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Decision-Making is no easy task!

Leaders are constantly faced with problems, opportunities, or the need to make a decision. For many people, these three things create anxiety, stress, and worry… but they don’t have to. Frequently, situations can involve more than just one of these, or even all three of these.

As an example, let’s say your company just found out today that you were awarded a $250,000.00 one-time grant to help develop your business. However, because of the late notice from the grant office, you must spend all $250,000.00 within the next seven days or give it all back. This is a terrific opportunity to make some significant changes, but it is also a problem because you only have a limited amount of time to spend the money or must give it all back, and you’ll need to make some decisions about how it is to be spent.

The basic decision-making processes/steps

The basic steps involved in decision making can vary depending on the specific context and the complexity of the decision. However, there are four basic processes involved in decision-making:

  • Identifying what is taking place.

  • Accounting for, analyzing and explaining what is happening (Who, What, Where, When, How and Why are the basic questions to be considered).

  • Formulate a response or action plan and implementation.

  • Evaluating the results of the action plan or response.

Depending on where you find your information there can be anywhere from 4 to 10 basic steps in the decision-making/problem solving model used. The SARA Model uses four basic steps. SARA stands for Scanning, Analysis, Response, and Assessment. Another decision-making model is called the OODA Loop model which is a decision-making and action cycle that was developed by military strategist Colonel John Boyd. The OODA loop is a model that describes the process individuals or organizations go through when facing dynamic and rapidly changing situations. Other decision-making models include:

  • PDCA Cycle (Plan-Do-Check-Act): The PDCA cycle, also known as the Deming cycle or Shewhart cycle, is a problem-solving model widely used in quality management and continuous improvement processes.

  • Fishbone Diagram (Ishikawa Diagram): The Fishbone Diagram is a visual problem-solving tool that helps identify potential causes of a problem or an effect.

  • DMAIC (Define, Measure, Analyze, Improve, Control): DMAIC is a problem-solving methodology used in Six Sigma projects. It provides a structured approach to define a problem, measure relevant data, analyze the causes, improve the processes, and establish control measures to sustain the improvements.

  • 5 Whys: The 5 Whys is a simple yet effective problem-solving technique that involves repeatedly asking "Why?" to identify the root cause of a problem. By asking "Why?" five times or more, it helps to uncover deeper causes and address them rather than just addressing the symptoms.

Generally speaking, decision-making involves the following steps typically found in almost all decision-making models and/or involved in the decision-making process:

  • Identify the decision: The first step is to clearly define the decision that needs to be made. This involves understanding the problem or the situation that requires a decision.

  • Gather information: Once the decision is identified, gather all the relevant information and data related to the problem, opportunity, or decision. This may involve conducting research, collecting data, and seeking input from experts or stakeholders.

  • Identify alternatives: Explore and generate a range of possible alternatives or options that could potentially solve the problem or address the situation. This step involves brainstorming and considering different perspectives.

  • Evaluate alternatives: Assess the pros and cons of each alternative. Consider the potential outcomes, risks, and benefits associated with each option. This evaluation can be based on criteria or factors that are important to the decision.

  • Make a choice: After evaluating the alternatives, select the best option that aligns with your goals, values, and the available information. This step involves making a decision and committing to a specific course of action.

  • Take action: Once the decision is made, implement the chosen alternative. This step involves putting the decision into action and executing the necessary tasks or plans.

  • Evaluate the results: After taking action, evaluate the outcomes and results of the decision. Assess whether the decision achieved the desired outcomes and if any adjustments or improvements are needed.

  • Learn and iterate: Reflect on the decision-making process and learn from the experience. Identify lessons learned and incorporate them into future decision-making processes to continually improve the quality of decision-making.

The variety of decision-making models and steps is almost as varied as the reasons people need to make decisions. Yet leaders must be careful to recognize some of the typical decision-making mistakes and biases influencing the leaders thinking.

Causes of poor decisions

There are several common decision-making mistakes that are referred to as a “bias” mistake because it is based on conscious or subconscious preferences people often make/have.

Confirmation bias occurs when individuals seek out information or interpret evidence in a way that confirms their preexisting beliefs or biases, while disregarding contradictory information. This can lead to flawed decision-making as it limits the consideration of alternative viewpoints or evidence. Overconfidence bias refers to the tendency to be excessively confident in one's judgments or abilities. It can lead individuals to underestimate risks, overestimate their own capabilities, and make decisions without fully considering potential drawbacks or uncertainties. Anchoring bias occurs when individuals rely too heavily on the first piece of information they encounter when making decisions. This initial "anchor" can skew subsequent judgments and prevent individuals from adequately considering other relevant information.

There are a few other concepts that create faulty decisions both individually and in groups. These include, Sunk cost fallacy, groupthink, the Abilene paradox, availability heuristic, decision paralysis and emotional decision-making. Let’s take a quick look at each of these.

The sunk cost fallacy is the tendency to continue investing resources (time, money, etc.) into a failing project or decision because of the resources already invested. This can occur even if it's clear that further investment is unlikely to yield desired results. This bias can lead to irrational decision-making, as past investments should not dictate future actions. Groupthink occurs when a desire for harmony or consensus within a group leads to a suppression of dissenting opinions or critical thinking. This can result in poor decision-making, as alternative viewpoints or potential risks may not be adequately considered. The Abilene Paradox often occurs in groups where members avoid expressing their true preferences or concerns to maintain harmony or avoid potential conflict. Instead of openly discussing their reservations, individuals may assume that others desire a particular outcome and go along with it, even if they personally disagree.

The availability heuristic is a mental shortcut where individuals make judgments or decisions based on the ease with which examples or instances come to mind. This can lead to overestimating the likelihood of events or outcomes that are more readily available in memory, even if they are not representative of the overall probability.

Decision paralysis refers to the inability to decide due to being overwhelmed by too many options or information. It can result in delayed or ineffective decision-making, as individuals become paralyzed by the fear of making the wrong choice. Sometimes referred to a paralysis by analysis because the decision-maker is over analyzing every specific aspect of the problem, opportunity or decision that needs to be made. Emotional decision-making occurs by allowing emotions to heavily influence decision-making which can lead to biased or irrational choices. Emotions like fear, anger, or excitement can cloud judgment and prevent a thorough consideration of facts and logical reasoning.

It's important to be aware of these common decision-making mistakes to improve the quality of decision-making and mitigate their potential negative impacts. Developing critical thinking skills, seeking diverse perspectives, gathering relevant information, and consciously challenging biases are some strategies to overcome these pitfalls. The goal is to make good decisions for individuals, teams, and the organization.

Some consequences of poor decision making

When leaders don't make good decisions, it can have several negative consequences for individuals, teams, and organizations. Some potential results of poor decision-making by leaders include missed opportunities, decreased performance, wasted resources, damaged reputations, increased conflict, and dissatisfaction, decreased employee engagement and retention as well as legal and ethical problems.

Poor decisions can lead to missed opportunities for growth, innovation, and success. When leaders fail to make sound judgments, they may overlook promising ventures, fail to adapt to market changes, or make decisions that hinder progress. Ineffective decisions can negatively impact the performance and productivity of individuals and teams. Poorly thought-out strategies, flawed resource allocation, or misguided goal setting can hinder progress, demotivate employees, and lead to suboptimal outcomes. Likewise, bad decisions can result in the misallocation of resources, including financial, human, and time resources. This can lead to wasted investments, inefficient processes, and unnecessary costs, negatively impacting the organization's bottom line.

Another concern for leaders making poor or bad decisions is damaged reputation. Repeated poor decision-making by leaders can harm the leader’s and the organization's reputation and credibility. Stakeholders, including customers, employees, and investors, may lose trust and confidence in the leadership, affecting relationships and long-term success. These poor decisions may also increase conflict and dissatisfaction. If leaders consistently make poor decisions, it can lead to increased conflict and dissatisfaction among team members. Disagreements may arise, morale may decline, and trust in leadership may erode, leading to a toxic work environment and reduced collaboration.

All these issues from poor decisions have a remarkably high potential to decreased employee engagement and retention. When leaders consistently make ineffective decisions, it can result in decreased employee engagement and job satisfaction. Employees may feel disillusioned, undervalued, or frustrated, leading to increased turnover and difficulty attracting and retaining top talent. Poor decision-making can sometimes lead to legal and ethical problems for organizations. Ignoring regulations, engaging in unethical practices, or making decisions without considering their wider impact can result in legal repercussions, damaged relationships with stakeholders, and reputational harm.

For these reasons it is crucial for leaders to prioritize effective decision-making, leveraging critical thinking, analysis, and consultation with stakeholders. Seeking input, considering diverse perspectives, and learning from past mistakes can help leaders make informed decisions that positively impact the organization and its stakeholders.

Why use a decision-making method or model

Using a specific method to make decisions can provide several benefits to leaders in making informed and effective decisions and helps leaders to offer a structured framework that guides leaders through the decision-making process. They provide a step-by-step approach, ensuring that all relevant factors and considerations are systematically addressed. This helps leaders maintain clarity and focus throughout the decision-making process. A decision-making model encourages leaders to gather relevant information, analyze data, and consider multiple perspectives. By following a model, leaders are prompted to consider various factors, such as risks, benefits, and potential outcomes. This systematic analysis helps leaders make decisions based on a more comprehensive understanding of the situation.

Another benefit of a decision-making model is that it helps reduce bias. Decision-making models help leaders minimize bias by providing a structured approach to consider diverse viewpoints and evaluate alternatives. Models encourage critical thinking and challenge assumptions, reducing the impact of cognitive biases that can distort decision-making. This also promotes consistency and fairness in decision-making across different situations. By following a consistent process, leaders ensure that decisions are based on objective criteria and not influenced by personal preferences or biases. This can enhance trust and transparency within the organization.

Consideration of long-term consequences is also a benefit of using decision-making models which often emphasize evaluating the potential long-term consequences of a decision. By considering the broader impact and sustainability of choices, leaders can make decisions that align with the organization's long-term goals and values. This coupled with stakeholder involvement encourages leaders to involve relevant stakeholders in the decision-making process. By seeking input from individuals who are impacted by or have expertise in the decision, leaders can gain valuable insights, increase buy-in, and foster a sense of ownership among stakeholders. But probably the greatest benefit to using a decision-making mode is improved decision quality. By providing a systematic approach to decision-making, models help leaders make more informed and higher-quality decisions. They facilitate a comprehensive evaluation of options, minimize impulsive or arbitrary decisions, and increase the likelihood of achieving desired outcomes.

Having all of this in mind

We suggest using the CMF Leadership Consulting’s L.E.A.D.E.R. Action Method as a decision making model. All you have to do is remember to be a LEADER and the word will help walk you through the decision-making process.

Using the L.E.A.D.E.R. Action Method©

The CMF L.E.A.D.E.R. Action Method© is set up to use the word leader to walk you through the application of different leadership theories in a practical problem-solving/decision-making process.

Here’s how it works:

Using the L.E.A.D.E.R. Action Method©

Locate conditions of focus, from the primary leader’s perspective.

Conditions of Focus are specific, articulable, stand-alone, conditions of focus, from the primary leader’s perspective, which can be a problem or challenge (P), an opportunity (O), or the need for some decision (D). It can also be a combination of (P), (O), & (D).

Evaluate and establish a logical sequence of events.

Try to determine what happened or how the situation developed to determine the underlying root cause of the problem, opportunity, or need for a decision.

Analyze leadership theories and experiences.

Apply the appropriate leadership theory to the specific condition of focus independently.

Determine derivation from the desired behavior/results.

Once the theory (theories) have been selected, determine what leader strategies and how much action and effort will be required to address the underlying root cause(s) or origin. This should be done for each condition of focus.

Establish and employ leader strategy (strategies) in a leader action plan.

Develop an action plan to put the leader strategies into action. Include S.M.A.R.T. goals and if needed a goal-setting matrix to develop the goals and plan.

Review results and assess for motivation, satisfaction, and performance.

Progress and results should be tracked and documented to determine if the plan worked as desired, or if additional changes need to be made. If the results did not completely resolve or address the conditions of focus, start the process of the L.E.A.D.E.R. Action Method again to address what is remaining.

Not only will using a model help, the CMF Leadership's LEADER Action Method is a proven method.

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