need to be creative in trying to obtain it or in encouraging someone else to make it for you! The seven-step process provides you with everything you need to make a compelling case.

6. Too many options

This situation can be confusing. It’s necessary to weigh each option against your objectives, as per Step 5 of the model. Some won’t measure up well. Get rid of them and narrow your choices down.

7. Inadequate support    

Lack of support from those above or below you can hinder an effective decision. The key to support is communication – both ways – and a willingness to listen to others’ points of view. The seven-step model assists you in convincing others.

8. Using too many ‘helpful’ tools.

There are so many decision-making tools available. Using the seven-step process, you may find you don’t need any tools at all. Choose the few you want to work with if any. Ignore the rest. 

Whatever the barrier to effective decision making, using the seven-step systematic process, outlined in this guide, will demolish it for you.

Conclusion and women with champagne

Conclusion

Now you understand the process of effective decision making, it’s time to put it into action. 

After all, decision making is a learned skill that gets easier with practice.

So. the next time you have to make a decision – of any sort – consciously think through the process. Write it down if you need to. Prove to yourself that you’ve covered all the steps.

Once this way of thinking is ingrained, you won’t need the pen and paper for those smaller decisions. 

But you’ll know you’ve already considered the factor and you’ll be prepared for any questions that arise. This will build confidence in your ability to make smart choices.

And as your confidence builds, so will your impact. Go, be productive. It will change your life.

FREE 7 STEPS TO EFFECTIVE DECISION MAKING INFOGRAPHIC

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