How to Make Effective Decisions

The September edition of e.manager introduced members to a more structured approach to solving problems. This involved the recognition of the problem (or an opportunity), differentiating between the problem and its symptoms, conducting an investigation and then carrying out a thorough analysis. The final stage in that process was a statement of clear objectives - what is it that you are trying to solve or what specific problem needs to be remedied? This statement provides the impetus for the decision-making stage, which is essentially concerned with considering alternative solutions and then choosing the most appropriate course of action.The purpose of this "How to" is to introduce members to a more structured approach to making a decision. It is, however recognised that in most cases a problem, opportunity or challenge arises and a decision is made simultaneously. Typically these will be routine decisions, utilising the experience of the administrative team. Moreover, most organisations have well established procedures and protocols that will direct the administrative team on what to do in most instances. Nonetheless, in the current, complex business environment, making a wrong decision could have a significant detrimental effect on the organisation. It is therefore worthwhile to consider a more structured approach to making decisions. While this cannot guarantee that the right decision will be made in all situations, it will provide the Administrative Manager with a degree of confidence that variables and implications have been evaluated.Decision-Making - a structured approachA structured approach to decision-making comprises three stages:1: Generate possible solutionsThis stage involves the generation of ideas and alternatives that could satisfy the stated objectives. It is important to consider all potential courses of action, and so it is advisable to involve the administrative team and other colleagues. They can not only provide ideas, they might actually be affected by the It is also useful to encourage innovation and creativity among the team to not only ensure that a good range of alternatives are generated, but also to avoid taking 'well-trodden paths'.2: Decide on a course of actionThe alternative suggestions now need to be evaluated. Initially eliminate those options which are clearly unrealistic, undesirable or prejudiced. Johnson et al (2008) analyse strategic options within a questioning framework of whether a particular option is suitable (does it meet the specified need?), acceptable (to all relevant stakeholders), and feasible (can it be actioned?). The options can then be evaluated using one or more techniques available to the Administrative Manager. These include decision trees, expected value, cost-benefit analysis, sensitivity analysis and scenarios (or 'what-if'). Here, the use of spreadsheets can be an important support for any quantitative analysis. Since most decisions will have a 'knock-on' effect to another part of the organisation, decision trees are particularly useful to examine the chain of impact created by the decision.Consider the scenario where CDE PLC has to decide from which company to order specialised parts. There are seven suitable companies, each of which offers different terms and conditions with the final price being determined by:- an initial deposit- a set-up cost- a unit costA - Using a SpreadsheetThe spreadsheet has been designed to highlight the initial cost, fixed cost and the total cost of ordering parts from each of the seven companies. These costs are calculated based on the terms and conditions summarised in Section 1.Section 2 calculates the costs based on ordering 2000 units and it is clear that Company A will provide the lowest overall cost and Company F the lowest cost without an initial outlay.However, in Section 3, the fixed costs are marginalised when the number of units ordered is increased to 5,000. …