Back in the day, managers used to make most of their decisions based on intuition or experiences they had gathered, but with changing times, relying on guts may not bring the best results.
Markets are only getting more competitive, and each decision taken by managers needs to be the most efficient one to give the business a desired edge.
Depending on the severity of the situation and how broadly it can impact the organisation, the decision-making processes can swing from intuition-based decision-making to more formal and systematic approaches.
Today we will discuss the top 5 decision-making techniques managers must know in 2023, which can help them make decisions of any level and difficulty.
What is Decision Making In Management?
Decision-making in management, as the phrase suggests, can be defined as the process of making a choice between diverse options. The process involves multiple steps, such as problem recognition, information gathering, and then evaluating the pros and cons to devise a feasible solution or alternative.
In the management field, the manager of an organisation carries it out in sync with the goals and objectives of the organisation. This means whatever decisions they take must be the best option to achieve the desired goals.
For example, the manager may choose to make changes in the logistics. Still, they need to analyse the decision well to ensure that the costs, benefits, and risks associated with it are the organisation’s best course of action.
Moreover, they may need to set goals and provide solid guidelines to ensure the plan’s accurate implementation and evaluate its effectiveness. Keep reading to learn how decision making methods can make a manager’s job easier.
Top Decision-Making Techniques For Managers
Here are the best decision-making techniques suitable for different scenarios.
1. Pro/Con Technique For Comparing Two Options
As a manager, if you have to decide between two options, this pros and cons technique can be used. Here are the steps to implement this decision making technique.
- Asking questions: Ask yourself very clear questions that can be answered with yes or no. Such as, “will this decision reduce the expenses” or “will this step reduce the turnaround time?”.
Don’t ask questions like “Should I hire new talents or train the present employees.”
- Jolt down the pros and cons: Once you have your question, make a regular pros and cons list, where on the pros side, you put the benefits, and on the cons, you put the drawbacks.
This step is crucial and requires a lot of brainstorming, so ensure you are taking enough time, especially if it is a crucial decision.
- Assess the probability of the pros and cons: For this, you can mark them from 1 to 10, where 1 is the least probable, and 10 is the highest.
When done giving scores, sum up the total score. The one with a greater probability score is more likely to happen.
Delete the arguments with the same score or low scores.
2. Heuristic Method To Save Time On First Trials
Not every decision you make as a manager has to be perfect on the first go. In those situations, you can use the heuristic method to save time instead. Investors often use this process to speed up the analysis of investment decisions.
This process also helps simplify problems and avoid cognitive overload. The solutions received from this method may not be the most optimal, but they are still efficient as they take the least amount of time.
3. Cost Benefit Analysis For Making Financial Decisions
As a manager, if you have to make a financial decision that is absolutely bias-free, a cost-benefit analysis can help you achieve that. This evidence-based evaluation technique will help you make more data-driven and logical decisions.
Other benefits of this technique include the following:
- Making the decision simple
- Finding out hidden costs or benefits
However, there are some limitations as well. With this technique, you can not predict all the possible factors that may impact the outcome. Besides, if you implement an incorrect or incomplete data set, the results may be faulty.
Here’s how Harvard Business School suggests doing a cost-benefit analysis.
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4. Linear Programming To Make The Most Out Of Limited Resources
This decision making technique uses mathematical linear equations and is great for making decisions when resources to solve a situation are limited. Limited resources can include things like money, material, or machinery.
5. NPV and PV For Making Investment Related Decisions
The net present value and present value method help make financial decisions of a business related to investment and capital budget, and hence, the future cash flow. The method is based on the ability of critically thinking and taking informed decisions.
Bonus: Multivoting for making fair group decisions
As a manager, there can be times when you have to make decisions as a team. According to this method, you first need to weed out low-priority options (which can be done using other decision-making methods) and then leave the team to pick the best option.
For that, you can hand over the list of options to each team member and ask them to choose the top three. Finally, by tallying up the votes, you will be able to find the opinion of the majority.
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How Important Are Decision-Making Skills
As a manager having good decision making skills helps make the job easier to quite an extent. Here are some reasons why good decision-making skills can be fruitful.
- Saves Time: Making decisions without any framework can cause a lot of confusion, hence, consuming a lot of time. Knowing when to use the right decision making methods not only saves time but also increases the chances of making the best choice.
- Prevents Conflicts: If a manager cannot make decisions independently, they will frequently rely on their team to make them, and more heads involved often leads to more conflict. An efficient decision-making strategy can avoid situations like these in the long run.
- Cultivates Respect: As a manager, if you are prompt at making decisions, the team will grow respect towards you. While lacking the same can have the opposite outcome.
- Boosts Productivity: Knowing how to make swift and accurate decisions simplifies your job while increasing your team’s overall productivity. The longer you take to make a decision, the more delays will be in starting the process.
- Motivates Team: If you are good at decision-making, your team will start looking up to you. You may even become their motivational figure to improve their professional skills.
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How To Improve Your Decision-Making Skills
Here are some tips to improve your decision-making skills as a manager.
1. Start with understanding the scenario:
You can not make an informed decision if you are unaware of the context and the entirety of a situation. Thus, your first step towards making a good decision should be understanding the context.
Once you have figured that out, setting goals and defining what successful outcomes you want to work towards will get easier.
2. Empower your team:
There are agile methods of decision-making that only work well if your team members are empowered and supported. They should also be well-informed about the situation and have the autonomy to voice their opinions.
For example, update the entire team during a product launch and schedule a meeting to get their feedback. Group discussions or individual feedback forms are a great way to involve and empower your team while valuing their opinions to become an equally capable leader.
3. Make plans to minimise mistakes:
Every decision you make as a manager will have long-term consequences in a business setup; therefore, it must not be taken hastily. When you have to make a difficult choice, make a plan that blocks time for separate decision-making stages, such as data collection, interpretation, etc.
4. Get a second opinion:
If you are new to this role, getting a second opinion from a senior is always good. However, taking a second opinion also works great if you want to have a different perspective of the scene.
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Takeaway
Leveraging decision making techniques definitely makes the job much easier, but it is important to have the basic skills to use them. To effectively use these techniques, you must have abilities like critical thinking, stress management, and analytical approach.
The first will eventually come with experience, but if you want to improve your analytical skills, upGrad’s Master Certificate in Business Analytics can be a great option!
The course will teach you how to leverage data to make informed business decisions while equipping you with trendy in-demand skills and experience necessary to perform your duties with utmost perfection.
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