Taking Better Decisions


By

Prof. R.K. Gupta
BE Hons MBA FIE
Professor of Management
Aravali Institute of Management
Jodhpur
E-mail:
cityju@rediffmail.com
 


Every day we as individuals or in professional or workplace situations have to take small and big decisions that influence critically our lives. The brain keeps processing available information in a process that is called decision making. Except for processing information for learning, the main use of processing is in arriving at conclusions. Some of the conclusions that need action with desired real life outcomes are called decisions. Decision making can be learnt through simulation techniques.

The fear of making the wrong decisions and Fear of judgment/criticism by others may lead to procrastination or inaction. This is well known to any responsible manager.

Due to uncertainty we can't decide fast enough or can't choose from available alternatives. This may be due to fact of genetic background, the lack of exposure to culture of decisiveness and boldness. A good leader like a captain in Army or a Leader in Business enterprise, even a good salesman has to decide with certain degree of boldness without procrastination and with clear outcome in mind. It is this boldness that enables person to decide in a given situation. One has to train oneself to learn to be decisive in life on clear line of action, irrespective of odds of success as there are a few decisions that have non –probabilistic outcomes. What is important is logical processing of inputs available or collected for this purpose with strong focus on desired outcome while ranking choices of outcomes.

Instead of hoping for the best, only prayers, Que sera sera or taking a blind action, it is always better to be proactive to decide course of action and actually go ahead with it keeping in mind possible outcome(s) and keep contingency plan if it does not happen the way desired. Positive attitude is important factor in being able to decide and act. In Srimad Bhagwat Geeta (A highly treasured and popular Vedic writing, Lord Krishna exhorts us to indulge into Kerma with required skills and best efforts and leave outcome to the Lord). Sometimes, however, taking no action or procrastination helps in resolving the situation with time. But that is not scope of this paper.

Any decision making dilemma faced by a person (Leader) is accompanied by:

1. Search for past experience that was successful in handling similar situation
2. Due to lack of such past based cue(s) the person will go on to collect information so as to minimize risk of outcome not as being desired
3. The group or team influence may also give shape to particular decision which includes the culture of the dominant group to which that person belongs
4. Education background
5. Risk taking capacity
6. Time pressure for taking decision
7. Ability to evaluate various outcomes and alternatives and their attached probabilities
8. Training imparted to take such decisions in peculiar situations (like in army).

We therefore, can see that decision making is not merely an art or a science or both but also is largely determined by availability of extent of definite information, uncertainty of outcomes and the predisposition of person(s) in decision making position.

Decision making in groups is sometimes examined separately as process and outcome. Process refers to the interactions among individuals that lead to the choice of a particular course of action. An outcome is the consequence of that choice. Separating process and outcome is convenient because it helps explain that a good decision making processes does not guarantee a good outcome, and that a good outcome does not presuppose a good process. Thus, for example, managers interested in good decision making are encouraged to put good decision making processes in place. Although these good decision making processes do not guarantee good outcomes, they can tip the balance of chance in favor of good outcomes.

A critical aspect for decision making groups is the ability to converge on a choice.

* Unanimity is commonly used by juries in criminal trials in the United States. Unanimity requires everyone to agree on a given course of action, and thus imposes a high bar for action.
* Majority requires support from more than 50% of the members of the group. Thus, the bar for action is lower than with unanimity and a group of "losers" is implicit to this rule.
* Consensus decision-making tries to avoid "winners" and "losers". Consensus requires that a majority approve a given course of action, but that the minority agrees to go along with the course of action. In other words, if the minority opposes the course of action, consensus requires that the course of action be modified to remove objectionable features.
* Sub-committee involves assigning responsibility for evaluation of a decision to a sub-set of a larger group, which then comes back to the larger group with recommendations for action. Using a sub-committee is more common in larger governance groups, such as a legislature. Sometimes a sub-committee includes those individuals most affected by a decision, although at other times it is useful for the larger group to have a sub-committee that involves more neutral participants.

Less desirable group decision rules are:

* Plurality, where the largest block in a group decides, even if it falls short of a majority.
* Dictatorship, where one individual determines the course of action.

Plurality and dictatorship are less desirable as decision rules because they do not require the involvement of the broader group to determine a choice. Thus, they do not engender commitment to the course of action chosen. An absence of commitment from individuals in the group can be problematic during the implementation phase of a decision.

Decision making in one's personal life

Some of the decision making techniques that we use in everyday life include:

* listing the advantages and disadvantages of each option, popularized by Benjamin Franklin
* flipping a coin, cutting a deck of playing cards, and other random or coincidence methods
* accepting the first option that seems like it might achieve the desired result
* tarot cards, astrology, augurs, revelation, or other forms of divination
* acquiesce to a person in authority or an "expert"

Decision making in business and management

In general, business and management systems should be set up to allow decision making at the lowest possible level.

Several decision making models for business include:

* Analytic Hierarchy Process - procedure for multi-level goal hierarchy
* Buyer decision processes - transaction before, during, and after a purchase
* Complex systems - common behavioral and structural features that can be modeled
* Corporate finance:
  o The investment decision
  o The financing decision
  o The dividend decision
  o working capital management decisions
* Cost-benefit analysis - process of weighing the total expected costs vs. the total expected benefits
* Decision trees
  o Program Evaluation and Review Technique (PERT)
  o critical path analysis
  o critical chain analysis
* Force field analysis - analyzing forces that either drive or hinder movement toward a goal
* Grid Analysis - analysis done by comparing the weighted averages of ranked criteria to options, a way of comparing both objective and subjective data.
* Linear programming - optimization problems in which the objective function and the constraints are all linear
* Min-max criterion
* Model (economics)- theoretical construct of economic processes of variables and their relationships
* Monte Carlo method - class of computational algorithms for simulating systems
* Morphological analysis - all possible solutions to a multi-dimensional problem complex
* optimization
  o constrained optimization
* Paired Comparison Analysis - paired choice analysis
* Pareto Analysis - selection of a limited of number of tasks that produce significant overall effect
* Scenario analysis - process of analyzing possible future events
* Six Thinking Hats - symbolic process for parallel thinking  by a team.
* Strategic planning process - applying the objectives, SWOTs, strategies, programs process
* Ubiquitous command and control is a concept for dynamic decision making based on "agreement between an individual and the world", and "agreements between individuals"

As would be evident from above discussions  TWO points come very clearly out>>>

Shyness in decision making is due to lack of adequate information available about person, situation or the likely behavioural outcome  in given  situation, and the personality and training of person entrusted with task of decision making.

The pressure of time hastens the process of decision making but is also having both positive and negative sides-Bold decisions are safer yet bold decisions have high chances of failure too, if based on mere assumptions and hunches.

Procrastination is a two edged sword.

A simple Decision Tree approach listing out possible choices at each logical step with possible outcomes and risk involved should prove adequate in most circumstances whereas sophisticated softwares are now available for help in decision making that are called ' decision Support Systems'.

The first requisite for success science is the ability to apply your physical and mental energies to one decision problem/opportunity incessantly without growing weary. Just being worried about making serious decisions is like sitting on a rocking chair--it gives you something to do but doesn't get you anywhere. Therefore worrying about making a decision is a waste of time. A decision is something you have the capability of changing. Anything else is a fact of life. The first principle in making good decision is that you must not fool yourself, and you are the easiest person to fool. Moreover, making a decision and implementing one are two different things.

Unlike deterministic models (risk-free decisions), the outcome of some decisions depends on the second party, as is the case in any advertising campaign strategic decisions in a competitive market. Therefore, one of the characteristics of decision analysis problems is that "good" decision-making does not necessarily bring about good outcomes.

Each and every business day the manager puts many decision questions to the test. The questions must first be identified as problems or opportunities, verified; scaled into mathematical models for which an answer will abound, and then controlled by updating the solutions because of the dynamic nature of business decisions. Mathematics has been recognized as an autonomous interior constructional activity which, although it can be applied to an exterior world, neither in its origin nor in its methods depends on an exterior world. The criterion of a good mathematical model is confined to its usefulness in making good strategic decisions. This is the absolute core of Management Science approach to decision-making, which is the science of decision-making. Not all science facts have practical usefulness. For example, Darwin's insight had no practical payoff, but he was a revered figure because he changed the way humans see their place in nature.

It is this approach to decision-making that makes the business successful. But it is important to note that such a process does not come easily. Again, this process is of a three-fold origin that encapsulates doctrines of computer integration, mathematical scaling and modeling and finally re-entering new data transformations that will occur as time ticks onward. This is the complex analysis that will deduct our thinking in this regard.

It is found that people who have high state of anxiety either decline responsibility and avoid serious decision making position, or take rushed decision without probing even most obvious outcomes too.

The emphasis should be on viewing each problem as an opportunity as a famous saying goes; because, the problem drives person to look for more detailed information, causes and solutions. With this clarity in mind, decision making can be more focused, sharp and effective. This is the reason feedback is invited form customers and employees so as to identify problems in business processes, quality or dealings with customers. These are then converted into specific problems for finding solution by improving processes.

Leaders take challenge against each problem encountered and set about winning the same by bold, logical and systematic screening of choices available like in Decision Tree Model/Flow Diagrams with yes/No type  branches or nodes for various options at each stage, Used in Operations Research. Probabilities can also be assigned for each course of action or outcome. The final choice of action will depend on values and attitude of the decision maker. One has to therefore cultivate habit of taking bold, timely and effective decisions with possible outcomes in mind and taking another set of decision to handle adverse outcome as process goes on.

The Decision-Making Process: A decision-maker must first decide on his/her values and set goals to insure a fruitful decision-making process. The environment you fashion out of your decisions is the only climate you will ever live in. Therefore, before taking any course of action one must discover/create a set of alternative courses of action and gather information about each. Having gathered the information with which to make a decision, one must apply information for each course of action to predict the outcomes of each possible alternative and make a decision for implementation. Out of every good decision, comes forth a new problem that will require another effort. Each success only buys an admission ticket to a more difficult decision problem.

We can reduce the process as below :>>>

What outcome is desired?
      
What are various possible choices available?
      
What is the probability of success of a choice if selected? Choice 1, 2, 3…. (Here more information may be sought)
      
What can be consequence if a choice fails? Is it at acceptable level? Yes/No (Here help from experts or colleagues is sought)
      
Weighing or processing the choices/information gathered with each other to prioritize action plans
      
Making final choice and action (Here the values, attitude, training and background of decision maker are important)

However more often than not in situations calling for decisions, time may be a restraining factor like in army operations and here past experience and available models or strategies to be used in emergencies is a must for enabling decision making.

In other situations like say heart operation or surgery being conducted on a critically ill patient, decision making will depend upon not only general decision making logic mentioned above but more importantly on wider knowledge, experience and training of surgeons involved. A CREATIVE BRAIN is certainly an asset for handling diverse decision making situations.

Six thinking hats: A Multi-perspective analysis (ref: Wikiepedia.org)

Astute leaders always think from opponents view point also, like, an army strategist before selecting possible tactics in Warfield or a Business leader views the situation/issue from point of view of Customer, employee or government representatives. Idea is to think from different perspectives or from angel of different experts about the same problem.

Six Thinking Hats is the title and subject of a book by Edward De Bono, published in 1985.

De Bono considered human cognition and thought to be of several types, approaches, or orientations. He theorized that of these approaches, most people used only one or two of the approaches and that people developed thinking habits which in turn limited people to those approaches. De Bono believed that if the various approaches could be identified and a system of their use developed which could be taught, that people could be more productive in meetings and in collaborating within groups and teams by deliberately using the approaches.

As a result of his investigations, De Bono was able to describe a process of deliberately adopting a particular approach to a problem as an implementation of Parallel Thinking™ as well as an aid to lateral thinking. Six different approaches are described, and each is symbolised by the act of putting on a coloured hat, either actually or imaginatively. This he suggests can be done either by individuals working alone or in groups.

De Bono's six hats are:

White hat (Blank sheet): Information & reports (objective)

Red hat (Fire): Intuition, opinion & emotion (subjective)

Yellow hat (Sun): Praise, positive aspects, (objective)

Black hat (Judge's robe): Criticism, negative aspects, modus tollens (objective)

Green hat (Plant): Alternatives, new approaches & 'everything goes' (speculative/creative)

Blue hat (Sky): "Big Picture," "Conductor hat," "Meta hat," "thinking about thinking", overall process (overview)

The main purposes of using Six Thinking Hats are:

-focus and improve the thinking process

-encourage creative, parallel and lateral thinking

-improve communication

-speed up decision making

-avoid debate

Key to a successful use of the Six Think Hats methodology was the deliberate focusing of the discussion on a particular approach as needed during the meeting or collaboration session. For instance, a meeting may be called to review a particular problem and to develop a solution for the problem. The Six Thinking Hats method could then be used in a sequence to first of all explore the problem, then develop a set of solutions, and to finally choose a solution through critical examination of the solution set.

So the meeting may start with everyone assuming the Blue hat to discuss how the meeting will be conducted and to develop the goals and objectives. The discussion may then move to Red hat thinking in order to collect opinions and reactions to the problem. This phase may also be used to develop constraints for the actual solution such as who will be affected by the problem and/or solutions. Next the discussion may move to the Green hat in order to generate ideas and possible solutions. Next the discussion may move between White hat thinking as part of developing information and Black hat thinking to develop criticisms of the solution set.

Because everyone is focused on a particular approach at any one time, the group tends to be more collaborative than if one person is reacting emotionally (Red hat) while another person is trying to be objective (White hat) and still another person is being critical of the points which emerge from the discussion (Black hat).

Finally, some characteristics of "Good" decision makers are:

* Having a well-ordered sense of priorities.
* Being a good listener.
* Always building the consensus around a decision.
* Avoiding stereotypes.
* Remaining resilient with feedbacks.
* Being comfortable with both soft and hard input.
* Being realistic about cost and difficulty.
* Avoiding a decision minefield.

Besides above, the personal traits of decision maker are high self esteem, objectivity in assessment and having at least moderate level of courage. These have to be cultivated with self training and clarity of purpose.

Conclusion:

One has to take decisions in life. Taking timely decision is must. For this one has to adopt rational and positive outlook to problems and time decisions well. Like high speed decisions in army battlefields or well manicured decisions for financial investments in projects.

Self confidence, gut feeling, science and mathematics, personality and extent of information available are important factors that lead to a good and successful decision making.

Lastly any decision excepting for some situations is not always totally un-retractable. Decisions can be taken during course of actions and outcomes as these take place following implementation of decision. If we don't decide we are like stuck on a rocking chair. Moving but not reaching anywhere.

Some of the reasons for poor quality of decision or taking no decision at all are :Fear of failure, fear of death, lack of self confidence, negative and defeatist attitude ,lack of right information and lack of experience about likely outcome from given situation and decision- Like in  a new experiment.

Bibliography:

The article has been prepared based on critical and extensive search of internet medium, journals on psychology , management science literature and self experience of author in various situation of leaderships in operations, marketing and administrative responsibilities in corporate and government sectors. Individual credits are not possible to be quoted for a part of the text has been borrowed from some of the articles on internet. However we gratefully acknowledge the help of respective authors.
 



Prof. R.K. Gupta
BE Hons MBA FIE
Professor of Management
Aravali Institute of Management
Jodhpur
E-mail:
cityju@rediffmail.com
 

Source: E-mail November 9, 2006

     

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