According to McKinsey, more than 80% of business professionals claim their companies are ineffective in decision-making.
Business professionals – whether owners, managers, or even employees – need to make decisions on a day-to-day basis. These decisions vary in importance and require people to undergo time-consuming, lengthy processes to evaluate and analyze the available options.
Many professionals utilize decision-making tools to simplify the process and make better business decisions.
This article will explain the five key decision-making stages and the tools, like free decision tree templates, that are required to make better, faster decisions.
5 Key Stages Of Decision-Making
Across different resources and knowledge bases, decision-making involves five to seven primary stages.
Use the following five key decision-making steps to make profitable decisions for your business. Not only can you prevent rash decision-making, but you make more informed, data-driven decisions.
Here are the five key decision-making steps:
- Identify goals – although you won’t need this step for your “personal” gains; however, when it comes to achieving business goals that involve various stakeholders, identifying your goals is crucial
- Muster relevant information – it includes both determining action plans and alternatives
- Assess options – at this stage, you have to evaluate the evidence you gathered
- Make choices
- Assess decisions – it includes both long-term and short-term assessments
The 7 Best Decision-Making Techniques And Tools
The best decision-making techniques and tools help businesses map out every possible outcome of a decision, its chances of failure or success, and its costs.
These tools provide useful ways to make the best decisions by simplifying and streamlining the decision-making process and drawing diagrams.
Listed below are the seven best tools to help organize thoughts and make better decisions:
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Decision Tree
A decision tree uses statistics and can help you better-understand problems requiring a multi-stage decision-making process.
Often, the tool involves a model or a graph that evaluates all choices and their impacts (outcomes). They are one of the best, most valuable tools to make decisions involving uncertainty.
The main decision tree analysis symbols include:
- Decision node (showing a decision is being made)
- Chance node (displaying several uncertain outcomes)
- Alternative branches (every branch indicates a potential action or outcome)
- Rejected alternative (displaying an option that wasn’t selected)
- Endpoint node (displays final outcomes)
Use these free decision tree templates to create efficient decision tree analyses.
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Decision Matrix
The decision matrix tool helps you comprehensively assess your decision’s various options. It consists of tables with several columns, including all the options and factors playing a part in decisions.
With the help of a decision matrix, you can easily rank various factors and score options to find the best that meets your business goals.
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Pro/Con Lists
Also called t-charts, pro and con lists allow businesses to compare the benefits and drawbacks of a particular option.
To best utilize this decision-making tool, make a comprehensive list of every possible outcome of your decision and evaluate their importance to understand your choices better.
It’s a perfect tool to decide, especially if you have a few options.
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Cost-Benefit Analysis
Cost-benefit analysis – also called benefit-cost analysis – are highly useful when deciding on financial consequences.
It helps you gauge the varying costs of a choice and its benefits. This way, you can decide which decision offers maximum dividends and low cost.
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Pareto Analysis
Pareto Analysis is an easy decision-making tool to assess competing problems and estimate the effect of fixing them. It helps you focus on decisions that provide maximum benefits.
The analysis utilizes the “Pareto Principle (80/20 rule),” which indicates that 20% of work can help you generate 80% of dividends. It’s a perfect technique when making business or organizational decisions.
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SWOT Analysis
Short for strengths, weaknesses, opportunities, and threats, SWOT analysis helps people and businesses assess various outcomes of a choice when making the decision.
This tool can help identify the advantages and disadvantages of possible options through multifaceted, in-depth examinations.
You can use SWOT analysis to increase opportunities and strengths and reduce threats and weaknesses.
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PEST Analysis
With the help of PEST analysis, you can evaluate a range of external factors influencing the outcomes of decisions.
This tool is increasingly useful when experiencing problems requiring special attention to existing trends and forecasting future ones.
For example, companies can use this technique to make choices to become more competitive.
Key Takeaway
Making business decisions can be challenging, especially when you know your decisions can make or break things.
Use the tools mentioned above to make better, more informed decisions to help your company grow extensively.