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How To Make The Most Crucial Business Decisions Of Your Life?

Learn the art of decision making. This article will help you to find out the effective methods for taking the most important business decisions of your life.

The future of your business strongly depends on the decisions you make today. According to a business guru, "Decision making is the heart of managing." In fact, decision making is the heart of your business. On one hand a good decision will bring lot of fortunes to your business while on the other hand, a wrong decision can totally ruin your business to ashes. Generally, the most crucial business decisions are taken by the Broad of Directors, CEO and Managers for achieving the most important business goals. The main functions of these executives are: setting business targets, preparing plans, actions plan, formulating business model, polices, guidelines, procedures, firing, promoting, firing and transferring employees and evaluating overall performance.

Managers are the key players who are either engaged in implementing the decisions of their superiors or are engaged in taking their own decisions. So the entire managerial process mostly revolves around decision making and nothing else. Even a decision to do nothing in the face of a problem is also a decision.

Why should you read this article?

Recently, I did a thorough research on different aspects of decision making and found out that we are lived by our decisions. And the better decisions we take, the better will be our future. So read my research paper, which is helping many executives for becoming a better decision maker.

This article will tremendously help you:

1. It will help you to take the most important decisions of your life. 2. It will help your to take the most crucial business decisions? 3. It will boost your sales and productivity. 4. If you are a blogger, you can get more pages-view to your blog by reading this article. 5. By slightly customizing the assumptions taken in this article, you can solve your day-to-day problems. 6. This article will help you to learn the effective methods for finding out the right solutions for solving your problems. 7. It will also help you to compare and weight your alternatives for choosing the best alternative. 8. Overall, it will make you a better decisions maker in every aspect of life.

Nature of Decisions Making

The process of crucial decision requires a clear understanding of the problem, searching and developing the alternate solutions to the problem, comparing the alternate solutions to find out the best solution, selecting the best solution, and implementing the decisions effectively. Your business decisions can be broadly categorized under two heading (a) Habitual decisions (b) Problem solving decisions. Whenever you come across small or minor problems like granting a leave application or etc, generally you should take these decisions immediately without going to deep minutes because these decisions are habitual in nature and needs recurrent decisions. So those problems, which are simple and minor in nature, should be solved instantly so that you can save a lot of time and energy for dealing with more complex problems.

While dealing with complex problems, first try to gather relevant information from trust worthy sources, prepare alternative solutions, compare and choose the best solution and implement it accordingly. But sometime the problems are much more complex and directly affect the existence of your business and thus you should deal with these problems by implementing the suggestions observed by Wallas. According to Wallas, any problem can be solved by just implementing the four stages of creative thoughts. So the four golden stages of problem solving or decision making are: 1. Preparation 2. Illumination 3. Incubation and 4. Verification.

Preparation

In this stage, you need to first identify the real problem. Once your problems are identified, write it down on a piece of paper. And after that your process involves collection of data, processing of raw data into information, analyzing the information, preparing alternative solutions, comparing these solutions, selecting the right solution and the implementing your decision.

Illumination

Nevertheless you prepared so hard, but something you will not find any alternatives for evaluating your decisions. In a situation like this, just don't worry, just put aside your problem, and during your period of relaxation, automatically the law of attraction will work and the solution will automatically flash in your mind. This phenomenon is observed as the state of illumination.

Incubation

Incubation is best defined as the time period between preparation and illumination.

Verification

Once you find the right solution, just verify your decision and implement it accordingly.

Theories of Decisions Making

The theories of decision making are broadly divided into two categories (a) Classical Theory (b) Administrative Theory.

Classical Theory

As the name indicates, according to this theory the decisions are made rationally, and are mainly directed towards a single and stable goal.

Assumptions

1. According to classical theory, the decision maker has complete information on the problem. 2. He is in possessions of all the alternative solutions. 3. He acts rationally and selects one of these alternatives that he thinks as the most suitable.

Criticism

This theory has been severely criticized by several experts because of the following reasons.

1. No man can have complete information on the problem. 2. The decision makers are always under risk and therefore are not under the blessing of certainty. 3. Under uncertainty, the outcomes of the alternatives solutions are most probably unknown. 4. The business goals may not be stable in nature. 5. In any point of time, the business organization may have several goals and some of these goals are often mutually conflicting with one another. Thus, the decisions taken by the decision maker may be good for one-business goals but simultaneously it may adversely affect other important business goals.

Administrative Man or Behavioral Theory

In this theory of decision making, "choice is always exercised with respect to a limited, approximate, simplified 'model' of the real situation". In this method, the decision maker has a very limited knowledge on the problem, alternative solutions and outcome of alternatives solutions. Thus, the decisions so taken are satisfactory in nature, rather than an optimizing solution to the problem. Therefore, Simon thinks that because of these limitations, the decision maker acts with "bounded rationality" rather than with fully rationally, resulting into satisfying rather than optimum decisions. To sum up, again in this theory the business suffers due to the limited skills, ability and performance of the decision maker.

Before proceeding towards to best method of taking challenging decisions of life, let's first have a look on the various types of decisions that could be taken during the process of decision making.

Types of decisions

Broadly speaking, any business decision could be classified under two headings (a) Programmed decisions (b) Non-programmed decisions.

Programmed Decisions

Those decisions that are of routine and repetitive nature and such that the decisions are made within the framework of policies, rules and standard operating procedures are mainly called as Programmed Decisions. The so called programmed decision requires very little evaluation and thinking, and involves little results, for the overall growth of the business. According to estimation, almost 80 % of business decisions are nothing but programmed decisions.

Non-Programmed Decisions

Those problems that are not routine and repetitive in nature and are unique, as such no references could be made to the existing policies or standard operating procedures to guide the decision maker, are mainly known as Non-Programmed Decisions. The non-programmed problems are most crucial in nature and needs extreme creative thinking, judgments and reasoning for solving it. The non-programmed decisions may be again divided into 1.Conditions of Certainty 2.Conditions of Un-certainty.

(a) Conditions of Certainty

Under the conditions of certainty, the decision maker knows all the outcomes of his decisions and thus he, evaluates the problems in terms of preferences and choose that meets his business goal.

Example

For example, sometimes you have to make a decision like whether to make a product or buy it from somewhere. In this case, you need to calculate the cost of production and then compare it with the cost of buying. Once done, you can choose the most economical alternative. In the said case, the outcome of your decision is well known to you and thus you can just acts rationally while selecting one of the solutions form the alternatives.

Computational Strategy

When the alternatives and outcomes are certain to you, you can take decision rationally and this system of taking decisions is mainly known as computational Strategy.

(a) Conditions of uncertainty

Under the conditions of uncertainty, the decision maker knows the alternatives but he have no knowledge on the definite outcomes, rather he only have an estimation of the statistical probability of each item.

Example

For example, suppose you have to decide on the expansion of production capacity, you can calculate the additional cost of production but you are not certain on the sales revenue but just have an estimation of the sales volumes.

When the alternatives are known to you, but the outcome is uncertain, you can take decisions based on your own judgment which are is based on Judgmental Strategy.

Most effective method for making business decisions

The most widely used or in other words the best method for making life changing business decisions or in fact almost any decisions, consist of four steps (a) Indentifying the problem (b) Analyzing the problem (c) Developing alternatives solutions (d) Comparing the alternative solutions (e) Choosing the best solution (f) Implementing and verifying the decision.

1. Indentifying the problem

The most important step of the decision making problem is nothing but to indentify the real problem because all the latter steps depends on this steps. If your assumptions are wrong, the consequences you draw from your assumption will be automatically wrong. For example, if your desktop computer does not start in the morning, the first thing you need to do is finding out the real problem. You have to understand the symptoms for diagnosing your problem.

So if without understanding and indentifying your problem, you start pulling and plugging this and that wire, dusting your RAM and motherboard and etc will not product any quick solutions. If in this case, the real problem is in the UPS and you go on diagnosing your CPU, then most probably you are not going to solve the problem because of lack of identification of the problem.

Thus, you should spend enough intelligence and time for identifying the real problem before processing to the next step.

2. Analyzing the problem

After successfully identifying your problem, the next step is to analyze the problem from different point of views and from different aspects. While analyzing the problem you have to find out the 'limiting factor'. The limiting factor must be changed or removed in order to make the problem solving decision more effective. Your ability towards finding out the 'limiting factor' plays a very crucial role for finding out the best solution for solving the problem.

Example

Suppose you are working as a Manager at YAHOO. And your problem is that: Day by day the page-views (traffic) of Yahoo.com is going down and you need to take decisions for improving the traffic (gaining more visitors to Yahoo.com). In a situation like this, first you need to find out the limiting factor, that must is changed in order to achieve your target. Is it the change in the taste of visitors, is it due to lack of advertising, is it due to change in SEO or search engine algorithms, is it due to lack of motivation of the developers for developing new features, and is it due to the lack of quality. Unless and until you identify the limiting factors, you are not going to make a wise decision.

Another most important factor is finding out the type of decision you need to take. It is a programmed decision or non-programmed decision. Another aspect to consider is the impact of your decision. What is the impact of your decisions on your business and on your life? What is the value that will be generated by your decisions?

Analyzing is the second most important step for making the most productive decisions of your life.

3. Developing Alternative Solutions

It is very rightly said by a prominent author, that there is not a single problem in this world, which does not have any alternative solutions. If you, as a decision maker do not find any alternative solutions for solving your problems, then in fact, you have not just searched for any alternative solutions. The process of finding is unending and thus you should consider finding out enough alternative solutions, if not all. No one is going to find all the alternatives, thus as soon as you find enough alternative, just move on to the next step.

Example

If your website "X" is not getting the target traffic or visitors and thus your company is unable to achieve its target revenues then, in this case, some of the alternatives solutions are:

1. Adding more relevant contents to your website. 2. Improving the SEO of your website. 3. Advertising your website on Televisions, Newspapers and other allied media. 4. Creating a product that will attract the visitors to regularly visit your website. 5. You can give something free like a free eBook, for attracting more visitors. 6. You can focus on getting more email subscriptions, and followers on twitter and Facebook. 7. You may hire freelance writers for writing contents for your website, either for getting fame or for a monetary reward. 8. And so on...and the list can cross 1000 likewise.

4. Weighing Alternative solutions

I think, weighting alternative solutions is bit complicate and needs a separate article for understanding the entire concept. Well, I will be writing a phenomenal article on "How to compare alterative solutions in my upcoming posts'. For the time being, let me give an overall idea that will help your for comparing your alternative solutions.

Examples

So in the example mentioned under the heading "Developing Alternative Solutions', we jotted out at least 8 alternatives for getting more visitors to our websites "X". And now we have to compare these alternatives for finding out the best alternative.

Factors

1. Your budget is $ 60, 000 2. Time period is 6 months 3. Target earning: Additional $ 5000 per month. (Objective) 4. Man power 25

1. Adding more relevant contents to your website.

Suppose your website have 60, 000 original articles and you are currently receiving 10 million page views per month. So from statistical point of view, if you will add an additional 6000 article to your website, then you will get 1 million extra page views per month. And for getting 6000 relevant articles you need to pay $60, 000 to your writers.

Questions

Within how many days can you add 6000 new articles to your website?

Do you have enough manpower to produce these contents?

With 1 million pages view can you earn more than $60, 000 with a stipulated time period? If yes, then how much?

Let's assume that you can earn $5000 per month with an investment of $ 60, 000.

2. Improving the SEO of your website.

Suppose you spend $ 60, 000 in improving the SEO of your website. Then will you get 1 million extra pages view? If it is possible that by spending $ 20, 000 on improving the SEO of your website, you can get an additional 1 million page view in 4 months, then this solutions weights more than the previous one.

3. Advertising your website on Televisions, Newspapers and other allied media.

If by advertising on Televisions and Newspapers with $ 60, 000 you can enhance your page view to 2 million per month within 2 months then this alternative weights is far more better than the above 2 alternatives.

4. Creating a product that will attract the visitors to regularly visit your website.

If, by creating a product, for example, selling "Customized T-Shirts", you can earn $ 25, 000 per month within 2 months of your investment of $ 60, 000, then most probably; this would be a better choice.

Likewise, you need to weight enough alternatives keeping certain factors constant like your budget, man power, stipulated time period an etc.

You can also take the help of experts as well as your colleagues for comparing and weighting alternatives.

5. Choosing best alternative

Once you finish evaluating and weighting all the alternative solutions, you need to compare each alternative solution with one another in terms of predetermined objectives. Drucker suggest four criteria for selecting the best among all the possible alternatives: (1) risk, (2) economy (3) timing (4) limitations of resources.

While choosing the best alternative solution, first try to find out the answers on risk involved, economic gain, period for achievement, and resources involved. Barnard observed; "the fine art of executive decisions consists in not deciding questions that are not now pertinent, in not deciding prematurely in not making decisions that cannot be made effective, and in not making decisions that others should make."

Anyhow, you are the best person to choose the best alternative for solving your problems. Have faith in yourself, and think twice before coming to any judgments.

6. Implementing and verifying the decisions

A best decision only becomes the best when it is implemented effectively. A better decision can become worst, if it is not properly implemented. In this scenario, the implementation of decisions is much more important than finding out the best alternative from various alternatives. Generally, difficulties in implementation arise when the decision requires a significant change, as it is said that it is the nature tendency of human beings to resist changes.

"I don't know where all the changes are productive, but I am certain that whenever there is any productivity, it is the outcome of a change."

Anyhow, after implementing your decision you need to verify it from time to time for judging its effectiveness and outcomes. If the decision is not producing the desired results, you may need to change your decision or its implementations.

Conclusion

It is observed by almost all the prominent decisions makers of the world that decision making is nothing but an art. The more you learn and practice decision making, the more accurate and impactful will be your decisions. You are lived by your decisions, and your future will be designed by your decisions.

Resources and References:

Organization and Management book - RD Agarwal

By Lakshman -

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