7 Steps to strategic​ decision making

Organizational decision-making is a way of life for anyone in leadership positions. Though you must make decisions daily, you do not have to apply the strategic decision-making process to every situation. Much like leadership, decision making is a subject that is studied in depth. Over the years, experts proposed different models and styles. In this post, we will cover the seven steps of decision-making. 

A strategic decision-making process aids the decision-maker to solve problems by examining the available choices to determine the best course of action. 

Using a step-by-step process can benefit the company in many different ways. The procedure has a positive impact because issues are examined extensively. Hence decisions are more influential to the organization’s short- and long-term goals.

Moreover, a strategic decision-making process is not only for a problem. It also used for opportunities. Leaders or owners thoroughly study investments, business direction, and any other impactful issues before commitment.

Let’s take Joe Davis, for example. He owns a customs t-shirt shop. In the last ten years, he has been able to increase his sales drastically. Between locals, and his website, The Blue Frog Custom T-Shirts employes eight people. 

About five years ago, to utilize some unused space, Davis started a new service — alterations. While the shop is busy, the owner noticed that over the last year or so sales are steadily going down.  

Now Davis must decide whether he should shut down the alterations service, or revamp the department. For this, he will need a strategic decision-making process using the seven steps of decision-making. 

Step 1 – Identify the decision.

The first step of an organizational decision-making is to identify if the problem or opportunity needs in-depth analyzes. This step should serve as a gateway. It is best to have specific criteria in place, and if the matter at hand meets the pre-requisites, you then proceed to the next step. 

Recognizing the situation — whether it is a problem or opportunity. Determine how the decision would impact your business, the customers, and most importantly, your employees. 

For instance, the type of coffee or cookie you offer to your walk-in clients doesn’t need a complex study. It has a minimum impact on the grand scheme of things. The worst it could happen is someone complaining about missing their favorite type of cookie. 

On the other hand, a strategic decision-making process is required for complex issues such as determining if a service you provide will be profitable in the next five years. It impacts your business as a whole, the customer you service, and your employees. 

In the case of The Blue Frog Custom T-Shirts, Davis identified that stopping the alteration shop service will affect his business, customers, and employees. Thus, it qualifies for a more in-depth analysis.

The problem is that sales have been dropping. Davis determined that the department is not losing money yet. But unless something changes, it will very soon.

Step 2. Gathering information.

Arguably, this is the most crucial step of any organizational decision making. Collecting data is vital for a successful decision that is based on facts. Understanding the problem or opportunity is a must as you seek facts needed to make the decision. This step involves both internal and external information. When weighing an impactful decision, the data has to be verified by two or more people familiar with the subject. Otherwise, the facts could be biased or misleading.

Keep in mind that some of the research will be done inside the company. You should take the time to speak with supervisors, team leads, and field workers. Since front line workers are the executors, most of the decisions made will subsequently affect them. Thus, they tend to be the ones who offer the most invaluable information. 

As part of his strategic decision-making process, Davis’ gathered the initial data from invoices and expenses. Later, he spoke with the department supervisor to find out if there was anything he was missing. A few days after, he casually talked to the shop workers. It was important to hear from them and find out if any improvements could be made. It also gave him a full picture from the leader and the workers. 

Furthermore, you should conduct external research. These types of data can be found online, books, and talking to subject matter experts.

In Davis’s research, he found that the clothing alteration service industry, in general, is experiencing many challenges. People are more likely to replace clothing than to have it repaired. 

In his research, he also discovered eight other alteration shops within a small radius of his store. Their prices averaged right below his. 

Step 3. Identify Alternatives.

During the previous phase, you were probably able to see possible paths you can take. Don’t stop there, continue to look through the data. Think of different ways to achieve your objective. List all your options, even the ones that appear to be unrealistic. Use as much creativity as possible. 

In his organizational decision making, Davis created several alternative plans for his problem. For instance, if he changed the lights in the shop, it would save on the power bill — lowering the overhead. Another option he considered is offering a clothing alteration membership. Also, selling high-end personalized suit jackets at the store would increase the chances of alteration.

One thing he is certain. If he keeps the alteration department, his prices have to drop to stay competitive.  

Step 4. Weighing the evidence.

Evaluate each course of action as if you would implement them. Assess each recourse based on how practical, acceptable, and desirable a solution will be. Take time to analyze each opportunity meticulously, document the pros and cons, and the risk involved for each of them. 

Additionally, consider the consequences that each one would bring to your staff, clients, and the impact on sales. Understand that in some cases, it is impossible to measure the effect of a change. Always consider anticipating unexpected problems, and try to come up with backup plans.

If necessary, combine different options to make them more appealing. As you contemplate contrasting alternatives, you will notice that some options are more suitable than others. Finally, evaluate each choice, and based on your value system, document them in priority order.

Davis began analyzing all of his alternatives. How realistic it was to keep three people’s payroll in the long-term? Would the demand be able to maintain those folks’ paycheck? At the same time, the department is not operating in the red. Can The Blue Frog Custom T-Shirts afford the loss of income? 

Step 5. Choose among alternatives

Once all of the evidence has been weighed, you are ready to select the most favorable option. 

Remember that you might not reach a perfect choice; those are the lesser of the evils. More times than not, you will have to trust your intuition, often referred to as “gut feeling.” Understand the risks involved in your decision. Keep in mind that misjudgment of the situation could gravely impact the company.

Upon analyzing all of the options, Davis decided that none of the initial options were the best fit for his needs. However, combining some of the solutions might make sense for his needs. Now he has to get to work. 

Step 6. Take action

Depending on the type of decision you are making, an implementation plan is necessary. However, timing is the most essential factor to consider when performing a change. Another key component is to gain support from your employees and stakeholders. The more people are behind the revamp, the more successful it is likely to be.

People might support you at first, but be aware that questions will arise. You must be well acquainted with your implementation plan to answer such questions.

In the organizational decision making, Davis forecasted that the alteration department would start to breakeven within 12 months. Even if he made some changes to lower the overhead, the service prices would have to drop to stay competitive.  

The store owner visited a few of the competitors in the area offering a partnership. In the end, Louise’s Alteration Shop negotiated a deal. Davis also met with his employees and explained the situation and offered them his solution. 

In the following three months, The Blue Frog Custom T-Shirts streamlined alterations to Louise’s Alteration Shop. In turn, Louise gives Blue Frog a discounted price. At the end of the three months, the alteration shop hired two employees from Davis to keep up with the demand.

Consequently Davis closed his alteration department. He will keep one of the employees. Besides new additional duties, the employee will also take alteration orders when clients come in.  

Step 7. Review your decision.

In organizational decision-making, this step is often overlooked or forgotten. But evaluating your decision for effectiveness is crucial. Keep clear notes of the changes being implemented and what impact has caused. Further, jot down all of the unexpected issues that were either forgotten or unforeseen. Understanding the outcome will help you develop your decision-making skills for future problems.

A year later, Davis began to analyze his decision and its impact it caused. The demand for alteration declined, just as he expected. The move to dismantle the department when he did was the perfect decision. He is still able to maintain an alteration income with very little overhead.

Louise had to lay off one of the new hires a few months later. The deal with The Blue Frog Custom T-shirts was not as profitable as she expected, but it keeps her busy. She is fairly happy with the deal. 

Conclusion

Each of these seven steps to decision making requires a great deal of patience. At times, you will have to return to step two and redesign your decision. Use caution and always anticipate unexpected problems. Following the steps will help you. Keep in mind the many pitfalls to look out for.

Gathering enough information. Collecting data is a critical factor while undertaking a decision. The amount of intelligence you can muster — on a particular problem — gives you more confidence to obtain the desired outcome.

Additionally, reliable information should be confirmed by two or more sources. Following a single source can lead to bias and misinformation — creating an unmeasurable ripple effect.

Misidentifying the problem. Identifying a problem is not always easy. Dealing with issues does not always solve the problem itself. Thus, gathering and processing the data is the foundation for a successful solution. Speak with the people who execute the work; they will be able to provide more specific details of the problem at hand.

In summary, some decisions require little to no effort, while others demand a more in-depth analysis and consideration. Although, at times, there is not an ideal solution, or the best solution might be out of range. Using the seven steps of decision making will assist you in achieving the most best-fitted outcome. Organizational decision-making is a skill that can be acquired and sharpened by executing it.