The 4 Best Decision-Making Techniques (Small Business)

My 12 years in the military taught me that there is no specific formula for effective decision-making — you must tailor-fit your approach based on your current circumstances. I’ve also learned that structureless decision-making is way too risky — intuition and a willy-nilly approach are not always reliable in producing the best results. I never really imagined that the techniques I learned then would still be indispensable in my entrepreneurial journey today.

The best decision-making techniques can address your unique needs. Examples are cost-benefit analysis, multi-voting, 6 Thinking Hats, and PEST analysis. They have distinct features to efficiently tackle your concerns, structure your decision-making process, and help you make the best business moves. 

Let’s start by discussing the common misconceptions leaders have about decision-making and how a structured decision-making framework can help you achieve your goals for your business advancement and success.

Then we’ll discuss 4 of the most reliable decision-making techniques and how these can come in handy for your various business concerns. You’ll find that learning about different techniques and structures can help you make better decisions. 

Why Making the Best Decisions Is Crucial in Business

Perhaps the biggest mistake business leaders commit when making decisions is having no structure or technique when diving into the process. A decision-making structure provides a reliable guide and accurate direction. Without it, you can easily fall into these common pitfalls in decision-making:

• Going with the flow. Doing what everyone else is doing or imitating what has already been successfully done may seem like a great way to circumvent tedious processes and significantly reduce decision-making time. However, it limits your opportunities, wastes your potential, and prevents the business from benefiting from more innovative, tailor-fitted solutions. 
• Falling for biases. Making decisions on your own without any structure or input from others makes you prone to giving in to your biases, personal convictions, and self-serving ideas. It’s more beneficial to consider situations from different perspectives and have a structured manner of gathering information so you can arrive at well-informed, relevant decisions. 
• Relying too much on intuition. You may have proven your gut to be quite reliable in getting you out of sticky situations in the past, but in the context of business, trusting your intuition is not the smartest way to go about making decisions for the organization. The best techniques and your strategic thinking and problem-solving skills as a leader are your best bets. 

Benefits of Utilizing Decision-Making Techniques

Decision-making techniques are great allies for business leaders because they can help simplify, organize, and accelerate decision-making. Let’s take a closer look at some of the ways businesses can benefit from them:

• Encourages brainstorming. Structured techniques encourage teams to collaborate and be more innovative in their approach to making decisions. Group decision-making is a great way to ensure you make well-informed and relevant decisions. 
• Helps eliminate biases. A sound decision-making framework can help remove biases, personal preferences, and self-serving motives from the equation. 
• Helps in better analyzing information. Weighing data and evaluating information can be taxing, especially when you find yourself overwhelmed with so much input. By having a structure or framework to work with, you’re better able to put things in perspective and focus more on the set parameters and goals. 

The Best Decision-Making Techniques

There are many decision-making techniques to choose from, each with its own strengths and limitations. The important thing is that each time you need to make a decision, you go for the one that best suits your current needs. 

We, at Sancus Leadership promote the value of effective decision-making because we believe it can spell the difference between success and failure. That’s why we encourage our partners to invest in this critical leadership skill to allow their businesses to benefit from calculated decisions and purposeful business moves.

When you’re ready to take your decision-making skills to the next level, book us a free leadership call, and we’ll help you get started on becoming a more efficient, resolute, and dependable leader.

Here are some of the most reliable decision-making techniques you can employ for your various business needs:

1. Cost-Benefit Analysis

A cost-benefit analysis is most reliable when you want to dive deeper into the financial ramifications of the alternative solutions available to you. From an economic perspective, you can analyze the different factors contributing to your decision so you can make well-informed choices. 

A cost-benefit analysis involves these steps:

1. Identify the alternative solution to be analyzed.
2. Make a list of all the costs related to making this decision to solve the problem.
3. List all the potential benefits you can think of related to finding a solution for the problem.
4. Assign a corresponding numerical value to each cost and benefit based on how much they’ll impact your business. 
5. Add up the figures for the costs and benefits.
6. Evaluate the results and compare them with those from your cost-benefit analysis of other alternative solutions to arrive at the best possible action. 

2. Multivoting 

Multivoting is a technique used in group decision-making where the entire team narrows down the available alternative solutions so they can make an informed, inclusive, and rational decision. 

This is how to go about it:

1. Present the list of all alternative solutions available. 
2. As a group, decide on how many alternatives should make up the final list of options.  
3. As a group, decide again on how many choices each team member is allowed to vote for (5 is the ideal number, but this largely depends on how long your original list of alternatives is).
4. The voting begins when each team member lists their 5 votes on separate pieces of paper and ranks them according to priority (with the top choices earning 5 points and the last ones earning just 1 point).
5. The leader collects all pieces of paper with the votes and the rankings. 
6. Tally the votes on a whiteboard for everyone to see (remember, transparency is crucial in group decision-making).

If a particular alternative solution emerged as the winner, then the team successfully employed the multi-voting decision-making technique. If no clear decision has been made, repeat steps 4-6 until you arrive at a final team decision. 

3. Six Thinking Hats

This group decision-making technique involves looking at different perspectives — or wearing different “hats” — so the team can approach the problem from different angles. Individuals are assigned to “wear different colored hats,” representing what they should focus on throughout the decision-making process. 

The 6 thinking hats are:

• White Hat: This symbolizes facts, including data, statistics, graphs, dates, names, and other objective information related to the problem. 
• Black Hat: This hat stands for the drawbacks, negative consequences, and potential risks involved in the decisions. 
• Blue Hat: This hat represents the team’s goals and the overall direction the team must take. Those wearing this hat must always consider the bigger picture and ensure the process is adhered to. 
• Yellow Hat: This hat represents the opportunities, potential benefits, and positive consequences involved in the decision. Those wearing this hat are all about positivity and optimism. 
• Green Hat: Those wearing this hat are in charge of thinking about new ideas and fresh proposals for the specified problem. They must be all about innovation, creativity, and tailor-fitting their approach to the team’s defined needs and goals. 
• Red Hat: Wearers of this hat must listen to their emotions, intuition, and reactions toward the problems or issues raised. They must learn to trust their gut and vocalize what their instincts are telling them. 

4. PEST Analysis

PEST is an acronym for:

• Political
• Economic
• Social 
• Technological

It analyzes mostly the external factors affecting your business and helps improve your timing in decision-making. If you’re keen on analyzing current practices and predicting future trends, this is the most suitable decision-making technique. 

Here are some tips on how to analyze the 4 essential factors in your PEST Analysis:

• Political: Identify the various regulations, laws, and government policies affecting your business and the alternative solution being assessed. Note how some of these influence the way you do business. 
• Economic: Consider the current interest rates, inflation, labor costs, and other financial aspects related to managing and running your business and how these will come into play if you enforce this alternative solution. 
• Social: Factor in the consumer trends, customer behaviors, and target market profile linked to your business. 
• Technological: Assess the potential involvement of artificial intelligence, industry innovations, cybersecurity, and the impact of social networking on the alternative solutions being assessed. 

By comparing the PEST analyses of various alternative solutions, you’ll get a clear picture of the best bet in your business’s current circumstances.