THE crux of any managerial role is to make decisions day in and day out. One leading politician who later on went on to become the prime minister once commented that not making a decision is even a decision taken after evaluating alternatives. Decision making prima facie might seem very easy as every one of us engages in decision making day in and day out, but the we generally do not feel the pinch of making a decision, till something goes horribly wrong and one starts ruing the move. For a manager or an entrepreneur managing an enterprise, decision-making is pivotal to the success of an organization. A marketing manager might be in a fix whether to launch a product now or wait for the competitor to put the product first in the consumer's kitty, an HR manager might face a dilemma whether to recruit horses for courses or go for proverbial jacks and likewise al other functions be it operations, production, purchase encounters situations where taking a call can make or break an organization. The million dollar question is to understand how a manager should go about in order to take decisions matching the needs of the organization, thereby making more rational and correct ones. There are various ways of decision making, which can be used judiciously if one understands the situation they are in.
Decision making Tools
The tools and techniques recommended by experts so as to make the right decision can very well be used in a common men's life, however, it is difficult for a layman to understand the nuances and subsequently implement. Various types of decision-making techniques are as follows -
1. Pareto analysis – This technique emphasizes on choosing the most important changes to be made. The idea behind this technique is that by doing 20% of work, one can generate 85% of advantage of doing the entire job. This formal technique is helpful for finding the changes that will give the biggest benefit. It is useful where many possible courses of action are competing for ones attention.
2. Grid Analysis- This technique is handy where many factors must be balanced. This technique is also known as Decision Matrix Analysis, Pugh Matrix, and Multi Attribute Utility Theory. The matrices are helpful where one has to go through a number of good alternatives and factors before zeroing into the final option. It starts with listing of the options, followed by the listing of factors important for making that decision. The options are to be laid out on the worksheet table, with options at the row labels, and factors as the column headings. Once that is done, the relative importance of the factors are worked out. These are shown as numbers, which in turn would be used to weight the preferences by the importance of the factors, which would provide obvious values. If the values are not obvious then paired comparison analysis technique is used.
3. Decision Tree Analysis- This tool is better while choosing between various courses of action. They provide a highly effective structure within which one can lay out options and investigate the possible outcomes of choosing these options. They also helpful in forming a balanced picture of the risks and rewards associated with each possible course of action. One can start a decision tree with a decision that one needs to make. A small square is drawn to represent this towards the left of a large piece of paper. From this box lines are drawn out towards the right for each possible solution, and that solution is written along the line. The lines are kept apart as far as possible so that the decision maker can expand his thoughts. At the end of each line the results are considered. If the result of taking that decision is uncertain, then a small circle is drawn. If the result is another decision that one needs to make, another square is drawn. Squares represent decisions, and circles represent uncertain outcomes. The decision is written above the square or circle. Once completed the solution at the end of the line, a blank can be left. Starting from the new diagram lines can be drawn representing possible out comes. A brief note on the line saying what it means at the end of the exercise can be helpful to the decision maker. This is done until the decision maker draws out as many of the possible outcomes and decisions as can be seen from the original decisions.
Case- A Company can make a decision tree so as decide whether they should like to upgrade the existing products or go for new product development.
4. Force Field Analysis – Force field Analysis is a useful technique for looking at all the forces for and against a decision. In effect, it is a specialized method of weighing pros and cons. The plan or proposal is to be described for change in the middle, and all the forces for and against the plan are to be put in two different columns. A score to each force form 1 (weak) and 5 (strong) is assigned and subsequently one can understand the viability of the decision.
Case- A company wants to expand their production unit, but was unable to decide whether to start a new plant or expand the existing one. The management decided to go for Force Field Analysis after considering the decisions for and against both the decisions whether to expand the existing unit or go for new expansion.
5. Six Thinking Hats- This powerful technique helps to look at important decisions from various dimensions and perspectives. It enables to make better decisions by forcing one to move outside the routine and habitual ways of thinking. This also helps understanding the full complexity of the decision and spot issues and opportunities, which might otherwise be invisible. Edward de bono created t his tool in his book `6 Thinking Hats' Different types of hats are as follows -
White Hat – One can focus on the data available after looking at the information one has and see what he can learn from it, One can also look for gaps in knowledge and either try to fill them or take account of them This is helpful where one can analyze past trends and try to extrapolate from historical data.
Red Hat- The problems here are looked at using intuition, gut reaction and emotion. It also helps in knowing other peoples reaction from an emotional perspective. The responses are to be understood from those people who are not toeing the common line or the generally accepted statement.
Blank Hat- Black Hat thinking enables to look at all the bad points of the decision after looking at it cautiously and defensively. One can also find out what does not work and what can work out. This would highlight the weak points, which can then be targeted for an effective decision Successful people can very well see the other side of the story like understanding and analyzing the weaker points and addressing them.
Yellow Hat- It helps in thinking positively. The optimistic viewpoint enables to see all the benefits of the decision and the associated value. Yellow hat is the motivator even during the trying times when everything around is dark and gloomy.
Blue Hat – Blue Hat depicts process control. The individuals who chairs a meeting generally put on this hat, which can be changed to green of black hat during handling of difficult situations and charting and implementing contingency plans. Blue hat helps in understanding professionals from various stakeholders' perspective like employees, vendors, customers etc.
Author is Faculty - Management of Tirpude Institute of Management Education (TIME) Nagpur. He can be reached at- [email protected]