BUSINESS RESEARCH

Better Decision Making

Executives make tough decisions every day – and for the most critical decisions, securing the best possible outcome can be make-or-break. An executive’s overall success rate for decision making will always be bound by a certain degree of risk. While difficult to eliminate completely, executives can lessen the risk and significantly improve the outcomes of their decisions by broadening their inventory of decision support tools and understanding how to apply these.

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January 2014

Many companies still rely on basic tools like scenario testing and discounted cash flow. These work well in stable contexts, but tools such as case-based decision analysis and “information markets” are better suited to uncertain, complex environments.

(1) Know what it takes to succeed: Know your causal model - this is the understanding of the critical factors and economic conditions for success and in what combination these lead to successful outcomes. Test your model’s strength by specifying “if-then” statements about the decision.

What you should ask: Do you understand what combination of critical success factors will determine whether your decision leads to a successful outcome? Do you know what metrics need to be met? Do you have a precise “recipe” for how to achieve success?

(2) Predict the variety of potential outcomes: Under uncertain conditions, executives are often unable to specify with precision the range of possible outcomes or the chance of these occurring – even in cases where they understand the critical success factors.

What you should ask: Can you define the variety of outcomes that could stem from your decision – both in the aggregate and for each success factor? Can you gauge the likelihood of each outcome?

Referenced techniques

Technique

Decision Trees

The concept describes one of the most used decision-making models, a decision tree, which explores all possible decisions and their consequences and allows for comparison of such alternatives in one single pane.

Technique

Decision Support Systems

The concept explains the usefulness of decision support systems for organisational problem solving. It describes the types of decision support systems available, their advantages and limitations, as well as real case studies of firms using DSS across different industries and sectors.

Technique

Bounded Rationality Model of Decision-Making

The concept provides a review of the practical decision-making process and explores the model’s strengths, limitations and implications by comparing it to the rational behaviour model.

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