Importance of Decision Making in Management

Halfpoint/iStock/GettyImages

In business circles, it is often said that if a company is not moving forward, it is moving backward because there is no such thing as standing still in business. This strong statement is a good reminder of the importance of decision-making in management. Without clear decisions based on where the company has been, where it is and where it is headed, the business tries to maintain the status quo but ultimately falls behind. Management with strong decision-making skills has the power to help build an organization that stands the test of time and stands out against the competition.

Understanding Decision-Making Skills

Decision-making skills are the processes we use to make choices about the direction we want to point our organizations in. Different from problem-solving skills, which are reactive in response to something gone wrong, decision-making skills are proactive and help to prevent crises from occurring in the first place. Decision-making skills are based upon the organization's mission, vision, financial situation, culture, priorities, values, long-term and short-term goals. Good decision-making skills recognize that what we don't do is just as important, if not more important, than what we do.

Seven Steps in Decision-Making

While many organizations utilize different decision-making models, the following seven steps are common and help us to think through what is actually best for our organizations and teams. The steps are as follows:

  1. Clarify the Decision: Consider what outcome you want to see from your decision. Narrow down the decision from something big and obscure to something specific and actionable. For instance, instead of saying that you want to increase overall profits, narrow down the decision to choosing which product lines to increase in order to generate more sales in the fourth quarter. 
  2. Gather the Facts: As human beings, it is normal to have feelings about our favorite products or employees, but as managers, we must act on the facts. Instead of choosing our favorite products, look at which products are performing best, what the market trends are and how that plays into the company's vision and mission. Instead of choosing our favorite employee to spearhead an effort, look at everyone's proven track record and educational background, as well as their leadership abilities. Choosing which facts not to consider is just as important as choosing which ones to consider. Information overload can bog down the decision-making process. 
  3. Look for Options: With pertinent facts at your fingertips, it is time to look for all the possible options. This is where creative management brainstorms and considers all the possible solutions to a problem or opportunity and gets them down on paper. For example, you could have employee B partner with employee D to increase product 223's revenues in the home market. Or, you could have employee A design product 224 so that it appeals to customers who already have product 223. Write down all your options.
  4. Weigh Pros and Cons: Narrow down your options to those that are most likely to produce the results you are looking for and then conduct a risk-benefit analysis. Write down the pros and cons of each scenario so that you have a good idea of what is really involved with pursuing any given path. 
  5. Choose the Best Option: When you weigh the pros and cons, you are likely to have an idea of which options produce the greatest possibility for benefit with the least amount of risk. While this is the case, sometimes the company values or objectives mandate assuming a certain level of risk, so choose among your options, according to your company's objectives. 
  6. Move Forward: Once you determine the best option for getting where you are going, move forward in an organized way. Ensure you know the who, what, when, where and why of moving forward and then supervise the process, making adjustments as you go.
  7. Evaluate the Results: Managers are humans and not robots, so we learn to make better and better decisions through experience. Evaluate your results to see if you got where you were going. What went well and what could you do differently next time to increase your success? 

Importance of Decision-Making Skills

The importance of decision-making skills cannot be understated. Without them, companies would never create new products, hire new employees, downsize, restructure, adhere to certain ethics or impact their industries with meaningful change. Good business is dependent on good and ethical decision-making skills.

Using a formal process or set of steps for decision-making alters the course of the future. As a manager, you have the power to increase the bottom line or even to accidentally reduce it. Your decision-making skills will influence job availability, which has a real impact on the personal lives of those on your team. When you possess strong decision-making skills, not only will the company get where it is going, but those who look to you for leadership will get where they are going, too.

Importance of Decision-Making in Life

The importance of decision-making in life is that our personal decisions shape our personal lives, and perhaps those of generations to come. One way to increase decision-making skills in the workplace is to practice decision-making skills in everyday life. Perhaps you want to retire early, spend more time working out, make it to the kids' basketball games, take the family on a vacation without pinching pennies, make more ethical purchases or give more to your favorite nonprofit organizations.

Try practicing the seven steps of decision-making in your personal life to make these smaller goals happen. The more you do it, the stronger your skills are likely to get. This gives you the opportunity to strengthen your decision-making skills without playing with large sums of money, and while simultaneously benefiting your family or personal life.

Importance of Decision-Making in Business

The importance of decision-making in business is that our decisions impact our own income, the business' bottom line, company culture, our customers' lives and the livelihood of our employees. While choosing between product A and product B might seem like a simple office decision and a reason for your regular Wednesday meeting to run late, it is actually so much more. This is why practicing our decision-making skills in our private lives is so vital. Once we get into the business setting, our decision-making skills impact not only our own families but the business as a whole, suppliers and multiple other families, as well.

Importance of Decision-Making in Leadership

Those in official management positions are not the only people in an organization that hold leadership pull. If you pay close attention to your employees, you will likely notice that others are in unofficial positions of leadership due to their:

  • Knowledge and expertise.
  • Ability to listen.
  • Inspiring nature.
  • Connections.
  • Integrity.
  • Ability to motivate.

The importance of decision-making in leadership roles that are unofficial is almost as vital as it is in official management. While these unofficial leaders probably will not have the final say on your next new hire, they will influence the way the rest of the team operates. Mentoring unofficial leadership in decision-making skills can make your job as a manager easier, as well as prepare them for possible official leadership roles later in their career.

Importance of Decision-Making in Management

Depending on the level of your management position, you likely make many important choices each day. These decisions could include things like:

  • New hires.
  • Downsizing.
  • Product selection.
  • Budgeting.
  • Buying.
  • Creating new products.
  • Team composition.
  • Morale strategies.
  • Marketing strategies.
  • Scheduling.
  • Training.
  • Mentoring.
  • Networking.
  • Continuing education.

Each of these decisions impacts many people, from the managers above you, to the families of employees below you, to your customers and their families. The importance of decision-making in management lies in your power as a manager to impact people either positively or negatively with each decision you make. The more you practice decision-making skills that aim to reduce risk and increase benefit, the greater of a positive impact you will have on those around you and the world.

Learning Decision-Making Skills

Learning decision-making skills is a process rather than a "one-and-done" exercise. Allow yourself the time to practice decision-making skills both at home and on the job over time. As you evaluate your results each time, you are likely to see gradual improvement. If not, courses at your local business school or community college could help catch your blind spots and teach you how to get the results you are looking for.

When it comes to personal hang-ups that get in the way of our professional decision-making abilities, it might help to see a therapist or mental health practitioner who can help you problem solve and become the leader you want to be.

Teaching Decision-Making Skills

Managers are often tasked with not only practicing decision-making skills, but also with teaching them to their teams or up-and-coming leaders. Regular meetings to practice making decisions together or to review the results of past decisions help the employees on your team to develop the kinds of decision-making skills they need for success on the job. Podcasts, videos and outside trainers are other options to pursue in order to account for a variety of learning styles and preferences.

Conflicts of Interest

Sometimes our jobs require us to make decisions that we cannot make in an unbiased way. For instance, a manager whose kid works alongside another employee might be tasked with deciding who stays and who goes during a company restructuring. Or, a husband and wife might both be managers and are asked to work together in a way that puts other managers at a disadvantage.

When conflicts of interest cloud your decision-making abilities as a manager, it is important to speak up. Many companies have policies and procedures in place to address situations where a particular leader encounters a conflict of interest in decision-making.

Finding Outside Help

Sometimes the best decision a manager can make is that they are not qualified to make a decision. Organizational development consultants, advertising consultants, corporate psychology consultants and others have developed entire professions out of helping to make the decisions you are not qualified to personally address.

When you are not qualified to make the needed decisions in order to further your organization's mission and vision, consider hiring one of these professionals who are trained to cover your blind spots. They can provide specialized insight and knowledge that would not be otherwise available so that you and your team can get where you are going as efficiently as possible.

References

About the Author

Anne Kinsey is an entrepreneur and business pioneer, who has ranked in the top 1% of the direct sales industry, growing a large team and earning the title of Senior Team Manager during her time with Jamberry. She is the nonprofit founder and executive director of Love Powered Life, as well as a Certified Trauma Recovery Coach, certified HRV biofeedback practitioner and freelance writer who has written for publications like Working Mother, the San Francisco Chronicle, the Houston Chronicle and Our Everyday Life. Anne works from her home office in rural North Carolina, where she resides with her husband and three children.