How to Make Better Decisions

This decision-making guide is designed to give you a better understanding of what problem-solving, and critical thinking entail. Not only will you learn about how to make better decisions in business, these ideas can make you a better problem solver at school or in your personal life when faced with challenges. Additionally, throughout this guide, we will provide you amazing online tools, videos, and resources to help you continue to learn how to make decisions better into your daily activities.

The Importance of Creative Problem Solving in Business and Life

Problem-solving is one of the leadership skills that successful business professionals and entrepreneurs are expected to have, yet many struggle with the simplest of decisions. What makes solving daily problems so natural for one person and such a struggle for the next?

The truth is, even experienced decision makers continually hone and perfect their creative problem-solving skills. And, there are many compelling reasons to do so. Not only do those who make better decisions have more job opportunities, get promoted more often, and increase their work productivity, but they are generally happier. In a recent study from the University of Chicago School of Business, research found that happiness depends more on opportunities to make decisions (i.e, freedom) rather than money or connections. This means that the ability to make decisions leads to more and better opportunities for success, which improves your quality of life. In other words, the better a decision maker you are, the happier and more successful you’ll be.

This concept goes against what many business leaders believe – that it’s what and who you know that makes you successful. In fact, how you understand and solve problems that is the key to success.

Fortunately, problem-solving and decision making are skills that can be improved upon, studied, and mastered. By learning specific problem solving and decision-making techniques, you can see problems sooner and make decisions faster. This allows you to make more confident decisions in your job, and gives you more control over the happiness and productivity in every part of your life.

Critical Thinking in the Decision Making Process

Critical thinking is the practice of methodically gathering, analyzing, and evaluating information. It is one of the most vital parts of the problem solving and decision-making process, as it is the act of clearly thinking through options that will lead to a final choice. While decision making is the process that leads to actionable conclusions, critical thinking is the element that defines whether the choice is sound. Think about it this way: If problem solving is the car that gets your business to its goals, critical thinking skills are the gas.

Although humans have been thinking critically since the first Homo Habilis picked up a stone tool, critical thinking as a process has only become one of the most valuable business skills in the last century. John F. Dewey, the inventor of the Dewey library system and a noted educational philosopher, began touting the importance of teaching critical thinking skills in his 1938 paper, Logic: The Theory of Inquiry. This educational reform may have inspired the rising generation to explore the concepts more, as a resurgence of interest in the subject presented itself between 1950-1970. Many new decision-making strategies (relying heavily on critical thinking career skills), were created over this time period, including CATWOE, PEST, and the Cause and Effect Analysis model.

Since that time, critical thinking and decision making are synonymous business skills that are expected of corporate leaders. Still, many people don’t truly understand exactly the underlying concepts that make critical thinking an effective process. There are four key structures that all critical thinking is based on:

Logic – An individual’s ability to see direct relationships between causes and effects. This is one of the most important decision-making skills, as logic provides accurate predictions about what kinds of effects a potential solution will have on individuals and systems.

Truth – The unbiased data of an event. Unbiased and unemotional facts are an important part of the problem-solving process. Good critical thinking culls out these biases and focuses on the historical and documented data that will support the final conclusion.

Context – A list of extenuating pressures and factors that will or should be impacted by the final solution. Critical thinking must take into account the historical efficacy of similar solutions, the physical and abstract stressors of the decision maker, and the assumptions or agendas of different shareholders. All of these outside elements must be considered in order to truly engage in a critical decision-making process.

Alternatives – Potential solutions not currently in use. In effective critical thinking, the individual is able to consider new ways of approaching problems that meet real-world goals and are based on accurate, unbiased data. This is the case, even if alternative solutions are not used, or when outside determinants are unexpected.

When you understand each of these underlying factors, you will become more aware personal biases and be more engaged in the critical thinking process. In addition, improving your critical thinking skills leads to faster, more confident, and more productive decision making. The fuel of critical thinking is the secret ingredient that will drive your business’s success.

Are You Asking the right Questions?

Thought leader Clayton M. Christensen observed that business leaders often think so much about action that they fail to consider why they are acting in the first place. Unfortunately, good action isn’t possible without considering the right critical thinking questions. Critical questioning allows you to clearly distinguish facts from biases, stakeholders from observers, and solutions from potential solutions. If critical thinking is the lens by which you see solutions, questioning is the telescope that gives that lens shape, structure, and purpose.

Since questioning is the means by which critical thinking and decision making is accomplished, consider whether you truly understand what a good question looks like. A good question will result in an actionable answer, usually one that provides additional information that is helpful in reaching a final solution. But, how can you formulate questions that do this?

There are a few ways to know whether the question you’re asking is a good one. If you don’t have good question-asking instincts, interrogate your initial question with a few of these.

1. Is Your Purpose Clear?

A good question is carefully designed to meet a particular goal. For example, instead of asking, “When can I meet with you?” a clearer questioner would ask, “Would you prefer to meet on Monday morning or Wednesday morning?” The narrower range of options encourages a quicker, more decisive answer, which can in turn be acted upon. In order to get the most actionable information possible, you need to have a distinct idea of the kinds of information you are looking for. You can then make your questions more intentional and directed as you come closer to what you are looking to know. Specific purposes of questions may include:

Definition: What does “work ethic” look like in our organization?

Comparative: What parts of our marketing strategy are different from our competitor?

Causal: If we invest in this new technology, what are some potential positive and negative outcomes?

Evaluative: What about this product is working for our consumer? What isn’t?

By knowing which types of questions to ask in each situation, you’ll have a more targeted discussion that leads to actionable answers.

2. Is The Question Framed Correctly?

Even with a clearly defined purpose, the framing of the question can still help or hinder its overall effectiveness. For example, asking “Why should we invest in a Halloween party when clown costumes are so expensive?” will not be as effective as “Why should we invest in a Halloween party when, historically, they have not improved business culture?” The first question suffers from its poor framing, as it assumes that a Halloween party must include the investment in a clown costume. Poorly framed questions can be identified through various smaller issues, including false comparisons, false dilemmas, and ambiguity. A good question deals with only one issue at a time, and avoids bundling disparate concerns into a single blanket assessment.

3. Is Your Question Closed or Open?

One of the biggest pitfalls of the questioning process is asking questions with a predefined, or “closed,” set of answers. These yes or no questions don’t require synthesis, analysis, or evaluation of facts. They are often asked by leaders who already have an idea of what the answer should be, and have no interest in additional information. While these can be useful when only a handful of acceptable answers exist, they don’t lead to creative thinking or better decision making in management.

In contrast, an open question requires thought and evaluation to answer. These questions can open the door to outside ideas and collaboration and ultimately lead to much more productive conversations than closed questions. These questions are designed to bring additional information to light, and often lead to more in-depth understanding about the problem and potential solutions.

4. Are You Following Up?

Initial questions offer a vital starting point for any critical thinking and decision-making discussion. Unfortunately, some people stop there, and that can be the death knell of effectiveness and efficiency. In order to get the best answers, you must engage in a series of follow-up questions to support your initial inquiry.

Consider this question: “What are some areas we can cut in order to meet our yearly budget?” On its own, it will get you some information, but may miss crucial further discussion. Questions like “Who will be affected if we cut that department?” or “What will the impact of that departmental cut be on our production processes?” will provide additional actionable information and lead to smarter, safer cuts. In fact, the highly effective Five Whys system of problem solving is built solely upon the idea of targeted follow-up questioning.

By incorporating effective questioning into your critical thinking equation, you will get clear answers that will help you to create actionable solutions. And, as you continue to evaluate your progress, effective questioning will become one of your

6 Methods and Techniques for Problem Solving and Decision Making

Even with good critical thinking and questioning skills in place, it can be difficult to maintain consistency when it comes to problem-solving. Organizations aren’t individuals, but instead employ an array of people with different personalities, skill sets, and strengths, which can make solving group problems virtually impossible without a clearly defined framework. For that reason, many top-level organizations choose to incorporate a standardized problem-solving methodology. Not only does this provide the consistency a business needs, but it often leads to more focused and productive discussions. This newfound productiveness in turn leads to more actionable plans and clearly defined goals for success.

Even though these processes have mainly been designed for large organizations, organizations of any size can adapt these concepts to suit their needs. Large businesses, small businesses and individuals can all benefit from these simple problem-solving and decision-making methods. They have proven to be effective at maintaining a structured problem-solving process regardless of the structures in which they see use.

6 Step Problem Solving Method

Although many have made variations on the 6-Step Problem Solving Method, the only research-based version of this methodology was invented by Dr. Sidney J. Parnes and Alex Osborn in the 1950s. After working with and observing high-level advertising employees throughout the brainstorming and implementation process, Parnes and Osborn recognized that creative people go through a series of stages as they create, organize, and choose good solutions for problems. Their findings were published in 1979 under the title, Applied Imagination: Principles and Procedures of Creative Thinking. In their original work, the 6-Step model was termed, “The Creative Problem Solving (CPS) Method,” and included these key segments:

Objective Finding Fact Finding Problem Finding Idea Finding Solution Finding Acceptance Finding

These six segments were further organized into three key phases of problem solving: Exploring the Challenge, Generating Ideas, and Preparing for Action.

After Parnes and Osborn released these creative problem solving techniques, many different groups and businesses adapted them to fit their needs and organizational culture, providing a consistent framework for making daily decisions. One of these popular adaptations was created by Yale University, and includes an evaluative segment that provides for continual optimization of the final decision. This model also incorporates some elements from the Soft Stage Management model (SSM), which provides a seven-stage approach to problem solving. The Yale adaptation has been adopted by businesses and organizations worldwide, and includes these six steps of action:

Define the Problem Determine the Root Cause of the Problem Develop Alternative Solutions Select a Solution Implement the Solution Evaluate the Outcome

In the updated version of the CPS model, more emphasis is placed on implementation and evaluation rather than simply accepting the results of the inquiry. This provides organizational leaders with an action-based problem-solving method that has been proven through research to be consistent and adaptable for virtually any need. Still, some aspects of business work present better opportunities to use this method than others.

Large Group Decisions – One of the core features of the 6-Step Model is that it relies heavily on brainstorming and group problem solving, which in turn means large groups will benefit the most from the system as presented. The more suggestions, definitions, and root cause determinations offered by participants, the wider the view of the potential problems that need to be solved becomes. In addition, when a group is the impetus for identifying and analyzing the problem at hand, members attain heightened motivation as the process reaches its final step, “Preparing for Action.”

Comparative Decision Making – Another situation in which the 6-Step Model shows its strength comes when comparing the efficacy of your organization’s ideas against a competitor. The group-think structure of the method allows for a logical discussion of potential best-case and worst-case scenarios resulting from each potential course of action. Not only is this a good thing when formulating new ideas or action plans, but it works magnificently when determining strategies to take in a competitive marketplace. The evaluative phase of the method allows for research and comparison with outside ideas and models, such as those of major competitors, which eventually will lead to a better product or idea.

Long-Term Restructuring – This model deals particularly well with long-term changes or processes in need of consistent evaluation and restructuring. Since the evaluation process leads back into the initial phases of defining problems and developing solutions, the method develops a circular flow that allows the user to tackle even the most daunting decision-making projects. It also adapts to the size of the project or system in which it is use, so as a small project or system gets larger and more complex, the 6-Step model remains effective, and can even be applied to individual components and subsystems as necessary.

PEST – Analysis Political Economic Social Technological

Noted as one of the most widely-used decision-making techniques, the PEST model derives from the concept that several influencing factors can affect an organization, namely Political, Economic, Social, and Technological factors. By carefully analyzing and evaluating these factors, organizations can make more informed decisions and have a better understanding of the long-term implications of those choices.

The PEST model of decision making was introduced by Francis J. Aguilar, a Harvard Business professor. In 1967, he published a book including the PEST model (originally the EPST model) entitled, Scanning the Business Environment. Arnold Brown reorganized the acronym as STEP (Strategic Trend Evaluation Process) sometime after the book’s publication, and it was adapted further by a number of authors in the 1980s into acronyms including PEST, PESTLE and STEEPLE. It is still well-known by some of these alternative nomenclatures, and each retains the core elements of the system introduced by Aguilar.

Although it was originally designed as a method for understanding the unique layout of the business arena, PEST quickly became a consistent way for leaders to understand both the internal and external pressures that affected their organizational processes and products. It can also be easily adapted for use with acquisitions and mergers, potential investments, and marketing campaigns. After decades of its use, the PEST model has proven to be especially effective in these specific situations:

Surveying Business Markets – Since this was its initial function, PEST functions best as a market surveying tool. The four key elements of the model can easily be adapted to any market, regardless of size or scope. In addition, permutations of the model like PESTLE include additional pressures that help to further understand the potential marketplace, such as legal and environmental factors. This makes the PEST model perfect for political ventures, building projects, or even human resource concerns.

Evaluating Strategies or Markets – Another area in which the PEST model shines is the evaluation of current strategies for flaws and inconsistencies. Because the model structures itself around rigorous evaluation, it allows all members of the decision-making team to have a clear idea of the potential impacts of the chosen course of action. By adding a weighting system to each of these elements, those in the discussion can clearly see which strategies have the greatest potential for success and will meet the organization’s goals. Such a system also figures in strongly when comparing markets or courses of action, as it results in data points to illustrate the projected gains and losses for each potential solution.

Large-Scale Change Including Complex Elements – Finally, the model allows for a methodical consideration of various influences, so that large-scale change can be managed in advanced and intricate detail. The PEST method highlights weaknesses in potential mergers or campaigns, allows for detailed speculation about future partnerships or markets, and gives insight into the regulatory or political drawbacks for each course of action. Through applying the PEST model, it is relatively easy to create a concise checklist of items to be addressed. This makes it one of the most actionable decision-making tools for corporate-level change.

SWOT Analysis – Strengths Weakness Opportunity Threats

The SWOT model of analysis sets out to help businesses analyze their company and better understand the arenas in which they operate. In this method, the Strengths, Weaknesses, Opportunities, and Threats of a company are outlined in a grid fashion, allowing the leadership to quickly identify toxic processes and behaviors.

Albert S. Humphrey usually receives the credit for the creation of the SWOT framework, as he presented it during his work with Stanford. In reality, the concept may have originated earlier than his 1960s presentation of the concept. Several researchers, including George Albert Smith, Jr., C. Roland Christiensen, and Kenneth Andrews of the Harvard Business School, reportedly worked with a prototype of the concept during the 1950s. Their model, published in 1965 as Business Policy, Text and Cases, had a slightly different set of values: Opportunities, Risks, Environment, and Competition. This research likely held some sway over the Stanford research model, which Humphrey initially referred to as SOFT Analysis (Satisfactory, Opportunity, Fault, and Threat). Researchers Urick and Orr changed this to SWOT by 1964, and the name stuck.

SWOT lets users evaluate potential business risks as well as rewards for business ventures on the basis of environmental pressures. Like other models, SWOT also lends itself to discourse that leads to making better decisions. Though it doesn’t work very well as a standalone decision-making model, it makes an excellent supplement to another more action-based system. Some of the situations where SWOT really shines include:

Brainstorming and Strategy Building – SWOT lends itself to sharing and discussing potential benefits and drawbacks of a single idea or course of action. Its simple format also plays well for situations involving big picture ideas and concepts. At the planning stage, it makes large issues readily obvious, as well as illustrating key benefits for each idea. When deciding on the strategy for a particular product, plan, or business, SWOT can make an organization’s position and the benefits of each situation acutely obvious. A plan that has a strong strengths-opportunities correlation will support an aggressive strategy, while a plan that has a strong weaknesses-threats connection should be approached defensively.

Business and Product Development – The simplicity of the SWOT matrix is perfect for easily identifying strengths and weaknesses of a business or product. This model helps encourage discussion about the competitive advantages or gaps in capabilities of a specific idea. It also helps bring to light clear threats for a course of action, such as political, technological, or environmental pressures that must be overcome before progress can be made. And, because it is such an adaptable model, it can be used for both large-scale and small-scale problems. This flexibility makes SWOT a good choice as a standardized decision-making tool.

Gathering and Organizing Data – SWOT can be a good choice at the brainstorming level of creative problem solving, but can also prove itself an excellent tool during the researching phase of a task. The simple matrix can help present and organize data in preparation for action. In addition, it can easily show where research is lacking, or where more information needs to be gathered.

FMEA Analysis

As one of the first systematic techniques for observing weaknesses in organizations, the Failure Mode and Effects Analysis (FMEA) system often sees use as a diagnostic tool for companies and other large groups. FMEA puts forth the idea that all of the elements of a structure have inevitable failure modes, which are points at which they will break down under stress or over time. The goal of FMEA, then, is to identify the probable failure mode for each component, and to project the impact that these failures will have on the overall success of the plan.

The US military and surrounding industries began using this method as early as 1949 for the purpose of identifying weaknesses in potential military equipment and weapons. Adopted in the early 1960s by contractors working with the U.S. National Aeronautics and Space Administration (NASA), FMEA helped these organizations produce parts and processes that would guarantee a high success rate for the space shuttle program. In 1967, the Society for Automotive Engineers (SAE) published a version of FMEA which, with revisions, has remained the standard failure mode model for the public aviation industry. Versions of FMEA have been used by the Automotive Industry Action Group, the U.S. Environmental Protection Agency (EPA), and Food and Drug Administration (FDA).

Henry Ford was the first leader to widely incorporate the FMEA model to identify process weaknesses within a business. He adapted the FMEA model into two main areas: Process FMEA (PFMEA) and Design FMEA (DFMEA). PFMEA helps leaders to identify potential breakdowns of production, supply, and market failure for an organization, while engineers and other technical personnel use DFMEA to assess the ramifications of potential weaknesses and safety issues in their designs. The areas in which these two types of FMEA are most effective include:

Manufacturing and Assembly Processes – The initial goal of the FMEA model was to identify problems and potential failures of elements within a manufacturing process. Because of this, the FMEA model is a good choice for businesses that are heavily involved in manufacturing and production. It guides the participant through each point of the production cycle, and allows him or her to foresee potential risks associated with parts, labor, and processes. Often, this results in fewer risks and elimination of unnecessary redundancies, which leads to a safer work environment and a more cost-effective business.

Business Strategy – Another area in which FMEA is highly efficient is in the preparation stages of any major change. This model focuses on potential risks at every point in the new process, which motivates leaders to understand and overcome challenges long before they arise. If a clear goal or emphasis is not established before beginning the FMEA process, however, this can become overwhelming and even paralytic, encouraging stagnation within a company. By assigning a Risk Priority Number (RPN) to each failure mode element, those using this model can make it much more obvious which failure modes require immediate attention.

Customer Satisfaction and Safety – Both PFMEA and DFMEA can assist in bolstering the satisfaction and well-being of customers. As processes are analyzed and evaluated closely, organizations become quicker and more cost-effective, often without sacrificing the quality of the final product. Because process flaws are identified and eliminated before taking the product or process to the customer, dissatisfaction becomes much less common. The DFMEA portion of the process becomes more reliable and safer as the model is applied time and time again, which can lead to higher employee retention and more loyal customers.

CATWOE

Soft Systems Methodology (SSM) is a decision-making process designed to tackle real-world problems that have no formal definition or scope. In this system, users must consider six areas in order to solve these kinds of soft system problems:

Clients Actors Transformation Worldview Owner Environmental Constraints

CATWOE systematically incorporates these elements into a discussion about potential actions, looking at how these actions will influence the major players in a transition or other major problem. Originally developed by Peter Checkland and Brian Wilson, this problem-solving system has been constantly assessed and improved through continuing action research over the last 30 years. Initially, it was designed in response to the systems engineering approach to management problems. In 1966, a team of researchers at Lancaster University led by Gwilym Jenkins found that the systems engineering approach only worked when a problem could be clearly and narrowly defined. In cases wherein no clear definition was available, they found that the system was not effective for solving real and complex management problems. With Checkland and Wilson taking the lead, the SSM model was established. CATWOE was the problem-solving format that arose from their research.

CATWOE, by definition, works most effectively when it is being used to manage complex, real-world management problems. This broad approach means it can assist in solving virtually any issue that is not easily defined. Some organizational situations still lend themselves more to CATWOE than other commonly accepted models, however, in spite of this adaptability. Some common CATWOE-friendly issues include:

Identifying Problems – Since the purpose of the CATWOE problem-solving method is to help define abstract problems, its ability to do so outstrips that of most other systems. Many of the day-to-day problems a manager faces are not concrete, so CATWOE can help significantly. When dealing with human resources, marketing, and workflow management, getting a clear understanding of what the problem is or how to best solve it and make decisions can feel like an impossible task. CATWOE allows leaders to consider all of the key influencers, such as people, ideologies, and environments, being impacted by the potential change or issue. This leads to a clearer understanding of the root causes that must be addressed in order to make forward progress.

Implementing Solutions – The CATWOE method also presents some strong tools when preparing to take action steps. Because CATWOE focuses on considering the influencing factors, people, and environments that will be integral to a solution, this method ensures that all of those elements are in place before the implementation. CATWOE also assesses the roles each team member will play in the change, breaking individuals down into broad categories such as client, actor, or owner. Since these roles are defined in the CATWOE structure itself, each person has a better idea of how they contribute to the project’s success and can in turn be easily held accountable for their responsibilities.

Organizing and Aligning Goals – When this problem-solving model is workshopped in a group of diverse stakeholders that includes both clients and producers, it serves to inform members about their role in the overall organization. It can also be very effective for aligning disparate worldviews and ideologies, enabling the whole team to become more focused and motivated towards a common goal. As with many of the other methodologies, CATWOE does a great job of opening discourse, but differs in that resulting action steps can’t really be taken unless the group has completed the initial steps of collectively defining the problem. Unlike some other problem-solving models, CATWOE lends itself strongly to collaboration, as it uses that collaboration to feed into further action.

Cause and Effect Analysis

In Cause and Effect Analysis,also called Fishbone Diagrams or Ishikawa Diagrams, thinkers assess a single effect in an attempt to find its potential causes. During this four-step model, participants identify a problem, work out the involved factors, identify potential causes, and analyze the final diagram in preparation for action.

This problem-solving model was created in 1968 by University of Tokyo engineering professor Kaoru Ishikawa, although the Cause and Effect Analysis framework dates back to the 1920s. It was first included as one of the Seven Basic Tools of Quality Control which W. Edwards Deming presented to post-war Japanese engineers, including Ishikawa himself. Of these seven tools, Cause and Effect Analysis deals with critical thinking the most extensively, and uses compartmentalization and categorization to define which influencers contribute to the effect in question and how.

Each industry often develops its own unique set of categories that can be used with the Ishikawa design. The manufacturing industry, for example, uses the six Ms (Manufacturing, Method, Material, Man Power, Measurement, and Mother Nature), while the service industry uses the five Ss (Surroundings, Suppliers, Systems, Skills, and Safety). These categories are often used in conjunction with the Five Whys methodology for questioning, which can make the root causes of any effect clearer.

The Cause and Effect Analysis model has held sway for a long time thanks to the instances in which it outperforms many newer models. The most effective implementations include:

Group Decision Making – The Cause and Effect Analysis model works best with a key group of invested stakeholders, preferably from each of the main categories that the diagram will incorporate. This allows for the most in-depth analysis of the root causes of a problem from the perspective of the people who are most familiar with that aspect of the business. The Cause and Effect Analysis model also lends itself to discussion, and can uncover fine details that may be closely connected with one another and in turn make analysis better. This happens most often in a group setting, where multiple members can become aware of the correlations of seemingly disparate parts of the business process.

Clearly Defined Problems – In complete opposition to decision-making models like CATWOE, which deal with ill-defined, nebulous issues, this model works best with concrete, tangible problems. This decision-making method starts by defining the problem, and without defining a problem clearly, the Cause and Effect model begins to break down. If the effect is vague or misunderstood by members of the team, analyzing its potential causes can be difficult. Framing is essential to effective use of Cause and Effect Analysis, as problems like “68% Employee Turnover” can be much more efficiently dissected than “Employees Unhappy.”

Complex, Interrelated Effects – Where this method really shines is in arenas where effects may have multiple, interrelated causes. This makes the Cause and Effect Analysis model perfect for large institutional change like mergers and acquisitions. Even on a small scale, this method does a stellar job of highlighting how seemingly unrelated processes or elements of production affect one another. Much like the PEST model, the Cause and Effect Analysis model assesses each segment of business operations that could change the outcome. This gives each stakeholder insight into the small changes that can be made within their segment, and in turn helps them to understand what might make the process or product more efficient and productive.

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