WEEK12D1

DECISION PROCESS

A decision-making process is a series of steps taken by an individual to determine the best option
or course of action to meet their needs. In a business context, it is a set of steps taken by
managers in an enterprise to determine the planned path for business initiatives and to set
specific actions in motion. Ideally, business decisions are based on an analysis of objective facts,
aided by the use of business intelligence (BI) and analytics tools.

In any business situation there are multiple directions in which to take a strategy or an initiative.
The variety of alternatives to weigh -- and the volume of decisions that must be made on an
ongoing basis, especially in large organizations -- makes the implementation of an effective
decision-making process a crucial element of managing successful business operations.

There are many different decision-making methodologies, but most share at least five steps in
common:

1. Identify a business problem.

2. Seek information about different possible decisions and their likely effect.
3. Evaluate the alternatives and choose one of them.
4. Implement the decision in business operations.
5. Monitor the situation, gather data about the decision's impact and make changes if necessary.

DATA-DRIVEN DECISION MAKING

Traditionally, decisions were made by business managers or corporate executives using their
intuitive understanding of the situation at hand. However, intuitive decision-making has several
drawbacks. For example, a gut-feel approach makes it hard to justify decisions after the fact and
bases enterprise decision-making on the experience and accumulated knowledge of individuals,
who can be vulnerable to cognitive biases that lead them to make bad decisions. That's why
businesses today typically take more systematic and data-driven approaches to the decision-
making process. This allows managers and executives to use techniques such as cost-benefit
analysis and predictive modeling to justify their decisions. It also enables lines of business to
build process automation protocols that can be applied to new situations as they arise, removing
the need for each one to be handled as a unique decision-making event.

 
If designed properly, a systematic decision-making process reduces the possibility that the biases
and blind spots of individuals will result in sub-optimal decisions. On the other hand, data isn't
infallible, which makes observing the business impact of decisions a crucial step in case things
go in the wrong direction. The potential for humans to choose the wrong data also highlights the
need for monitoring the analytics and decision-making stages, as opposed to blindly going where
the data is pointing.

CHALLENGES IN THE DECISION-MAKING PROCESS

Balancing data-driven and intuitive approaches to decision-making is a difficult proposition.

Managers and executives may be skeptical about relying on data that goes against their intuition
in making decisions or feel that their experience and knowledge is being discounted or ignored
completely. As a result, they may push back against the findings of BI and analytics tools during
the decision-making process.

Getting everyone on board with business decisions can also be a challenge, particularly if the
decision-making process isn't transparent and decisions aren't explained well to affected parties
in an organization. That calls for the development of a plan for communicating about decisions
internally, plus a change management strategy to deal with the effects of decisions on business
operations.

Decision-making models can also be used to avoid these various challenges by creating a
structured, transparent process.

WHAT IS A DECISION-MAKING MODEL?

A decision-making model is a system or process which individuals can follow or imitate to ensure they make the best
choice among various options. A model makes the decision-making process easier by providing guidelines to help
businesses reach a beneficial conclusion.

Decision models also make the decision-making process visible and easily communicable for everyone involved,
including all managers, stakeholders and employees. They can be used for a wide variety of purposes across departments,
businesses and industries, but they are especially useful when selecting software vendors or new tools, choosing new
courses of action or when implementing changes that effect large amounts of people.

TYPES OF DECISION-MAKING MODELS

Common types of decision-making models include:

 
RATIONAL MODELS. Rational decision-making is the most popular type of model. It is logical and sequential and
focuses on listing as many alternative courses of action as possible. Once all options have been laid out, they can be
evaluated to determine which is best. These models often include pros and cons for each choice, with the options listed in
the order of their importance.

A rational decision-making model typically includes the following steps:

1. Identify the problem or opportunity.

2. Establish and weigh decision criteria.
3. Collect and organize all related information.
4. Analyze the situation.
5. Develop a variety of options.
6. Assess all options and assign a value to each one.
7. Decide which option is best.
8. Implement the decision.
9. Evaluate the decision.

INTUITIVE MODELS. These decision-making models focus on there being no real logic or reason to the decision-
making process. Instead, the process is dictated by an inner knowledge -- or intuition -- about what the right option is.
However, intuitive models are not solely based on gut feelings. They also look at pattern recognition, similarity
recognition and the importance or prominence of the option.

RECOGNITION PRIMED MODELS. These models are a combination of rational and intuitive decision-making. Its
defining element is that the decision maker only considers one option instead of weighing all of them. 

The recognition primed decision-making process involves:

1. Identifying the problem, including all its characteristics, problem cues, expectations and business goals.
2. Thinking through the plan and performing a mental simulation to see if it works and what modifications might be
needed.
3. If the plan seems satisfactory, then the final decision is made, and the plan is implemented.

In recognition primed models, alternative courses of action are only considered if the original plan does not produce the
intended results. The success rate of this model correlates to an individual's experience and expertise.

CREATIVE MODELS. In this decision-making model, users collect information and insights about the problem and
create some initial ideas for solutions. Then, the decision maker enters an incubation period where they do not actively
think about the options. Instead, they allow their unconscious to take over the process and eventually lead them to a
realization and answer which they can then test and finalize.

WHEN TO USE DECISION-MAKING MODELS?

Even when rules and procedures are set up to make business decision-making more systematic,
there can still be room for intuition on the part of decision-makers. For example, after gathering
data about different alternatives, more than one might seem similarly advantageous, or
management might find itself lacking certain information needed to make a decision with full
confidence. This is a good use case for incorporating an intuitive decision-making model into the
process.

On the other hand, decisions that happen frequently and have clear optimal outcomes benefit
from a structured, rational decision-making models. This approach to business problem-solving
uses clearly prescribed steps and, usually, data analytics software to evaluate the available
options and arrive at a decision.

Sometimes involving more people in the decision-making process can pay off. This is known as
participatory decision-making; in the business world, it involves managers seeking input and
feedback on decisions from the workers they oversee. The participatory approach has the
potential advantage of generating many ideas for solving a business problem; it also helps to
engage employees.

DECISION MANAGEMENT

Decision management -- also known as enterprise decision management (EDM) or business

decision management (BDM) -- is a process or set of processes that aims to improve the
decision-making process by using all available information to increase the precision, consistency
and agility of decisions. The processes also focuses on making good choices by taking known
risks and time constraints into consideration.

Decision models and Decision support systems (DSS) are key elements of decision management.
Decision management processes also use business rules, business intelligence (BI), continuous
improvement, artificial intelligence (AI) and predictive analytics to access the capabilities of big
data and meet the needs of modern day user expectations and operational requirements.

Decision management systems treat decisions as reusable assets and introduce technology at
decision points to automate the decision-making process.  Decisions may be fully automated, or
they may be presented as possible choices for a human to select. 

Increasingly, organizations who deal with financial services, banking and insurance are
integrating decision-making software into their business process systems as well as their
customer-facing applications. This approach is especially useful for high-volume decision-
making because automating such decisions can enable more efficient, information-based and
consistent responses to events.
DECISION MAKING TOOLS
Top 10 BEST Decision Making Tools for Business in 2021
The decision making tools help you to map out all the possible alternatives to your decision,
it’s cost, as well as chances of success or failure. These applications provide a useful way to
make the right choice by simplifying the decision making process and by drawing a
diagram.
1) SWOT Diagram
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT Diagram is
an important management application that helps any organization to assess its current
situation. It works as a basic guide for strategic planning.
Tool to create SWOT Diagram: Creately
Creately is an easy way to create SWOT diagrams online. It is one of the best tools in
decision making that contains 100s of readymade SWOT analysis templates. It has a user-
friendly interface that enables you to customize your diagrams. You can use this tool to
collaborate around your organization strategies in real-time.
2) Decision Making Diagram
Decision making diagrams are graphs that enable you to map out the decision you have
taken. It is one of the best decision making methods that helps you to estimate eventual
actions based on the outcomes and risks. You can use this diagram for planning team
strategy.
Tool to create Decision Making Diagram: Lucidchart
Lucidchart is a tool that helps you to build decision tree diagrams. This software can be
used to collaborate with your teammates in real time. It enables you to visualize potential
paths and examine outcomes. Lucidchart can simplify decision making process using
technical diagrams.
3) Decision Matrix
A decision matrix is a technique that contains values that helps you to identify and analyze
the performance of the system. The elements of a decision matrix show results depend on
specific criteria.
Tool to create Decision Matrix: Mindtools
Mindtools convert your data into row and column. It represents table row as your decision
and factor as a column. It is one of the best decision analysis tools which enables you to
score each option from 0 (indicate poor) to 5 (indicate very good).
4) Pareto Analysis
Pareto Analysis is a method for decision-making. It is also known as 80/20 rule meaning,
20% of your activities will account for 80% of your results. It is used for prioritizing
possible changes by identifying the problems and resolve them.
Tool to create Pareto Analysis: Visual Paradigm
Visual Paradigm helps you to add or input data to your pareto chart easily. It is one of the
best tools of decision making that enables you to change chart’s fonts and colors without
any hassle. This tool automatically generates a chart based on the data available in the
Google Sheet. Visual Paradigm allows you to resize the chart to any dimension.
5) Cause and Effect or Ishikawa Diagram
Cause and Effect or Ishikawa Diagram shows the causes of a particular event. It can be
used for product design and to check its quality to identify possible factors causing an
overall effect. You can group causes into categories to find sources of variation.
Tool to create Cause and Effect or Ishikawa Diagram: SmartDraw
SmartDraw is a simple tool that enables you to draw Ishikawa diagrams online or on your
desktop PC. It provides support for Mac and Windows operating systems. Causes and
effect diagrams are integrated automatically, and you can move or delete them quickly.
SmartDraw offers numerous templates to draw Ishikawa diagrams.
 
 
6) Force Field Analysis
Force Field Analysis enables you to examine your project. It provides a framework for
looking at the factors that influence a particular situation. This analysis helps you to
understand the process of any organization in a better way.
Tool to create Force Field Analysis: SmartDraw
SmartDraw is a decision making tool that provides templates to perform force field
analysis. You can use this graphical tool for making decision. This drawing tool
automatically adjusts items on the drawing area. It is one of the best analytical tools for
decision making which helps you to import or export a force field analysis diagram from
Vision.
7) Strategy Map
Strategy map is a diagram that can be used to document strategic business goals. This map
is created during the planning process of business. It is used as a primary material to
check-in and review meetings.
Tool to create Strategy: Cascade Strategy
Cascade Strategy is a decision making tool that provides a drag and drop interface to build
strategy Map. This tool supports a wide range of frameworks. It is one of the best tools for
business decision making which allows you to export map to the PDF file format.
8) Break-even analysis
A break-even analysis helps you to determine at what stage a new business product will be
profitable. It’s an economic calculation used to determine the number of products or
services you need to sell to cover your costs.
Tool to create break-even analysis: Good Calculators
Good Calculators provides a calculator that enables you to make better business decisions
and calculate the break-even point. You can utilize this tool by just entering fixed and
variable costs, selling price per unit, etc. It enables you to calculate it with just a single
mouse click.
9) Pugh Matrix
Pugh Matrix is a diagram that is used to evaluate alternative solutions for business. It helps
you to determine which solutions are more valuable than the others. This method does not
require a massive amount of quantitative data.
Tool to create Pugh Matrix: Psychologia
Psychologia is a tool that provides a score for every option you have entered. This app
enables you to find the highest score. It helps individuals to find the importance of specific
criteria over others.
10) Ratio Analysis
Ratio analysis is a term used for comparison of items available in the financial statements
of a business. It used to evaluate a number of problems with an entity, like its liquidity,
efficiency of operation, and more.
Tool to create Ratio Analysis: Finstanon
Finstanon is a solution for financial analysis. It helps you to interpret profit ratio, liquid
ratio, debt ratio, and more. This tool enables you to analyze more than 15 different types of
metrices. Finstanon generates data in tables and diagrams.
 
What are Decision Making Tools?
Decision Making tools are software applications that help you to map out all the possible
alternatives to your decision, its cost, as well as chances of success or failure. These
applications provide a useful way to make the right choice by simplifying the decision-
making process and by drawing a diagram that helps you to make a better decision.
 

WHAT IS DECISION ANALYSIS (DA)?

Decision analysis (DA) is a form of decision-making that involves identifying and assessing all
aspects of a decision, and taking actions based on the decision that produces the most favorable
outcome.

The goal of decision analysis is to ensure that decisions are made with all the relevant
information and options available. For example, a corporation may use it to make million-dollar
investment decisions, or an individual can use it to decide on their retirement savings. 

As a form of decision-making, the fundamentals of decision analysis can be used to solve a

multitude of problems, from complex business issues to simple everyday problems.

How Decision Analysis Works

Decision analysis allows corporations to evaluate and model the potential outcomes of various
decisions to determine the correct course of action. To be effective, the business needs to
understand multiple aspects of a problem to result in a well-informed decision.

The analysis entails understanding various goals, outcomes, and uncertainties involved,
including the use of probabilities to measure the expected outcome of various decisions.

One of the most important aspects involves framing the problem in a way that allows for further
analysis. Framing is typically the first part of decision analysis, and it involves creating a
framework to evaluate the problem from multiple perspectives. They can include opportunity
statements, action items, and measures of success.
Once the framework is established, a model can be developed to evaluate the favorability of
various outcomes. One of the example of models are decision trees.

1. Decision Trees

After creating a framework to evaluate a problem, models are typically used to evaluate the
outcomes of various decisions. Models are visual representations of expected outcomes, and they
are used to illustrate decisions in comparison to other alternatives.

By modeling the various expected outcomes and their probabilities, businesses can then select
the decision that produces a favorable outcome.

One of the most common models involved in decision analysis is decision trees, which are tree-
shaped models with “branches” that represent potential outcomes.

Decision trees are used because they are simple to understand and provide valuable insight into a
problem by providing the outcomes, alternatives, and probabilities of various decisions. This
makes it easy to evaluate which decision results in the most favorable outcome.

 
 

BUSINESS RULES:

The thing about leadership is that nobody will tell you how to do it; ultimately, you have to
figure it out yourself.

1) Find Your “Product/Market Fit”

The most important task of any founder is to find harmony between their product and the
markets’ demands. But 99 percent of companies cease to exist because they fail to correctly find
their market fit, and align their products to it. Entrepreneurs struggling with this should read
Peter Drucker, who has some amazing books on the subject.

2) Set Up Goals and Get Out of the Way

The enthusiasm of a group of smart people working together to achieve a certain goal is what
makes a great company. Founders of successful companies should set goals, but shouldn’t dictate
how to reach them. They should give feedback where needed, but always allow the talented
people that they’ve hired the freedom and trust they deserve to get the job done.

3) See to Company Values

Ten years ago, no one cared about company values; today, they are often what attract people to a
company. Strive to be your best self, and have your company strive for the same. Just remember,
the company value of a small or big company is defined as the worst behaviour of your managers
you are willing to tolerate.

4) Have a Mission

When I ask my employees what our mission is and they don’t know (or I watch them struggle to
think something up on the spot) that’s bad. Each businessperson should know where they are
heading. Each company must have a clear mission to know what it is doing. And each employee
should know that mission, and if they don’t know the mission teach them until they do.

5) Communicate

Having a vision and mission doesn’t mean anything unless you’re able to communicate it to
three key entities: your team, investors and customers.

Take investors, for example. You have to be able to persuade them that if they don’t invest in
you immediately, they’ll lose money. You’ll know you’ve nailed this communication skill if
investors start calling you back soon after you meet with them; if they don’t, they’re simply not
interested.

6) Focus on Your Customers

Too often, I see technology companies over-concentrate on their products or on their founder. It
is absolutely critical that founders focus on understanding what, why, when and how customers
buy, as during a business’ startup phase it is usually the founder who brings a new product to the
market. So my advice is to serve your first 50 or 100 customers yourself, to really get to know
their needs and what your business can do for them.

7) Know How to Say Yes/No

Effective leadership is like playing sports. You might not know what will happen three plays
later, but you can’t just stand there saying you don’t know where to throw the ball. You just have
to play the game.

Similarly, a founder or manager will always feel that they have too little information to make a
decision. Often, they will say they need additional studies, analyses, etc. But this isn’t what your
employees want to hear; they need to hear a clear yes or no. And this same principle applies to
investors.
8) Focus on Opportunities, not Problems

Problems never pay out in the long run as much as opportunities do. So don’t let problems
consume so much of your time that you’re unable to do anything else because of them.

9) Organise your Time

As a founder, time can be your most precious resource or your worst enemy. If you don’t take
control of your time, it will take control of you and you won’t manage anything. Make sure you
reserve time to clear your head, even if others want something from you.

10) Finish your Work

Too many people start fifty things and never finish anything. A prerequisite of successful
founders is following through.

11) Enjoy What You Do

If you do something because someone else wants you to do it, or if you do it for money, you can
do that for a month or two. But not for ten years. Work is hard, success is harder, so to make it
worth it you had better enjoy what you’re doing.

12) Do not Search for Consensus

It might sound counterintuitive, but companies that always act in consensus sometimes find
themselves in a complicated situation. This is because they are missing disharmony, which can
be a driving force for doing things differently or better. It is important to create some
disharmony, because this gives birth to new ideas and innovations.

13) Let the Ship Sail

If you have started a certain project, or set your teams on a specific course, do not regret it the
next morning and change it; see it through.

14) Energise your Team

Really working with your employees is critically important. A founder should be in touch with
their team, motivating them and sometimes sharing common activities (I love to go cycling with
members of my team.) This not only keeps your team motivated and makes them feel lead rather
than commanded, it keeps you in touch with the pulse of your company in a way that you just
don’t get otherwise. I’ve known many managers that didn’t talk to or interact with anyone on
their team, and then were surprised then they finally found out their team had broken up.

15) Measure Everything

If you do not measure, you will get nowhere. Good founders and managers should use metrics to
understand how they are performing, although it is sometimes difficult to find the right people
for the problem. Even using the wrong metrics can provide valuable lessons, and as you move
forward you can reevaluate what you measure.

16) Be True to Yourselves

If a person becomes a founder, they should remain true to themselves and should not pretend to
be anything else. It’s impossible to live under a false pretence for any significant length of time;
inevitably, people will see through to the real you. So make sure the real you is worthy of of
being seen.

THE ADVANTAGES OF FOLLOWING THE RULES

THE ADVANTAGES OF FOLLOWING THE RULES

Not all rules were "made to be broken." Your small business benefits from rules you set and enforce. They define your
organization and give it its personality, and they can keep your business in compliance with the law. Those rules also help
managers and employees understand where they fit into your business.

1. Effectiveness of Decisions

When your organization follows the rules of reporting to supervisors and managers, your decisions spread throughout your
business uniformly. For example, if you decide your company will adhere to a business casual dress code, you can ask
your managers to enforce that code, deal with any infractions and provide you with a workplace that offers the appearance
you choose. Larger decisions, such as pursuing a new market, spread through your organization efficiently when everyone
obeys the rules of the reporting hierarchy.

2. Reduced Discrimination

Fair treatment of employees results from firm rules regarding discrimination in hiring and management practices. Though
one complaint about rules is that they can be impersonal, in this case the removal of personal bias in the treatment of
employees works in your favor. If you clearly state anti-discrimination policies, you can show that your position is clear in
the event of a violation, accusation or lawsuit. The rules protect you and your company by showing that discrimination is
against company policy.

3. Clear Authority

When you set rules, you decide who enforces them. Conveying authority to managers and supervisors establishes
guidelines for discipline and correction. Employees learn not only the rules but who they are accountable to for their
adherence to those rules. This creates an orderly workplace with clear lines of authority that save employees and managers
time determining who enforces the rules.

4. Criteria for Promotions

When all of your employees follow the rules, you can promote people based on their skills rather than their compliance.
For example, if all employees follow safety regulations, you don’t have to spend your time evaluating each employee on
the basis of adherence to safety measures. You can instead evaluate useful skills and aptitudes that earn the employee a
higher position with more responsibilities.