Today we’re going to talk specifically about making decisions, and we’re going to talk about how to use the information to make decisions more effectively.
All of us have goals that we want to achieve. There is always a decision to be made. And in order for us to achieve those goals, decisions must be made. To achieve a goal, there are different possibilities or ways in achieving that goal. We always make decisions on a day-to-day basis. Actually, we make decisions more often than that.
So for this blog post, we tackle The Foundations of Everyday Leadership Week 2.
One of the topics discussed for this session is Decision Analysis.
It is defined as “a systematic framework for selecting actions to get to your goal”. This topic was quite difficult for me to initially understand so I will do my best to make it a bit simpler.
Decision-making is difficult because there are uncertainties. It’s hard to decide if you are not sure what will be the outcome of your decision. One key thing discussed in this lesson is the decision dilemma. A decision dilemma occurs when making a decision, there’s a choice between choosing an outcome that has a certain outcome, and a choice that does not a certain outcome. For us to be able to make a better decision, we need to:
- Identify what outcome do we want to achieve
- Identify what actions are we going to take to achieve the goal
The course gave an example to help make the decision analysis easier to understand. In this post, I will tweak it a bit.
Let’s say Vikko owns a sports outlet where the main product is caps. The hometown team is playing for the championship this weekend. Vikko needs to decide whether to print championship caps to sell to the fans if the hometown team wins the championship.
Vikko understands that the best chance to sell more caps is after the game. But what would happen if the hometown team loses the game? Definitely no one will want to purchase the caps Vikko is selling. It will cost Vikko $500 to make the caps , but he thinks he can sell them for $1,000.
Given this case, what do you think should Vikko do?
Steps To Help Vikko Make a Decision
Step 1: Identify the two choices
In this case, Vikko has a choice to 1.) Do not print the caps, 2.) Print the caps
Step 2: Identify the uncertainties
For Vikko’s choices, 1 has a definite outcome while another has uncertainties tied to it.
If Vikko will choose to print the caps, he needs to consider if the hometown team will win or lose. That is the uncertainty that Vikko has to manage in this decision.
Step 3: Identify possible outcomes
Of course there are outcomes attached to the choices.
If Vikko chooses not to print the caps, he won’t get any profit, but he won’t also have any investment losses.
If Vikko decides to print the caps and the hometown team wins, he will get a $500 profit.
But if Vikko decides to print the caps and the hometown team loses, he will lose his investment of $500.
Although what I have shared here is quite an oversimplification, you can still use this approach when you have a big decision to make. Good decision making includes identifying the choices you have, identifying the uncertainties, and identifying the possible outcomes.