In Part I - What’s a decision anyway? we defined what a decision is and looked briefly into the characteristics of a decision. Although understanding what a decision is already helps a lot, the goal most of us have is to make the best decision possible. When you want to make a high quality decision, certain elements need to be present. Without those, you can’t really make a good decision.
Basic Elements
There are three basic elements that need to be present to make a good decision:
- What you can do (alternatives)
- What we know (information)
- What we want (preferences)
Decision analysis provides a way to convert those three elements into a course of action. This is sometimes referred to as the decision model.
Alternatives/Options
We already touched alternatives in the previous post
Options are available actions that the decision maker can take that will lead them to a different future.
If you have multiple options, but all lead to the same outcome, than you have no decision to make, because it does not matter which one you pick.
There are some tools and techniques available to generate options for the decisions that you have to make. One example of this is the Strategy table.
Preferences
A decision maker will have preferences about the options. Preferences (what we want) are the criteria or values by which you will compare one option with another one. This means that certain options are more desirable, because the outcomes of those options are more desirable.
If the decision maker does not prefer one option over the other, they don’t care about the possible futures. This means that there is no decision to be made, because any option will do.
Our preferences and values are sometimes refered to objectives in a more professional setting. A good tool is Objective Hierarchy
to determine a decision makers preferences and criteria.
Information
The linking of what the decision maker can do (alternatives) with what they want to do (preference) is provided by what they know. What they know is called information.
Getting the right amount of data in order to make an informed decision is very important. You don’t want the gathering of information to be over- or underdone. Every decision involves a level of uncertainty, regardless of how much information you posses.
Other elements
There are other elements that are present in each decision:
- a decision maker
- a frame
- logic
A decision maker
A decision maker is a person with the authority to make a decision. To put it differently: the decision maker is the person who has the authority to allocate the resources. Making a decision is not just about authority, it is also about commitment. A decision maker also needs to be committed to making a decision.
In the beginning the decision maker could only be a single person. Since business has changed, Decision analysis is changing its view
on this too. A decision maker can also be a group: a team or a committee. However, there often is a head or lead selected that is in charge of the group. It is important to know who the decision maker is beforehand, because the criteria by which alternatives are compared depend on who the decision maker is. When analysing a decision, we will pick the criteria for the entire group and not just for the person in charge of it.
It is important to note that the decision maker might not be involved in the analysis.
A frame
Before starting the analysis, it is important to frame the problem. It does not matter how well you analyse the decision, if you are solving the wrong problem. So the frame is the way of looking at the decision that has to be made.
In order to have the correct frame, you need to:
- identify the correct problem,
- clarify the problem, so everyone understands it,
- assess the bussiness situation in regard to the problem,
- create the appropriate alternatives/options.
There are many techniques that can help you create a good frame, which we will discuss later in the series.
Logic
A process to derive the action we should take from what we can do (options), what we want to do (preferences), and what we know (information). As mentioned in the beginning of the blogpost, this is sometimes refered to as the decision model.
Resources:
- Abbas, Ali E.; Howard, Ronald A.. Foundations of Decision Analysis, Global Edition. Kindle Edition.
- Skinner, David C.. Introduction to decision analysis, Third edition. Hardcover Edition.