When starting out in entrepreneurship, I constantly looked back at my experiences as a team leader in Explosive Ordnance Disposal. Back then, decisions had to be made accurately, strategically, and comprehensively, especially since they often meant the difference between life and death. Today, in the relatively safer world of business, I still have to make the best decisions to ensure my company’s growth and success.
The best decision-making tools provide you with simpler, more efficient ways to determine the best business solutions in varying situations. For instance, a decision tree, force field analysis, and strategy map offer unique perspectives in providing solutions for different concerns.
In this article, we will talk about the different decision-making tools you can use when making important decisions for your business and how they can help simplify and accelerate the process for you and your team. We will also discuss their drawbacks, benefits, and the common pitfalls you must avoid when utilizing these tools.
Impact of Decision-Making Tools on Your Business
Decision-making tools are great resources for leaders and their teams who want to make better decisions for their organization. They can help you identify and analyze relevant information, compare various alternatives, and make the most informed, comprehensive, and suitable decision.
Biggest Mistakes When Using Decision-Making Tools
Decision-making tools aim to help leaders through the process of making choices for the business to boost their chances of always choosing the best alternatives. However, sometimes, when decision-making tools aren’t wisely and efficiently utilized, they can defeat the purpose for which they were employed in the first place.
Here are some of the common pitfalls you must avoid:
1. Losing Track of the Main Objective
When using decision-making tools, especially if it is a novel concept to the team, you may quickly lose track of the primary objective — the main problem being addressed. You might get wrapped up or distracted by the details of your chosen tool and may end up wasting time discussing issues not entirely pertinent to your goals.
It’s similar to what happened to a friend of mine when she was painting a garden scene on canvas that someone had commissioned her to do. She became so intent on painting a cluster of yellow tulips that she completely lost track of time and exerted all her energy on this minute detail of the painting.
She ended up having to ask for an extension on the deadline simply because she got so wrapped up in the tulips that she practically had no time left for other equally important details, such as the pond, trees, ducks, and sky.
When using decision-making tools in business, the key is to start by clearly defining your goals and making regular checks and analyses to ensure everyone is still on the right track. Revisiting your goals encourages the team to always move synergistically in the same direction.
2. Too Little Debate
You might think utilizing a reliable decision-making tool can take the place of healthy debates and vigorous discussions. Remember, you should never rely too much on decision intelligence, especially when your organization’s future is on the line. The danger with not engaging in stimulating conversations with your team is you wouldn’t get to explore as many alternatives as possible in providing solutions for problems at hand.
It’s like investing in security systems for your home. Just because you have a smart lock in place doesn’t mean you’ll no longer ensure that doors are securely locked every night before you go to bed. In the first place, your smart locks won’t work if your doors aren’t securely shut.
In business, explore all possible options before relying on decision-making tools. They are there to guide and structure your decision-making process, never to make decisions for you.
3. Not Investing In Your Decision-Making Skills
Decision-making tools won’t really be worth much if they aren’t efficiently utilized and the information provided isn’t accurate, transparent, and relevant. In the hands of an inefficient leader, any decision-making tool may virtually be worthless.
Investing in your own skills ensures the perspectives and data provided by decision-making tools will be effectively utilized. Your leadership competencies will come into play when making the best decisions for your business. Remember, even the best decision-making tool cannot be a reliable substitute for your own critical thinking and problem-solving skills as a leader.
Sancus Leadership believes in training leaders and arming them with the best skills to effectively lead their teams toward growth and success. Book us a free leadership call when you’re ready to take your leadership brand up a notch. We’ll begin by sharpening your decision-making, problem-solving, and risk-assessment competencies so your organization can quickly reach its goals.
Downsides of Using Decision-Making Tools
When using decision-making tools, it’s crucial to be aware of the downsides linked to them so you don’t fall prey to these common snags:
1. Letting Cognitive Biases Rule
You may often find your cognitive biases getting in the way of accurate and equitable decision-making. These blind spots affect the way we think and approach various situations we find ourselves in. Here are some of them:
- Confirmation bias: This happens when you strive to gather information to support your initial convictions. The tendency is you’ll ignore any information that contradicts your beliefs, hence promoting flawed, skewed decisions.
- Bandwagon effect: Rather than formulating their own evaluations and convictions, some people might jump on the bandwagon and go with whatever the majority supports.
- Availability heuristic: This can happen when you choose to oppose or support a specific course of action simply because you recall previous instances when such decisions proved right or wrong, even if the circumstances are entirely different. This may result in poor choices and missed opportunities.
2. Choosing the Wrong Decision-Making Tool
There is always a risk of choosing inappropriate decision-making tools when making various decisions for your business. This may result in costly mistakes, especially since some decision-making tools entail investments, and delays may force you to incur avoidable expenses.
Remember, decision-making tools are designed for specific purposes, so it’s crucial that you select the most suitable one that can most efficiently address your unique needs in any given situation.
Merits of Using Decision-Making Tools
Decision-making tools enhance the process by providing easier, faster, and more reliable ways to make smart choices for your benefit. Let’s take a closer look at some of the benefits of utilizing one in your decision-making processes in the workplace:
1. They Convey Information More Accurately
Decision-making tools help you visualize scenarios more objectively and precisely. They can aid in promoting transparency in group decision-making by making it easier for you to convey information to your team, and include them in the decision-making process. Everyone’s insights and perspectives can be clearly expressed and communicated through various decision tools.
Having a decision-making tool up your sleeve is similar to holding a menu while deciding what to order at a restaurant. A menu clearly describes each dish so you know exactly what you’re getting. On the other hand, not having one will make you feel as if you’re groping blindly in the dark, hoping that what you end up with is at least similar to what you originally had in mind.
2. They Help You See the Bigger Picture
Decision-making tools can help you break down the various factors involved in each alternative you’re considering so you can make informed choices. They can aid you in identifying and assessing the strengths and weaknesses of each course of action, as well as the internal and external opportunities and risks involved.
This way, you’ll have a deeper understanding of the impact each potential solution can have on your business. You’ll be better equipped to utilize a more comprehensive approach to decision-making where you can essentially leave no leaf unturned when making decisions for your organization’s growth and success.
The Best Decision-Making Tools
There are many decision-making tools to choose from, each of which can cater to your business’ varying needs. Remember, different situations require different strategies, and a specific decision-making tool that has previously worked wonders for your team may not necessarily be the best route to take in a different scenario.
Here are some of the best decision-making tools to choose from:
1. Decision Tree
Decision trees are visualization tools that will help you identify the best course of action among your available alternatives. This tool can be your handy ally when there are multiple solutions worth considering.
The tree’s branches represent potential outcomes for various courses of action. You can keep extending them until you get to a point where there are no more minor decisions left to make. This way, you exhaust all possible opportunities and consider all potential risks related to each alternative. This boosts your chances of arriving at the most advantageous decision for the business.
2. Decision Matrix
A decision matrix is a chart that displays various criteria relating to the alternative solutions you’re considering and the rank scores of each. It will help you compare and evaluate each alternative objectively and consistently to make the best possible choice.
Business leaders ideally use this tool when they can’t decide between 2 most promising solutions. A decision matrix can provide head-to-head comparative data so you can more easily weigh each factor and determine which alternative best suits your defined needs.
3. Force Field Analysis
A force field analysis will help you weigh the pros and cons of specific courses of action so you can make a well-informed decision on which particular route to take in a given situation. This decision-making tool is excellent in cases where an organization is faced with opportunities for change and development.
This decision-making tool requires you to identify and analyze the forces related to the proposed changes, including restraining forces (factors supporting the status quo) and driving forces (factors supporting the proposed changes). The elements may include any of the following:
- Workforce
- Regulations
- Company values
- Needs
- Set goals
- Resources available
The factors are scored based on how strong (or weak) the impact is on the team. After assigning scores, you can then decide whether or not to push through with the proposed change. You can also devise tactics to weaken the restraining forces or strengthen the driving forces to help make the proposed change more favorable for the business.
4. Ratio Analysis
A ratio analysis is a valuable decision-making tool that helps you analyze your organization’s financial performance by determining strengths and weaknesses, and identifying growth opportunities. You can effectively utilize it before making investment decisions for the business.
Ratios are mathematical expressions between 2 factors. A ratio can be meaningful in business if it describes an economically sound relationship. For instance, a ratio analysis can be used to express the direct connection between a product’s cost and its sale price.
There are different types of ratios to help you make decisions for your organization. Here are some of them:
- Liquidity Ratio: This expresses the organization’s ability to cover its current expenses. It describes the relationship between your company’s current assets and current liabilities.
- Debt-Equity Ratio: This describes the relationship between the company’s debts and equities and can determine long-term financial stability.
- Proprietary Ratio: This describes the relationship between proprietary funds and the company’s total assets to give you a glimpse of your business’ overall financial situation.
5. Break-Even Analysis
A break-even analysis is a great tool to use when pricing and costs are significant factors in your decision-making process. For instance, if you’re in the car industry, it can tell you how many units you need to sell to pay for the cost of continuing your business.
Determining the break-even point — the point where costs equal revenue — is instrumental in identifying your margin of safety. Beyond that, you can enjoy profits and allocate your budget for other less pressing business concerns.
A break-even analysis can be used to decide on some of these pertinent business issues:
- Which supplier to go for
- Pricing schemes for your products and services
- Investment budget for new equipment and supplies
- Cost reduction efforts
6. Strategy Map
A strategy map is a diagram that offers a visual representation of your organization’s objectives and how you’re planning to go about realizing them. This decision-making tool will help you interconnect the goals and formulate sound strategies so the entire team can understand the various courses of action at a glance.
Strategy maps will also aid in determining and assessing the progress made so leaders can ensure everyone is always on the same page. It can also help prioritize tasks so the organization realizes the most important goals.
