How to Choose the Appropriate Decision-making Method

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Decision-making and Valuation > Best Practices > How to Choose the Appropriate Decision-making Method

How to Choose the Appropriate Decision-making Method
Anneke Zwart, Student (University), Netherlands, Moderator
Most decision makers in organizations rely on conventional decision-making tools - even in situations of high complexity and uncertainty. However, these basic tools are based upon the assumption that decision makers have access to all information that is needed. Therefore, these conventional tools can only work in stable contexts.
See also the Cynefin Framework or Taleb's 4 Quadrants to appreciate the difference between these decision-making circumstances/contexts: in uncertain and complex environments the conventional tools are useless, mainly because of the lack of reliable and complete information.
The problem with the above is not the absence of alternative tools; rather, it is the lack of clear guidance about how and when to use what tools. As a result, managers will use only those tools that they are highly familiar with, instead of using the most appropriate tools.

Courtney et al. (2013) explain a model of decision making that matches the right tools to the decisions to be made. Their model is based on three factors: an understanding of the factors that will lead to success; the predictability of outcomes; and the degree of centralization of information.

So what do you need to do as a decision-maker?

You need to start with asking 2 questions to analyze the context and find the appropriate tools in that particular context:
1. Do I have a clear understanding of the factors and conditions that are needed for a successful result? In other words is there a "strong causal model", in which the combination of Critical Success Factors (CSFs) and economic situations that lead to success are clearly understood.
2. Are the possible outcomes of a certain decision predictable? In order to determine which tools are appropriate, it is critical to know whether predicting the outcomes resulting from a certain decision is possible.

According to the authors, answering the first two factors/questions will direct you to the most appropriate kind of decision making tool, which could be Conventional Capital Budgeting Tools, Quantitative Multiple Scenario Tools, Qualitative Scenario Analysis, Case-Based Decision Analysis.

And what should you do next?

The third factor – the degree of centralization of information – has to do with choosing the right Information Aggregation tools. Such tools deal with capturing dispersed information and operate independently from the decision making tools. The related question is the following:
3. Is the information that you need centralized or decentralized?

Standard aggregation tools have been used for a long time, but nowadays also newer tools for aggregating dispersed information are used:
- One example is the use of information markets to obtain the knowledge of informed crowds with regard to important variables such as macroeconomic outcomes.
- Another example is called similarity-based forecasting. This approach asks individuals to rate the similarity between a certain decision to a past decision.
- The last example mentioned is incentivized estimation. In this approach certain people are estimating an important outcome; the person that most accurately estimates the outcome will receive a payoff.


This model of choosing the right decision making tools is highly simplified. In reality there will be many kinds of complications and problems when important decisions are made. Some of the most important complications in selecting the right decision making tools are the following:
1. Cognitive limitations and behavioral biases: It is simply impossible for human beings to always accurately predict the level of uncertainty. This might us lead to say that the above proposed model is not very practical. However, it is argued that these biases can be managed by choosing the decision-making tool in a systematic, transparent, public way in which peers are able to assess the decisions that are made.
2. Problematic organizational protocols: Because of the influence that money and power have on decision making behavior, organizations are required to establish some general decision making protocols. These protocols often get in the way of using the most appropriate decision making tool.
3. Reliance on one tool: Although decision makers often rely on one specific decision making tool, it is often more efficient to use more than one tool and combine certain tools.
4. The time/timing of the decision: Besides considering what decision to make, it is important to consider when to make the decision as well. Sometimes it is more efficient to delay a certain decision rather than making the expensive and high-risk decision directly.

Source: Courtney, H., Lovallo, D., and Clarke, C. (2013) “Deciding How to Decide” HBR November 2013 pp 62-70

Who Still Thinks Decision-making is Easy?
Jaap de Jonge, Editor, Netherlands
Thank you for contributing this outstanding summary! An earlier 2007-article by Snowden and Boone already presented the Cynefin Framework mentioning 4 decision-making contexts (Simple, Complicated, Complex, and Chaotic).
Each of these situations requires a different decision-making model; involving other people.

As decision-maker you need to choose the right decision-making process and tools. Depending on the decision context. To determine the context, Courtney c.s. suggest to ask yourself:
1. What are the underlying factors and conditions (CAUSALITY)?
2. What is the PREDICTABILITY of the outcome (effects)?
3. What type of INFORMATION is needed (de/centralized)?

If you then select the matching decision process and information tools, and are able to avoid the various pitfalls the authors mention, you have done all you could to make the probability that you arrive at the right decision as high as possible.

Another Factor to Decide on Decision Making
Yeshwant Moodliar, Consultant, India, Member
A most important factor in any decision making is also the TIME FRAME to be observed in conveying your decision. At times, speed of response is warranted.
Considering all these aspects in the "Decision Making Process" I would strongly suggest that you need to do three things before decision making:
1.Understand the overall scenario.
2.Know the repercussion of each possible decision you can think of.
3.Take the decision which is most appropriate for that moment of time.

Wise Decision-making Requires Intelligence, Regardless of Method
De Monte, Canada, Member
The mind requires data/information and knowledge, just like a computer, to apply a program method/tool/ software, to analise for an indicator/ trend and pattern for tracing, accounting and decision-making based on priority/risk.
The Achilles Heel of intelligence for wise-decision-making is effective planning of time, resources and budgets. The difference between certainty and uncertainty is based on the degree of planning and improving, to keep up with a continuously changing environment, to be prepared. Semper paratus.

A Real Taste of Decision Making
SURENDRA GANGADHAR YERNAL, Project Manager, India, Member
Decision making is not restricted to a certain level of the management, decisions have to be taken by every process owner.
The above article will definitely help to determine the decision making process.

Blink and Making Decisions
Andrew Blaine, Business Consultant, South Africa, Member
And if you are still in a quandary after all this deliberation follow Gladwell and "blink"! (Preferably, read the book and enter the decision-making process with the content and message in mind).

Decision Making Depending on the Situation at Hand
Nyasulu Pachisi, Malawi, Member
Great discussion, analysis of the situation at hand is very important. Even after that it is always necessary that the decision maker should be of a sober mind and always remembers to also focus on who will 'win or lose' from the decision made and to what extent the damage will be caused by the decision that is made.
Please try your best never to be surprised by your own decision.

Clear Vision to Take Decisions
Stefania Di Cristofalo, Coach, Italy, Member
@De Monte: The Achilles heel of the decision making are all the resistances people have to see the reality for what it objectively is (Editor: see cognitive biases, bounded reality). Data and a method are necessary but not sufficient.
Stress and personal unsatisfied needs build filters. Filters are like glasses that can mystify reality and lead to take wrong decisions even if you are an excellent analyst.

Quality and Acceptance Factors in Decision-Making Process
Victor Jurado, Business Consultant, Mexico, Member
I think its important to take certain attitudes, behavior, interests and other human variables into account. We can make our best selection and use of a decision technique, and even arrive at a very good (technically robust) decision; but, when we want to put it in effect, there could be a lot of resistance against its implementation by those who are to be in charge of it, or those who are to be feeling the effects of its implications.
I call these the "quality" and the "acceptance" factors. There are decisions which demands for a very good "technical quality" (i.e. based on a sound analysis and expertise) and other type of decisions which are simpler to approach to.
We must somteimes make a trade-off between seeking first for an "acceptance" decision, in order to simplify its implementation and, on a posterior phase work on an improvement plan aimed at attaining the quality it deserves.
Or we can implement a "technical quality" decision and plan for a good "selling" effort later on.

The Importance of Organizing and Cooperating by Management in the Decision Making Process
MOHAMED ELDALY, Analyst, Egypt, Member
Summarizing what was said until know I think that the decision making process may depend basically upon an appropriate assessment of the environment and having the required information that may be useful through brainstorming and discussion with all involved parties without neglecting any opinion.
The second step may be using the appropriate tools and information technology as well as statistical and economic analysis for the results.
Then the next step is filtering them, note the time factor and the confidence for the participants in the field or the nature of the decision, the cooperation is very important here too.

Decision-making Process Similar to the Chess Player's
David Dicanot, Analyst, France, Member
Hello, consider the similarity between a decision-making process as described and how the chess player decides to play a move.
1. The chess player assesses first the position. He analyzes the strengths and weaknesses of each player's position. It corresponds to answer what are the underlying factors and conditions (INFORMATION)
2. He defines an objective, a target, short term or long term, to achieve
3. He elaborates a plan, a strategy to achieve his objective.
4. He selects the move which leads to a position more flexible. That means being able to come back without compromising his plan and his position in addition to be able to changing his plan in the course. It corresponds to the PREDICTABILITY.

Many Decisions Rest on Wrong Assumptions and Biases
Greenhow, Consultant, Sweden, Member
1. This discussion helps to deal with an assumption decision-makers often make: that they have access to all the information needed. And there is a second, hidden assumption - that this information is of high quality and known to be so.
These are in fact killer assumptions. How good are these tools in the real world where we often lack information, and the quality of information that you do have is unknown? It there is uncertainty this further complicates the information quality issue too.
2. Cognitive and behavioral biases also include the value system of the decision-maker. Most decision-makers will not make decisions they don't believe in. And all too often we believe what we want to believe so we make the data fit our beliefs. If managers surround themselves with peers who share their beliefs, there is little room for modification by other perspectives.

The Decision-making Tool in a Complex Environment is the Computer
De Monte, Canada, Member
Assuming and presuming no bias, prejudice and conflict of interest to filter, the central collection of intelligence in a modern organizational environment would require either a genius or a well-thought out computer program.
A leader may envision the mission/business lines based on values, but it is the daily work of employees that drives and propels an organization forward to respond to the needs of its customers/services, to profit.
It is expected that the management have a pulse on the workers to make everyday decisions that maintain the health of the organization. I agree that decision-making is like a chess game and go further to say it is like rubric's cube, with it myriad of permutations/ algorithms to achieve the right colour/s. Getting it right requires effective planning from top to bottom.

If you don't Select the Right Decision Context, You're Dead
Jaap de Jonge, Editor, Netherlands
@Greenhow: I believe you hit the nail on the head. Those kind of wrong assumptions of having proper information and believing in opinions of people in your team (you appointed yourself because they share your views) and similar confirmation/overconfidence errors are also mentioned by the authors as a "complication" (See above complication #1).
But indeed if you think of it, these are not "decision complications", but rather "decision killers". Because they cause the decision maker to already go wrong at the first step of the decision-making process: assessing the decision-making context.
And if you already go wrong there, the chances of ever arriving at the right decision (which allows to take the right actions) are close to zero.
In what ways can organizations ensure that step #1 - the judgment of the decision context (simple, complicated, complex or chaotic) - is done properly?

A Bad Decision is Better Than no Decision
Andrew Blaine, Business Consultant, South Africa, Member
@Jaap de Jonge: The importance of making the right decision is only outweighed by the value of a decision. If a decision is wrong, then it can be changed. However, if, for fear of being wrong, no decision is made, the impact on a business is potentially fatal!

Objectivity is Very Important in Decision-making
Jillo K. Molu, Accountant, Kenya, Member
Not having a desired outcome, irrespective of how informed a decision maker is about the factors to consider, contributes to the probability of good decision. What are the possible outcome and the impact?

Making the Right Decison Requires an Effective Plan
De Monte, Canada, Member
@Jaap de Jonge: Language, words and instructions require careful alignment just like a blueprint to anything before implementing its construction. In my world this is called quality management, requiring commitment by the leader for time, resources and budgets to do it right to get it right. Anything less is less, to get it wrong by lack of commitment, meaning something else is more important, to deflect time, resources and budgets from the decision-making process. This is called management-risk, of making a bad decision on planning allocation of time, resources and budgets, to beget a risk to manage by reacting with time, resources and budgets that were not planned. Plan the trip/map to the destination, lest one get lost.

Is Waiting a Good Decision Making Strategy?
Jaap de Jonge, Editor, Netherlands
@Andrew Blaine: Whether postponing a decision, or involving experts, or involving many people in a decision is a healthy strategy, depends on the decision context.
In many simple circumstances and during a crisis it probably is not; in some more complex situations it is.
I believe that is the idea behind the models mentioned in this article.

Decision Making Failure and the Reasons Why!
edward sevume, Sweden, Member
What really disturbs me is when decision making is influenced by confirmation bias! And what of that thing called groupthink? This is why sometimes, decisions end up achieving not what they were meant to achieve and worse still, they can cause dissonance among the team or within the company!
The purpose then is to find a sound model on how to make good decisions stick plus make the team or the company carry out the decisions even when they did not fall in line with the thinking behind or even the way leading up to the deciding itself.

Agree on Importance of the Factors Before Taking a Decision
Bhavesh Sodagar, Manager, India, Member
Very fruitful discussions, indeed!
The factors mentioned in the above discussion also include the team members. They also play a critical role by contributing to make a correct decision. Also the decision needs to be accepted by the team.
Also very important is to understand the timing factor in the decision making, which is sometimes based on the outcome. The decision needs to be verified before it is taken.

Making Decisions
Andrew Blaine, Business Consultant, South Africa, Member
@Jaap de Jonge: 50 years ago, as a young Officer Cadet, I was taught the process of making "An Appreciation of the Situation" - the military process for making decisions. The system remains in force today and involves the following steps:
1. A review of the current situation.
2. Identification of the Aim of the proposed innovation, together with any limitations that affect the realisation of this aim.
3. Identification and consideration of those factors that affect realisation of the anticipated/desired position.
4. Consideration and distillation of the deductions derived from the considerations made in "3" above.
4. The formulation of Conclusions from step "3".
5. Based on the conclusions derived above, the identification and consideration of options/Courses open to realise the desired position.
6. Formulation of a plan by which the desired position can be realised.
I have found the system works very well in both the military and business world?.

The Appropriate Decision-making METHOD
Jaap de Jonge, Editor, Netherlands
Andrew, thanks for your reaction. Indeed the situation/circumstances should be taken into account in any decision you make. That's a no-brainer.
But note that this article goes one essential step further to say that one should also adapt the METHOD or the PROCESS of making the decision to the circumstances.
So the whole idea is to NOT adopt one system or approach for any situation!

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