improving Decision-Making and decisions - a model-based approach

Introduction
​The term decision is used when a grocery store customer encounters an entire aisle of breakfast cereals, we say he has a decision to make. When a high school senior considers which college to attend, we say s/he is facing a decision. When a poker player weighs whether to raise or fold, that's a decision, too. And when a company faces an opportunity - to enter a new market, acquire another company, or launch a new product - what is required of its management? A decision.  The same term is applied to routine as well as complex deliberations, to both small-stakes bets and high-stakes commitments, and to exploratory steps as well as irreversible moves.

​All these decisions have one property in common, the fact that people have to make up their minds in a great variety of circumstances. ​The use of the same word "decision" for deliberations in all these very dissimilar situations is a source of confusion, and makes it very difficult for people to apply any lessons learned or research knowledge in one situation to another situation.

Model-Based Approaches to Decision-Making
These different types of decisions require different approaches, based on a model, that provide a consistent process to help decision makers improve their decision-making. One approach is a model of decision-making based on two (2) factors that influence decision-making, namely:

1. level of control on outcomes, and
2. whether performance is absolute of relative.

​These factors define two (2) dimensions that can be organized into four categories. These categories define a structure/model useful in categorizing decisions that lead to finding useful approaches to improve decision-making. They include the following:

1. Routine Choices and Judgments - In these decisions we have no control over outcomes and our performance is absolute; we are not competing with anyone. Decision-makers can benefit from knowledge of well-known lessons about avoiding common biases that make good sense, and result in good decisions. Examples of these decisions include consumer choices - picking from product selection in a supermarket - and personal investment decisions, or administrative decisions (e.g., where to hold a company's picnic, etc.). 
2. Influencing Outcomes - These are decisions that relate to much of what we do in life - using our energy and talents to make things happen. These involve situations where we can control judgment or outcomes to perform well. Examples include determining how long we will need to complete a project or operational decisions; (e.g., which jobs to schedule into production, etc.). That's a judgment we can control, and performance is absolute.
3. Placing Competitive Bets - In this dimension, we cannot influence outcomes, but performance is no longer a matter of absolute performance. Decisions are tactical and success depends on how well we do relative to others. The best decisions must anticipate the moves of rivals. This is the essence of strategic thinking.
4. Strategic Management Decisions - Strategic management decisions involve managing for strategic success. They involve strategic thinking - the ability of the organization to plan - and strategic choice. For these decisions, decision makers can actively influence outcomes, and success means doing better than rivals. And success depends on the ability of managers to influence the desired outcomes through its people, and the need/expectation to outperform rivals. By definition, these decisions require executives (decision makers) possess the ability to influence outcomes by the way they lead and communicate, and through their ability to inspire and encourage people to perform better than the competition. 

​Decision-makers can improve the quality of their decisions substantially, if before making any decisions they make an assessment of the type of decision(s) required for the situation at hand.

Improving Managerial Decisions
​​In any business enterprise decisions can be made at varying levels in the organization. Managers at all levels in the organization must make decisions on behalf of a company. Those decisions range from simple selection of which conference rooms to use for a meeting, approval decisions, to very difficult decisions - strategic decisions.

Managers face in the course of their daily responsibilities, a range of decisions that are consistent with their positions and roles in the organization. The difference between decisions at the various levels, typically, lies in the type and scope of the decision or choices made. From the point of view of management, managerial decisions can be broadly classified into these categories, namely, strategic, tactical, operational and administrative, which can be aligned with the dimensions of the model defined above.
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1. Strategic Decisions - Strategic decisions are major choices of actions that affect and influence the business organization as a whole. In general, they are complex, unstructured and novel. A manager/decision maker has to apply his/her business judgment, evaluation and intuition into the definition of the problem statement and decision choices. Strategic decisions are influenced by the decision makers knowledge, available information, and mind-set - values and beliefs. They are long-term in scope and affect the competitiveness of the company as a whole.
2. Tactical Decisions - Tactical decisions relate to developing functional/divisional plans, structuring workflows, establishing distribution channels, acquisition of resources such as human resources, materials, and money needed for implementing strategic decisions. These decisions affect development of resources and capabilities in functional areas to support implementation of strategic decisions.
3. Operational Decisions - Operational decisions affect specific day-to-day activities of the enterprise. They are taken repetitively and have a short-term horizon. These decisions are based on facts/data regarding business events and d not require much of business judgment. Operational decisions are taken at the lower levels of management and rely on operations information systems to make rational and informed decisions. Operations management concerns itself with all input-transformation-output processes and enables search for efficiency and optimization by rearranging or changing the processes. 
4. Administrative Decisions - Administration s simply an activity that concerns itself with day-to-day enforcement of policies, rules, and conduct of affairs in the organization.

These decisions concern making choices from alternatives courses of action based on facts, information, and value premises with the intention of moving towards a desired state of affairs. 
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Levels of Management and Decision-Making
All management decisions can be related directly or indirectly to broader management functions: planning, organizing and staffing, leading, and controlling; with different management levels spending more time on certain functions than on others.

​The management decisions based on positions, roles and responsibilities may be defined as follows:

• Board or Owners - A company's board or owners create the mission and write the mission statement for the internal and external audiences. All business and management activity follows from the company's mission. Success in accomplishing the mission could take many forms. The form chosen gives a company its vision, an ideal the business seeks to actualize. A caterer, for instance, might envision becoming the first choice for jet-set soirees. Besides defining a lofty ambition and the existential question of mission, a company's board or owners also articulate the company's core values, those standards the business will never compromise.
• Upper Management - Upper management translates the vast scope of mission and vision into concrete achievements over time. In order words, upper management needs a strategic plan to help it decide the overall direction of the company. Decisions related to strategy involve company-wide matters enacted over the long term. The goals are what the company hopes to accomplish at least a year - - more often five years - into the future. Management then choses a grand strategy such as growth, diversification, etc., to reach the strategic goals. 
• Middle Management - Middle management choses smaller tactical objectives that put together, accomplish strategic goals. Middle management create tactical plans, which have more detail than the strategic plans. The tactics are geared towards some function or department such as production, marketing, etc., where a possible objective could involve some measurable efficiency or quality improvement.
• Operational or Line Management - Operational management is the level; directly responsible for employees. By choosing their own goals on a daily, weekly or monthly basis, operational managers accomplish the objectives of middle management. The scope of operational management covers departments, sections or teams. Inventory, scheduling, and budgeting are examples of plans and decisions that operational managers adopt. Goals might include a certain number of sales for the day. 

The management decision levels defined in terms of positions, roles and responsibilities may have designated decision rights including decision authority associated to each position. An organization’s ability to execute well rests on its ability to make and implement the decisions that matter most.

Decision Rights and Authority
Many organizations struggle with timeliness and clarity of decision making, hampered by a broad range of factors: unclear priorities, consensus decision making, ambiguous decision roles, poor decision and meeting disciplines, siloed behaviors, or organizational structures that thwart collaboration and accountability. 

• Decision rights are a component of organization design, that help identify and establish "what" business decisions need to be made, both to drive the business and to drive alignment to strategy. And "who" is involved in making them and "how" the decisions will be made through operating processes.
• Decision authority is the, power or obligation to make a decision and the duty to answer for its success or failure. There are six (6) common types of Decision Authority, including:

1. Accountability -Accountability is the duty to answer for the success or failure of a decision. 
2. Responsibility - Responsibility is the duty to make a decision or take action as a result of a decision.
3. Delegation - Delegation is the process of granting your decision making authority to another person. You can delegate responsibility, but accountability can't be delegated.
4. Approval - Approval is the process by which decisions that require validation from multiple individuals and/or groups according to a predefined approval list may be done to validate the decision from multiple points of view or to gain broad support for a decision.
5. Consensus - Decisions that require the consensus of a group.
6. Automated Decisions - Decision authority always lies with a person and can't be delegated to a machine. Decisions made by a machine on the authority of the managers who operate the systems making the decision. As such, managers remain accountable and responsible for the decisions made by systems under their control.

Identifying and defining decision rights helps companies to organize their decision making and execution processes by setting clear roles and accountability, and by giving those involved a sense of ownership of decisions.