Decision Analysis

Published: Jun 11, 2004
Updated: July 2, 2009

Decisions are the foundation for working smarter.

How to Make Decisions

This "vanilla" version of a complex procedure is for the small business manager with limited resources. Each section of this basic format has been explained in more detail in the items that follow on this web page. Refer to the Recommendation section for tips on how to use these guides.

Problem Definition

The word, problem, is used here in a general sense. Other terms such as challenge, opportunity, threat may be more appropriate in some situations.

While it may seem unnecessary, it is critical to the final decision because as you proceed you may find you have more than one problem, a different problem than first thought, a more complex situation or aspects that are complicated by other factors.

While this section appears at the beginning of your document it may be revised as you proceed until you finally arrive at a clear definition.

For more details see Problem / Opportunity Definition.

Background

This section provides the historical information that is pertinent to the making of the decision.

It is included whenever some decision-makers are not completely familiar with preceding or existing conditions relevant to the decision.

Items in this section may generate more ideas for the other sections. For this reason alone it should not be omitted.

For more details see Composing a Backgrounder for a Decision Analysis.

Situation Description

In this section you are describing the current situation and the information you have gathered. The quality of your final decision depends, in a large part, upon the information gathered and how it has been analyzed.

Thorough thought applied to this section stimulates alternative ideas in the following section.

This will help clarify the problem definition if that is proving a challenge.

For more details see Composing a Situation Description for a Decision Analysis.

Alternative Solutions

Quantity and quality are the keys. Diligence yields surprising dividends.
The more alternatives from which to decide - the better the quality of the final solution. [Refer to the story accompanying the maxim, 80% of a Decision is Information.]
Revisit this section on more than one occasion. Involve as many minds as possible.
Brainstorming is effective if you allow the freedom to name as many possibles without judging or evaluating until the flow of ideas has ceased.
Include combinations of separate solutions.
For each alternative, list the advantages and disadvantage or other evaluative methods.
Always include the important Do Nothing alternative.

For more details see Listing Alternative Solutions and Evaluating Alternative Solutions for a Decision Analysis.

Recommendation

This is the final decision.
Include as much rationale as is required to convince yourself or others.
A fall back solution may be appropriate.

For more details see Final Decision / Recommendation of a Decision Analysis.

The scope of your document will, of course, depend on the importance of the decision. When this format is followed often, the discipline can be followed in your mind for quick on-the-spot decisions. If a manager is not endowed with a high level of intelligence, good decision-making will make him/her appear smart. Of all the management skills, decision analysis is the one that is most handsomely rewarded.