We spend a lot of time taking decisions in our everyday life, but when it comes to business decision-making, it’s a whole new ball game.
Effective business decision-making goes way beyond weighing the pros and cons and assessing the consequences.
It entails acquiring relevant know-how, strategic thinking, and the influence of data in the decision-making process.
Managerial decisions are incredibly critical for the success of any organization. If you are a business owner or manager looking to expand your business and take it to the next level, you must prioritize working on your business decision-making capabilities.
Consider this article as a practical guide on effective decision-making.
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The basic process
A decision-making process can be defined as a course of action selected to deal with a specific problem. Any decision-making process involves a series of six basic steps.
Identifying the problem:
Without knowing the problem you cannot take informed decisions. Hence, identifying the problem is the first step in any decision-making process.
Listing resources and constraints:
Once the problem is identified, you can then assess the available resources and know the possible constraints that are contributing to the problem.
Generating alternative solutions:
There may not always be one specific solution to a problem. Therefore, it’s best to create some alternative solutions.
Once you have short-listed the possible alternative solutions, you need to evaluate the effectiveness of those alternatives.
Selection and implementation:
After deciding the best possible decision and aligning it with the specific needs of the problem, you can implement the decision.
Monitoring the decision:
To know if the selected solution is working and is addressing the problem as expected, you need to monitor the outcome.
Types of managerial decisions
There are essentially two types of managerial decisions; programmed decisions and non-programmed decisions.
- Typically, programmed decisions involve devising well-established solutions for some of the basic, simple, common problems that occur most frequently.
- On the other hand, non-programmed decisions have to deal with unusual, uncommon and more complex and unique problems.
All managerial decision-making situations fall into three categories mainly based on the:
- Level of certainty
- Risk involved
Business decision-making methods
While there can be no error-free decision-making process, there are certain methods that can help managers arrive at the right decision more often.
This is more of an authoritative or dictatorial method, wherein the central business owner makes the final decision without taking into account the opinions of others such as employees or suppliers.
This method involves brainstorming or repetitive discussions before arriving at a decision for a solution.
This is an all-inclusive kind of decision-making method. Inputs from multiple people are taken into consideration. However, the ultimate decision-making power still lies in the hands of the central authority.
One of the common methods to take any decision. Voting is considered as one of the most democratic methods of decision-making.
The decision is taken based on the majority of votes.
Multi-point analysis method
This is a method wherein several factors such as cost, quality, performance, ROI (return on investment), skills and resources are taken into consideration.
This is one of the most comprehensive and solid decision-making methods.
For effective managerial or business decision-making, the availability of information, knowledge and valid data is paramount. Data enables managers to know these finer nuances with much precision and speed.
Related: The 5 big web analytics tools
Role of data in business decision-making
Today, enterprises sit on huge amounts of data day in and day out. Business owners and managers need to use this data to make smart business decisions.
In today’s digitized age, data plays a huge role in many aspects of your business. Good data can help you to:
- Make smarter business decisions
- Hire the best-fit employees
- Recalibrate strategies for sales performance
- Provide you with valuable insights in your day to day activities
Sharing across departments
Managers cannot take the right decisions without having a 360 degree view of the problem at hand or without the support of relevant insights.
It would be unfair to expect decision makers to make solid decisions without having the right data at their disposal.
Data has the potential to streamline the functioning across different departments in an organization.
But it is not enough to have high quality data alone, as it is equally important to have the people who are equipped to translate that data into useful business insights.
If you want data to be valued and used, data culture needs to take root in the organization.
All leaders and managers across departments must first understand the value of data. They must also have the knowledge of how data can impact business decision-making and ultimately impact sales and ROI.
Inculcate data culture into the company just as you inculcate other values.
Regular training must be imparted with an open dialogue between senior leaders, managers and other employees. Leaders must acquaint their employees with the role of data with case studies and examples that cite the actual impact of data on businesses. Eventually employees at all levels must be able to take decisions based on data.
Related: What is CRM software?
Making sure it’s the right data
We are living in an age where voluminous amounts of data and information can be easily available.
There is plenty of information bring thrown at us from all directions and all we need to do is catch the right data that is relevant and aligned with our business goals. Business decision-making can be very effective if organizations have the relevant data and can combat misinformation.
Where to learn to be a better business decision-maker?
Getting equipped is the first step in effective business decision-making. Learning to make the right decisions at the right time can improve the way you do business.
EdX.org offers a range of free online courses and certifications in decision-making skills.
EdX is a hub where you will find plenty of courses in business decision-making for entrepreneurs, and for anyone who wants to take their business to the next level. It is an educational hub that offers online decision-making courses from top universities and institutions.
Business decision-making is one of the most critical skills that business owners of all types and sizes of businesses must know. Today’s competitive and crowded market demands business owners to be well equipped in not only one specific skill set, but possess other skills that support and impact the overall business.
Business owners who are looking to expand their venture must know the importance of business decision-making and the role of data in it. Business decision-making is a strategic skill-set that can be a game-changer when it comes to the growth of your enterprise.