Making Effective Analytical Business Decisions
Business decision making is a quality that is highly regarded amongst leaders. Business leaders will often make many decisions every day, some that involve internal teams and some that involve the success of the business. Making decisions can be easy or hard depending on its impact, the nature of the decision maker, and of course qualities like experience, understanding and intuition.
Before we go ahead it may be a good idea to define business decision making.
Decision making is the process of selecting the best course of action from amongst a set of options. There are a plethora of factors that could become considerations to making a decisions but broadly, here are a few; number of decision makers involved, time available to make a decision, impact on business.
A large part of making the decision lies with the person on the team making it, and his or her decision making style.
Here are a few styles that managers use to make decisions:
Consultative Style: the leader will give the decision making team all the facts and information and then look for suggestions and answers before a decision is finally made. This can be extrapolated to a larger audience by using the example of a survey. A survey asks relevant people for inputs, these inputs are then assessed and used to make a final decision.
Autocratic Style: The leader does not depend on anyone to make a decisions and uses only the available facts, information and his or her abilities. This style of decision making can be tricky as there is a high chance of insufficient information being considered and also relies on the nature of one person.
Informative Style: This is an amalgamation of the consultative and autocratic style of making decisions. When a leader does not possess enough information, he or she will consult with the team to get more information before a decision is made independently.
Negotiation: This style is typically seen when there are multiple stakeholders in a team. A leader will present the facts to everyone and then all decision makers will go back and forth, try and reconcile differences before arriving at a decision.
Delegative Style: In this style of decision making, the leader plays the role of a facilitator, with the decision being made by a group of identified stakeholder or a team.
The one commonality to all of these styles of decision making is that there is information involved. Unless a manager is making decisions intuitively, there is a very strong chance that he or she would use information in the form of reports, history, email and people's opinion to make a decision. If analytical decision making were to be defined, it would be - the approach where a leader makes decision based only on reliable data or information and only once it is available.
Since the mid-2000’s there has been a boom in data collection and business analytics, presenting leaders with not just a lot of information, but the most relevant information presented in a personalized way. The decision making process goes back to early mankind, but the way we consume information has completely changed. Using a process called GOFER which was proposed by psychologist Leon Mann, analytical business decisions can be made in 5 steps:
1.(G)oals: this is an important step but is also most overlooked at times. Define the problem and what the solution intends to achieve. If you’re making a decision that a superior has ask you to take, ensure you understand the problem; sometime cross-questioning reveals more facts!
2.(O)ptions: The first thing to do is put all the information down on a system where you can easily analyze it. Next would be to create an analysis plan that should predict a solution or justify a hypothesis.
3.(F)acts: Gather data that can be used as input to the statistical model you choose or information that will help build the hypothesis from the first step.
4.(E)ffects: the information that you gathered in step 3, will then have to first be validated to check correctness and relevance to the decision making process. These inputs will then give you insights and reports, and will possibly yield multiple decision routes. Evaluate each route to understand what effect it will have if it were to be your final decision.
5.(R)eview: Depending on who is making the decision, you may be required to present one or multiple options. Propose a plan of implementation taking each decision route into consideration.
Considerations while making analytical business decisions
Although making analytical decisions gives you a process to depend on and reliable data to consider, there are a few considerations you must operate with:
1.Time: A big part of making decision is not just making the right ones, but also to be able to make the decision at the right time. Data and information can be analyzed in many ways and may present multiple outcomes. Consider the styles of decision making and pick one to help; making an analytical, and consultative or intuitive decision for example.
2.Data driven decisions may be tent to make leaders rigid as dependence on information and analytics increases. This tends to make people become less receptive to information that is intuitive and comes from other leaders. Always be open to ideas and always have a plan B.
None of these two considerations makes analytical decision any less desirable. In fact, analytical decisions will move you away from relying on hunches or make guesses. Of course by looking at data, you greatly reduce your chances of making a wrong decision.
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