As a business leader, you should remember that you are, first and foremost, a leader. If you have to make a decision for yourself, then things are generally very easy. You know yourself well enough to know what works for you and what doesn’t and carrying out internal debates with yourself isn’t nearly as difficult as doing the same with a whole other human being when deliberating potential solutions to a problem.
On the other hand, things get very complicated very fast when you’re leading a group. This is the crux of decision making in business.
A good example of this is when you’re trying to lead your friends across a river. You’ve probably crossed plenty of rivers before, and so this wouldn’t be especially difficult if you were doing it on your own. However, you’ve never been with your friends while tackling this kind of problem before and, truth be told, you don’t know how to make that decision when you have to lead people as well.
You’re going to be scrambling around trying to figure stuff out like the speed of the river and trying to decide whether you should just discard the whole decision-making process and just wing it. Alternatively, you could put it all off till tomorrow and just camp by the river bank.
After a while, you hear one of your friends triumphantly announce that they found a log and suggest the whole group should cross over on the log. Now you have this internal conflict between choosing what currently seems like the quickest and easiest solution and the potential danger and a log that loses balance and gives your entire group up to the river. You and your friends huddle around and debate the pros and cons of all your different options, such as turning around going back, wading through the river, going with the log idea, and just going on with the scouting till you find a better solution.
The process is a meta-process. You aren’t just making a decision about which option to pick, you’re also making a decision about how to make a decision about which option to pick.
As you go through this process, you are most likely going to go through a whole bunch of decision-making strategies. These are the ways in which we make choices in light of the information available to us; whether it’s how to pick an elective for the next semester, how to cross a river, or how to move our businesses forward.
It’s important as a leader that you know different decision-making strategies because using the right strategy at the wrong time can prove catastrophic for your business.
Most people go through trial and error when making decisions, relying on experiences, both good and bad, to figure out what step to take next. But what if you’re seeing a novel situation that isn’t anything like what you’ve dealt with before? You need to have decision-making strategies for both the familiar and the unfamiliar.
There are four types of strategic decisions you can begin to apply straightaway, whether you are dealing with a familiar situation or a novel one.
Analytical Decision Making
This strategy is for when you have all the information relevant to the given situation at your fingertips. It is methodical and involves a well-ordered sequence of steps to arrive at a decision. You rely on information that is objective and can readily be observed. It is a very attractive strategy because of the way it breaks up a complex decision in an array of smaller interlocking pieces.
Be careful with this method, however, as the comfort of logic can sometimes be misleading. You might decide that you have enough money to keep your business going for the rest of the year without actually looking into your cash flow situation.
Analytical decision making is ideal when you have explicit and easily definable goals, can access all of the information you need, and have the experience to know which information is relevant and which information isn’t. You also need to have time to go through the whole analytical process.
Pros
This is a versatile and methodical strategy and it is pretty easy to communicate to your colleagues and employees. It works well when you can represent the variables and outcomes in terms of numbers.
Cons
It is only useful in circ*mstances that are specific enough to meet all of the requirements. It also requires experience to carry out quickly. It might therefore not be easy to carry out for novices.
Heuristic Decision Making
This strategy is most appropriate when you don’t have all the information you need but have a mix of some information and experience at your disposal. Heuristics basically lets you make generalizations based on the little information you have.
Take the situation when you’re driving. You see two red lights appear at about car-width right in front of you and you instinctively step on the brakes. You didn’t go through a long analytical process trying to figure out if those really were car brake lights and what they meant. You just remember from past experience that such red lights are typically car brake lights and you know how to respond to that.
Heuristics don’t work all of the time, but they work often enough that we can trust them in many situations. You should use them when you have the right heuristics for the situation and a lot of confidence in them and their accuracy. There also shouldn’t be very great consequences for being wrong.
Pros
This is a simple and fast strategy and can become subconscious with enough practice, leaving your mind free to think about other things.
Cons
Heuristics can lull you into a false sense of security, which can be dangerous when dealing with a novel situation. You might also rely on the wrong cues to guide your decisions, which will obviously result in the wrong decisions.
Expertise Decision Making
This kind of decision making relies on your expertise and competence in an area. This is when you know so much about something and have enough experience that most of your decisions are intuitive. You recognize the information and put it together without thinking too much about it, even when it doesn’t seem to match up in the eyes of others.
An experienced sailor, for example, will typically know if it’s going to rain much earlier and much more easily than a novice. Sometimes all the information they need is the wind picking up. A novice might need to see more, such as clouds building up and so on.
This kind of decision making works when you have enough experience in an area and can easily check your decisions against the right heuristics.
Pros
Expertise decision making is pretty fast and is the cause of many accurate decisions that typically take place on a subconscious level.
Cons
Because of the fact that most of the decisions take place on a subconscious level, it’s a hard thing to teach, especially things that the expert sees as obvious, which will be seen as pretty difficult by others. Also, there is a tendency for people to think that just because they are an expert in one area then they are an expert in other areas as well.
Random Choice Decision Making
This might seem weird, but flipping a coin can and often is, a very good way to make decisions. It is the simplest method and can save you time and even be effective when you use it appropriately.
Say you have to divide your employees into different teams and know that interpersonal dynamics may make it difficult for the individuals to decide which team to go with. Random decision making can be an effective way to get people teams without having to deal with the interpersonal dynamics that follow.
This strategy is most effective combination of minimal consequences, limited time, and a lack of other appropriate strategies to choose from. You should also use it when the alternatives you’re choosing between have such similar or ambiguous outcomes that it’s impractical to distinguish between them.
Pros
It’s a fast and simple strategy.
Cons
You aren’t going to have any control over the outcomes.
The next time you’re thinking about making a decision, whether for your business or your personal life, take a moment to think about how you ended up there. What strategy did you use? Was it the right one in the circ*mstances? When you understand not just the decision you made but how you made it as well, you become a better decision maker, for your personal life as well as your business.
