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Business

How to Make Informed Decisions: 7 Step Decision-Making Process

Written by MasterClass

Last updated: Nov 8, 2020 • 3 min read

When it comes to making high-stakes decisions, it’s important to correctly identify the choices at hand, gather all available information, and make the most informed decision possible.

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The Importance of a Decision-Making Process

The decision-making process is a part of our everyday life. Some of those decisions are trivial, short-term decisions, like what to have for breakfast or what type of clothes to wear. Business decisions, on the other hand, can set the course of a company.

The stakes are high with complex decisions, as they require you to gather information, brainstorm potential solutions, analyze possible alternatives, and ultimately arrive at the best course of action. Each part of the decision-making process may require intense problem solving and a cost-benefit analysis.

7 Steps of the Decision-Making Process

Decision-makers must understand each part of the step-by-step process that goes into making informed decisions. Here are seven steps to help you make informed decisions:

  1. Identify the problem. The first step of effective decision-making is to correctly identify the problem that must be solved. This might sound simple, but it’s impossible to begin working on a plan of action when you don’t fully comprehend the question you are trying to answer. Bad decisions are often made when the root of the problem is incorrectly identified, so make sure specifically and accurately spot the decision that must be made.
  2. Collect data and information. After you’ve accurately identified the decision that must be made, it’s time to enter the information-gathering phase. Good decision-making requires you to be as informed as possible and tackle the problem from all available angles. In business decision-making, it’s often helpful to talk to the group of people at the office who have the most knowledge about the decision at hand. Outside sources like market research and studies may serve as relevant information during this phase of the decision process as well. Gathering enough information will help you analyze all possible outcomes and make the best decision.
  3. Brainstorm all possible alternatives. Use the information you gathered in the previous step to generate as many solutions as you can, helping to identify the best alternatives. Don’t worry if any of these will ultimately lead to the right decision quite yet; important decisions often require outside-the-box thinking, so feel free to be as creative as possible during this part of the process.
  4. Weigh the alternatives. Now that you have a list of potential solutions, it’s time to analyze each one. When you make tough decisions, there are different approaches you can take when examining your options. Get out a piece of paper and make a list of pros and cons for each one. Make a decision tree or flowchart, looking for any red flags that may arise along the way. Compare each of your potential alternatives against the status quo to make sure there’s real potential to improve the future of your business or company. Beware of analysis paralysis—that is, spending so much time considering your alternatives that you ignore your gut instincts and never take action.
  5. Take your pick. Once you’ve collected all relevant information and analyzed the alternatives, it’s time to make a hard decision. If you’ve followed a thorough decision-making model, hopefully, this final decision isn’t actually too difficult. However, it can sometimes be difficult to pull the trigger, even when a rational decision is staring you in the face. If you find yourself plagued with indecision or dwelling on the worst-case scenario, you may just have to trust your gut.
  6. Enact a plan. After completing your individual decision-making process, you’ll need to develop a plan to put that decision into action. Now you get to play the role of the motivator, encouraging your team to implement your plan.
  7. Review the decision. Once a certain amount of time has passed, it’s time to analyze the results of your decision. When examining your own decisions, it’s crucial to remain objective and not fall prey to confirmation bias. Did your decision achieve the desired results? If it feels like you made the wrong decision, review each step of your decision-making process to see what went wrong. Did you gather enough information? Are there ongoing processes that need to be changed in order to improve the results? Poor decisions are not the end of the world, and it’s important that you learn from your mistakes so that you’re ready to tackle the big decisions that come in the future.
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