Decision-Making Tools in Business

We make decisions every day in our lives, whether as mundane as which shirt to wear or as consequential as which architect to go with for house renovations. In the context of managing a business, the decisions we make become even more far-reaching because they can potentially affect everyone around us. That’s why we should take advantage of any support available to us, especially business leaders who carry the weight of an entire company on their shoulders. 

The most popular decision-making tools in business include decision trees, decision matrices, SWOT diagrams, Ishikawa diagrams, and force field analyses. These help you dissect relevant factors influencing your choices so you can make more accurate evaluations and arrive at the best decisions. 

Let’s take a closer look at some of the most popular decision-making tools utilized in business and what they can do to help simplify and accelerate the decision-making process. I will guide you through the basic steps of putting them to good use. We will also discuss common misconceptions about decision-making, tips on choosing the best tools, as well as the pros and cons of using decision-making tools with your team. 

Are Decision-Making Tools Really Useful?

Decision-making tools help leaders find the best solutions for their organizations’ various issues and problems. They help in analyzing the alternatives available and highlighting factors that must be considered. The best decision-making tools can also simplify the process by making relevant information more accessible and comprehensible. 

Common Misconceptions On Decision-Making

Decision-making can mean the difference between a business’ failure and success. Good decisions can propel an organization faster toward its goals. On the other hand, bad decisions can hold it back and may even cause it to regress. 

Having the right mindset about making better decisions for your business is crucial. Here are some of the most common misconceptions about decision-making and what you have to keep in mind to make things work:

1. The leader makes all decisions for the business. Some leaders assume that, because of their position in the organization, they’re in charge of making all decisions, from the most routine tasks to the most consequential ones. This sometimes leads to biased decisions. Group decision-making is a great way to ensure inclusive, relevant decisions that align with the company’s shared goals. 
2. All decisions must be made as quickly as possible. You should never waste time dilly-dallying with decision-making, but the speed with which decisions are made doesn’t always imply efficiency. Sometimes, you have to sit back to see the bigger picture and spend some time analyzing the situation so you can arrive at the best decisions. Making decisions too fast may lead to regret later on. 
3. Decision-making is all about facts. The best decisions are always well-informed and logical, but there are instances when trusting your gut is effective. Randomness in decision-making and intuitive reactions can produce controlled random decisions that promote creativity and innovation. 
4. Decision-making is a linear process. Many leaders think their decision-making responsibilities are done once a decision has been made. In reality, decision-making is circular because you need to go back and assess the situation, gather feedback, and evaluate if the decision is indeed good for the business. Circling around also means you’re willing to make changes when necessary. 

Cons of Using Decision-Making Tools in Business

Utilizing decision-making tools to help you make better choices for your business comes with some drawbacks. Here are some aspects you must be conscious of to avoid falling into the pitfalls when using these practical business allies:

• Tendency to allow personal biases to affect the decision-making process. You might feel inclined to structure data in ways that support or promote your own ideas and perspectives. 
• Relying entirely on decision-making tools to make choices for you. Although they are dependable in providing sound solutions for even the most pressing problems, at the end of the day, your critical thinking and problem-solving skills must be effectively utilized to arrive at the best solutions for your business’ needs. 

Benefits of Utilizing Decision-Making Tools in Business

Here are some of the benefits you can enjoy with a great decision-making tool up your sleeve:

• Access to the most relevant solution alternatives that can potentially solve problems encountered in the workplace
• A comparative view of the costs and risks involved with each alternative
• Sound forecasts on potential outcomes for each alternative
• Provides an objective approach to weighing risks
• Well-informed, rational decisions
• Relevant choices that reflect your organization’s goals
• Visual representations provide a clearer and more concise explanation of the factors involved in decision-making
• Faster decision-making

Tips on Choosing the Right Decision-Making Tools 

Choosing the right decision-making tool for your business is a decision in itself. There are many types of tools to choose from. A particular model or software may work extremely well for one company but  may not be as useful in your organization. 

The key is to find one (or a handful) that will work best for your company’s unique needs, profile, expectations, and goals. Here are some tips to help you make the right choices:

1. Consider the type of dilemma you’re facing. Different tools are best suited for different kinds of issues encountered in the workplace. Clearly define the problem so you know exactly what needs to be done to efficiently address it. 

2. Don’t be afraid to experiment with the different types of decision-making tools available. This is a great way to evaluate just how effectively a tool can address your needs. Look into the additional resources and time required, as well as the added expenses to be incurred by your company

3. Ask for help from professionals. As a leader, it’s essential to invest in your own skills. We, at Sancus Leadership, can help enhance your proficiency in decision-making and navigate your way through the ins and outs of various decision-making tools. When you’re ready to take your brand of leadership up a notch, schedule a demo with us, and we’ll show you the way toward making accurate decisions faster! 

The Most Popular Decision-Making Tools in Business

Here are some of the most popular decision-making tools utilized by leaders to help make the decision-making process simpler and faster:

1. Decision Trees

A decision tree is a diagram that helps you visualize the potential outcomes of various alternative solutions available for a specific problem. It clearly shows you the essential details attached to each probable solution, such as the risks, costs, and possible consequences. A decision tree helps you hone in on the best course of action for the problem at hand. 

Decision trees are made up of branches and nodes that represent various courses of action. You can follow these simple steps:

1. Identify the root node. Clearly state the problem or the decision that needs to be made. 
2. Create the branches. Identify specific actions you can employ to possibly address the situation. Make sure each course of action has its own branch.
3. Keep expanding the branches. Work on each branch until you reach an endpoint where there are no more decisions or alternatives related to all the courses of action. What are the pros and cons of this branch? What are the risks involved with each step?
4. It’s time to evaluate. Assess each of the branches closely and figure out which of them presents the most ideal course of action for the problem at hand. Ideally, you should opt for the branch that offers the most benefits and the least amount of risks. 

2. Decision Matrices

A decision matrix (also called a Pugh Matrix) provides a quantitative approach to evaluating your alternative solutions to an identified problem. A list of weighted criteria is used to weigh the options and establish which of these is the best route to take for the business. 

Here’s how to make a decision matrix:

1. Identify the problem. Clearly define the problem and what type of decision needs to be made to solve it. 
2. Come up with criteria. Brainstorm the criteria you’ll use for evaluating the options. Is cost a huge factor in this decision? Are you willing to sacrifice quality over cost? Is employee retention a primary concern? 
3. Rate each criterion. Weigh them according to the impact they have on the final decision, usually from a scale of 1-5, with 1 being the least impactful and 5 having the most impact on the final decision. 
4. Fill in the grid. Draw a grid and write the criteria and their corresponding weights as labels on the horizontal part of the grid. Your proposed solutions go on the vertical part. 
5. Rate your alternative solutions. Rate your solutions based on the scale used for weighing each criterion. 
6. Compute the final scores. Multiply each of the ratings by the weight of the corresponding criteria. Generally, the proposed solution with the highest score indicates the best course of action for the specified problem. 

3. SWOT Diagrams

SWOT is an acronym for:

• Strengths 
• Weaknesses
• Opportunities
• Threats

Leaders use it for analyzing the internal (strengths and weaknesses) and external (opportunities and threats) factors related to the different alternative solutions they have for a particular problem. It provides an opportunity for you to break down the factors affecting your organization and effectively classify them so you can better understand how to handle or maximize them.

A SWOT analysis will rarely give you a specific solution to a problem, but the results from your analysis will be significant when you move on to actually making your final choice. 

4. Ishikawa Diagrams 

Also known as a Fishbone diagram, the Ishikawa diagram helps you get down to the bottom of the situation you’re dealing with. It assists you in finding the root cause of the issues presented so you can move forward with a deeper understanding of how to solve the problem. Addressing the root cause produces better results than dealing with just the symptoms.

The Ishikawa Diagram highlights cause-and-effect scenarios. Here’s how to go about it:

1. Identify the “head” of the fish. Clearly define the problem at hand. Be specific about details, such as the timeline and circumstances involved. Then, draw an arrow 
2. Draw an arrow behind the head. The arrow should aim toward the head, representing the fish’s “backbone.”
3. Draw the fish’s “ribs.” List the factors affecting the problem by drawing them on diagonal lines connecting to the backbone. You may end up with both simple and intricate “ribs” because the contributing factors may significantly vary. The goal is to get a deeper understanding of each factor.

6. Force Field Analyses

A force field analysis will help you in analyzing the benefits and drawbacks of specific factors, so you know whether or not a specific course of action is worth pursuing. You assign values to these factors and determine whether they’re a “driving force” or a “restraining force” in the given scenario.

Here’s a simple guide to conducting a force field analysis:

1. Describe the proposed change. Identify the objectives and describe the elements involved. 
2. List the driving forces. Make a list of the factors that support the proposed change and place them on the left side of the diagram. 
3. List the restraining forces. Make a list of the factors that oppose the proposed change and place them on the right side of the diagram.
4. Rate the factors. Using a scale of 1-5, with 1 being the least impactful and 5 having the most impact, rate each of the factors. 
5. Tally the scores. Add up the scores on each side of the diagram. 

Generally, if the driving forces score higher than the restraining forces, you can take it as a sign that pushing through with the proposed change will be beneficial for your business. On the other hand, if the restraining forces score higher, you can think of ways to strengthen the driving forces and weaken the restraining forces, or you can abandon the proposal altogether and think of better ways to address the situation. 

Key Takeaways

Decision-making tools can be useful resources for leaders in making well-informed, comprehensive, and relevant decisions for the business. They can help you identify and assess alternative solutions to specific problems so you can reach the best possible decision. 
Choosing the right type of decision-making tool for the various problems you encounter at work is also crucial since each of them has its unique strengths and flaws. However, more importantly, you, as the leader, must invest in your own skills so you’re always equipped to make the best decisions for your business, with or without these decision-making tools.