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Financing - Profit analysis
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Tools & References
Steps in decision making
In real-life business situations, decisions can often fail because the best alternatives are not clear at the beginning, or key factors are not considered as part of the process. To avoid this problem-solving and decision-making strategies need to be used.
A structured process can help in addressing all critical elements needed for a successful outcome.
Working through this process systematically (step by step) will reduce the likelihood of overlooking important factors.
Step 1 - Identify problems
The first step in the decision making process is to recognize that there is a decision to be made. Decisions are not made arbitrarily; they result from an attempt to address a specific problem, need or opportunity.
Step 2 - Seek information to understand the situation in detail
Managers seek out a range of information to clarify their options once they have identified an issue that requires a decision. Managers may seek to determine potential causes of a problem, the people and processes involved in the issue and any constraints placed on the decision-making process.
Step 3 - Generate good alternatives
Having a more complete understanding of the issue at hand, managers move on to make a list of potential solutions. This step can involve anything from a few seconds of thought to a few months or more of formal collaborative planning, depending on the nature of the decision.
The wider the explored options, the better the final decision is likely to be.
Step 4 - Evaluate alternatives and choose the best one
Managers weigh the pros and cons of each potential solution, seek additional information if needed and select the option they feel has the best chance of success at the least cost.
Step 5 - Implement the Plan
The decision taken should be converted into a plan or a sequence of activities and implemented.
Step 6 - Evaluate Outcomes
Even the most experienced business owners can learn from their mistakes. The results of strategic decisions should always be monitored. Adaptation of the plan should be done if necessary, or another potential solution should be chosen if the first one does not work out as expected.
A structured process can help in addressing all critical elements needed for a successful outcome.
Working through this process systematically (step by step) will reduce the likelihood of overlooking important factors.
Step 1 - Identify problems
The first step in the decision making process is to recognize that there is a decision to be made. Decisions are not made arbitrarily; they result from an attempt to address a specific problem, need or opportunity.
Step 2 - Seek information to understand the situation in detail
Managers seek out a range of information to clarify their options once they have identified an issue that requires a decision. Managers may seek to determine potential causes of a problem, the people and processes involved in the issue and any constraints placed on the decision-making process.
Step 3 - Generate good alternatives
Having a more complete understanding of the issue at hand, managers move on to make a list of potential solutions. This step can involve anything from a few seconds of thought to a few months or more of formal collaborative planning, depending on the nature of the decision.
The wider the explored options, the better the final decision is likely to be.
Step 4 - Evaluate alternatives and choose the best one
Managers weigh the pros and cons of each potential solution, seek additional information if needed and select the option they feel has the best chance of success at the least cost.
Step 5 - Implement the Plan
The decision taken should be converted into a plan or a sequence of activities and implemented.
Step 6 - Evaluate Outcomes
Even the most experienced business owners can learn from their mistakes. The results of strategic decisions should always be monitored. Adaptation of the plan should be done if necessary, or another potential solution should be chosen if the first one does not work out as expected.
