HR Specialists Make Decisions Daily. Each of Them Directly Impacts the Business and Potentially Can Trigger the So-Called ‘Butterfly Effect’ – Becoming the Cause of Problems in Entirely Different Areas of the Company.
Making decisions is challenging, especially in times of crisis. In this article, we will discuss the most popular decision-making methods and how to ensure your choices are the right ones.
How Should Decisions Be Made?
Decision-making is our choice of the most suitable option from all the possibilities.
What Should You Consider When Making Decisions?
- The Problem: What problem does the specific decision address? How does it impact the company’s operations?
- Consequences: What will the decision specifically affect? What is the scale of the consequences?
- Responsibility: Who will bear responsibility for the changes and their outcomes?”
4 Popular Decision-Making Methods
SWOT analysis involves creating a matrix to systematize information into categories:
- Strengths — strong points.
- Weaknesses — areas that need improvement.
- Opportunities — potential advantages.
- Threats — potential disadvantages.
As a result, you have a matrix with characteristics of the situation. The gathered information helps in making a more informed decision in the existing conditions.
2. Pareto Chart
With the help of this method, you can identify problem areas and step by step find solutions.
Pareto Chart can be used to:
- By outcomes (identifying the most significant issues).
- By causes (identifying the root causes).
The construction of the Pareto Chart consists of 7 steps:
- Identifying the problem.
- Creating a list of causes that contribute to the problem.
- Counting the occurrences of each cause over a specified period.
- Compiling a table with data arranged in descending order of significance.
- Representing the data on a coordinate system. The x-axis represents the factors, and the y-axis represents the magnitude of each factor’s contribution to solving the problem.
- Creating a chart for each individual cause of the problem. The height of the bars should decrease from left to right.
- Analyzing the results based on the chart.
3. Ishikawa Diagram
Alternatively known as the ’cause-and-effect diagram’ or ‘fishbone diagram,’ this method allows for a schematic representation of the key characteristics of a problem. Ishikawa, one of the developers, was instrumental in the concept of production organization at Toyota.
The diagram is constructed starting from the formulated problem. The ‘backbone,’ a horizontal line, originates from the problem. This line branches into the main factors of the problem. Each of these factors is further broken down into causes that contributed to that specific factor. Typically, there are multiple causes.
The diagram is excellent for visualizing the relationships between the factors of the problem and identifying the root causes, thus aiding in making the right decision.
4. Risk Map
An effective decision-making tool is described in the book ‘Smart Choices’ by John S. Hammond, Ralph L. Keeney, and Howard Raiffa.
The authors help you obtain the best possible outcome using a risk map.
To make the right decision, follow these steps:
- Identify Your Key Concerns
List them for each of the decision options and then consider their criticality.
- Determine Potential Consequences
The number of consequences depends on the number of concerns.
- Determine Likely Scenarios
Understanding probabilities helps you grasp the feasibility of different approaches.
- Analyze the Results
Describe the outcomes in as much detail as possible for each decision. You can evaluate the results within categories like ‘normal’ or ‘bad’ and also financially characterize them as ‘fits in the budget’ or ‘too expensive.’
Complex decisions require more effort than considering concerns and risks alone. For such cases, a decision tree can assist, showing the essence of the decision and the interrelation between choices and concerns.
Errors in Decision-Making
Incorrectly made decisions are often based on errors. Typically, two groups of factors influence decision-making: internal and external.
Internal factors pertain to aspects related to the personality of the decision-maker. These encompass perception, values, and motivation.
The internal factor of decision-making can be grounded in an individual’s past experiences, which may not be relevant. Moreover, internal factors can lead to making risky decisions, overestimating resources, or delaying decision-making.
External factors are those connected to the conditions for decision-making and external influences.
Such decisions may be driven by a sense of duty, constrained by time, reliant on the decisions of others, or influenced by status.
Another mistake can be the setting of incorrect goals and timeframes for implementing decisions, as well as the improper allocation of responsibilities and the absence of control over the implementation.
To prevent errors in the decision-making process, one should adhere to the following
- Set goals and timeframes correctly.
- Define decision criteria.
- Analyze data thoroughly.
- Choose appropriate decision-making methods.
- Allocate functions and responsibilities correctly within the decision.
- Monitor the implementation of the decision at each stage.
- Consider the consequences and take responsibility for incorrectly made decisions.
The Complexity of Decision-Making in a Crisis
A crisis is a powerful external factor that significantly impacts the quality of your decisions. The first thing to do is to detach from external circumstances, choose one of the methods, and adhere to it rigorously. When you see the problem as a whole and stop focusing on the complexity of external factors, you will find the most accurate solution.
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