208 / BECOMING MORE EFFECTIVE
Making decisions
The place that you have reached in your career or your personal life
is the result of the decisions you have made. Every decision closes off
some opportunities and opens others. Life is full of difficult choices
and that is why making good decisions is essential.
Defining the process
Making big decisions isn’t simply about
mulling over a few options. Big decisions
require thought, information gathering,
and the creation and evaluation of
alternatives before the decision is
finally made. Timing is critical: you
may sometimes be able to delay a
major decision—although think carefully
through the consequences if you do—
but for many you will have to seize
the moment.
Deciding process
When faced with a major decision,
use the process described here to give
structure to your decision-making. This
will work for large personal decisions
that you take yourself, but is even more
important if you are working with others
in making the decision.
GO WITH THE FLOW
If your company culture is
for decisions to be made by
consensus, do that. If you
act alone, you will not be
supported and are likely to
fail, regardless of whether
the decision you made was
correct or not.
Tip
Evaluate the
outcome
Establish evaluation
criteria
Implement
the decision
How to make a decision
Use the process described
here to give structure to
your decision-making
01
07
06
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MAKING DECISIONS / 209
Establishing criteria
There are two reasons to establish early
on the criteria by which you will evaluate
your decision. First, these criteria will
determine what information you need
to collect to make the decision. Second,
they help make the decision process
transparent. Everyone involved knows
what the list of alternatives will be
judged against.
Prioritizing elements
In joint decisions, create and agree
the evaluation criteria in a group. Your
organization will have its own criteria,
so make sure these are included on
the list. If the result is a very long list,
then persuade the group to agree and
prioritize the most important criteria
for making the decision.
In business, the evaluation criteria
are often hard numbers—to do something
for the least cost, for example, or to make
the most profit. In your personal life, the
criteria are usually more subjective—
the relative size of the property you are
buying, or the desirability of its location.
Often you need both types, which is why
you need to use judgment.
Making group decisions
Group decision-making can be very
powerful, because it creates ownership of
the decision. Make sure that all involved
understand the process you will use, and
are aware of the input that is required
at each stage. The decision will even be
supported by those who disagree with the
outcome, as long as the process by which
you have made the decision is seen to
be transparent and fair. However, you
will have to abide by the outcome of the
process. If you fail to do so, the decision
may be seen as arbitrary and the team
will be reluctant to be involved again.
Collec t
appropriate data
Make the decision
Develop alternatives
Evaluate
the alternatives
of employees claimed they
valued their own judgment
of an analysis when making
business decisions
38%
03
05
02
04
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Finding alternatives
Decisions are usually choices between
alternatives; so successful decision-
making depends on identifying the best
possible set of alternatives to evaluate.
Search widely, but remember you can’t
evaluate everything. You may need to be
creative and on occasions “to think the
unthinkable,” but don’t forget the obvious.
One alternative you should consider
is doing nothing. This is not always easy,
but may be a real alternative. At the very
least it gives you a benchmark against
which to compare the other possibilities.
In some circumstances you may find it is
possible to do two of the alternatives at
the same time. This will require greater
levels of evaluation than discussed here,
but asking the question can sometimes
overcome major dilemmas.
House
purchase
decision
BUY HOUSE A:
BORROW $300,000
Likely
interest
rate
Annual
mortgage
cost
Chance of
interest
rate
Proportion
of cost
10% $30,000 20% $6,000
6% $18,000 50% $9,000
4% $12,000 30% $3,600
$18,600
House A total expected annual
mortgage cost:
Decision chart for choosing between two houses
of employees in one survey
valued analysis more than
judgment in decision-making
43%
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MAKING DECISIONS / 211
Using decision charts
Creating a decision diagram or chart
can help you weigh up a number of
alternatives. For example, imagine you
are considering buying a house and have
found two options, one of which is more
expensive than the other. To buy house A,
you will need to borrow $300,000; to buy
house B, $500,000. You are concerned
about how much each of the houses will
cost you to buy over the lifetime of your
mortgage. To compare the two options,
first consider what the interest rates are
likely to be in the future. For example, you
may evaluate three possibilities: interest
rates rising to 10 percent, staying at the
current rate of 6 percent, and falling to
4 percent. Next estimate the percentage
chance of each change happening. For
both houses there is a 50 percent chance
of the rate remaining at 6 percent.
Now create your decision chart. To
calculate the expected cost, multiply the
annual mortgage cost by the percentage
chance for each interest rate and then
total the costs. The expected annual
mortgage cost for house A is $18,600
and $31,000 for house B.
Use this information to evaluate
your alternatives, but remember that
this is the average expected cost.
Averages very rarely happen, so you
also need carefully to assess risk, for
example, by asking yourself: “Can I
afford the house if the interest rates
are at 10 percent for a long period?”
BUY HOUSE B:
BORROW $500,000
Likely
interest rate
Annual
mortgage cost
Chance of
interest rate
Proportion
of cost
10% $50,000 20% $10,000
6% $30,000 50% $15,000
4% $20,000 30% $6,000
$31,000
House B total expected annual mortgage cost:
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212 / BECOMING MORE EFFECTIVE
Making the decision
By the time you have created the
evaluation criteria and evaluated the
alternatives, the decision should be all
but made for you. Remember, however,
that after all of your calculations and
analysis, you will have to make the
decision based on your judgment of
the situation. You will have to decide
whether one factor is more important
than another, and will choose to value
some things above others.
Understanding emotions
There is evidence to suggest that
you cannot make decisions without
also making emotional choices
such as these value judgments.
Decision-making is not wholly rational,
so be very careful about taking a
decision that you are not entirely
comfortable with. Your emotions
or your subconcious may be telling
you something important that the
“rational” analysis has missed.
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