Develop Your Decision

Making Skills

AUTHOR: Paul Parcon

PUBLISHER: Lotus Press
DATE OF PUBLICATION: 2006
NUMBER OF PAGES: 128 pages
THE BIG IDEA
Develop Your Decision Making Skills by Paul Parcon

• The moment we all open our eyes in the morning, the decision
process begins, and continues to happen all throughout our day
until we fall asleep at the end of it, whether we are aware of said
process or not. We are thus all decision makers. Whether we are
good decision makers or not is the question. However, even if
one is not a good decision maker, one need not fret – it is an
ability that can be learned by anyone.
• Although people can learn at different rates – some more quickly
than others of course – there are no short cuts to learning and
everyone has to follow a similar learning process to learn how to
make good decisions. One of the things that can be learned is a
specific process to make a decision. This book, then, outlines
this process for its readers and makes the learning process that
much quicker and less complex, and thus helps readers improve
their decision-making skills.
Decision-Making Defined
Develop Your Decision Making Skills by Paul Parcon

• Decision-making is the study of identifying and choosing

alternatives based on the values and preferences of the
decision-maker. When we make a decision we have to choose
between alternative choices, and we want not just to identify
these alternatives, but also to choose the one/s that fit us best.
• Decision-making is the process of reducing uncertainty and
doubt about alternatives to allow one to choose one of them.
Uncertainty can only be reduced in most cases, not eliminated;
very few decisions can be made with absolute certainty
because it is almost impossible to know everything that can be
known about all the alternatives.
Ethics and Morality in Decision-Making
Develop Your Decision Making Skills by Paul Parcon

• Ethics is defined as the branch of philosophy that defines what is

good for the individual and society, and which establishes the
nature of obligations or duties which people owe both themselves
and one another.
• Making ethical decisions in business is often difficult because
business ethics is not just an extension of either an individual’s or
a society’s ethics. However, the following support being ethical:
Trustworthiness - others believe in us and hold us in high esteem; concerns
qualities such as honesty, reliability, integrity and loyalty
Respect – we should treat everyone with respect regardless of who they are
and/or what they have done
Responsibility – we have to be accountable for what we do and who we are
Fairness – adherence to a balance standard of justice without relevance to
one’s feelings or inclinations
Caring – the heart of ethics and ethical decision-making; we should
consciously cause no more harm than is reasonably necessary to
perform our duties
Citizenship – this includes civic virtues and duties which tell us how we ought
to behave as part of a community
Kinds of Decisions
Develop Your Decision Making Skills by Paul Parcon

1. Decisions whether – the yes/no decisions that need to be made

before you proceed with the selection of an alternative.
2. Decisions which – these involve a choice of one or more
alternatives from a set of possibilities (based on how well each
matches up to predefined criteria).
3. Contingent decisions – decisions made but put on hold until
some condition/s is/are met.

Decision-making is a recursive process, it is a nonlinear process.

Most decisions are made by moving back and forth between the
choice of criteria and the identification of alternatives.
Components of Decision Making
Develop Your Decision Making Skills by Paul Parcon

• The decision environment – the collection of information,

alternatives, values, and preferences available at the time
of the decision. The environment is always constrained
because time and effort to gain information or identify
alternatives are limited. Decisions must be made within this
constrained environment.
• Delaying a decision – potentially good because it allows
for the possibility of more information and extended
analysis, for the creation of new alternatives, and/or for any
changes in the decision maker’s preference/s.
• Effects of quantity – if too much information is obtained,
this can delay the decision-making process; also,
information overload can occur, as well as mental fatigue.
• Decision streams – decisions can never be made in
isolation from one another, but are made in the context of
other decisions such that they “flow” into each other, similar
to a stream.
• Precision – a combination of the effectiveness of the
decision and the use of best practices in the way those
strategies are developed
Components of Decision Making
Develop Your Decision Making Skills by Paul Parcon

• Information – knowledge about the impact of the decision,

effects of its alternatives, etc. Too much knowledge can be
bad, as discussed above.
• Options – possibilities to choose from.
• Standard – characteristics or requirements that each
option must possess to a greater or lesser extent.
• Objective – what is it you want to accomplish in the first
place?
• Value – how desirable a particular outcome is, and/or its
alternatives.
• Decision quality – a rating of whether a decision is good
or bad (good decisions are logical, based on the available
information and reflect the preferences of the decision
maker).
• Acceptance – can conflict with the quality factor; ergo, the
best quality solution might not be one that is accepted by
the most people.
• Cost of decision – your decision-making’s efficiency is
directly related to its costs.
• Agility of decision – how quickly and easily you can
Decision-Making Strategies
Develop Your Decision Making Skills by Paul Parcon

• Optimizing – strategy of choosing the best solution to the

problem, discovering as many alternatives as possible and
choosing the best. Depends on such factors as importance of
the problem, time available for solving it and personal values.
• Satisfactory and satisfying – the first satisfactory alternative
is chosen rather than the best overall alternative.
• Maximize the maximums – focuses on evaluating and
choosing the alternatives based on the maximum possible
payoff.
• Maximize the minimum – the worst possible outcome of
each decision is considered and the decision with the highest
minimum (or salvage value) is chosen.
Decision-Making Procedure
Develop Your Decision Making Skills by Paul Parcon

• Identify the decision to be made together with the goals it

should achieve. Determine the scope and limitations of the
decision; clarify goals.
• Get the facts. Get as many as possible; it is impossible to
get all of them.
• Develop alternatives. Make a list of all the possible choices
you have, including the choice of doing nothing at all.
• Rate each alternative. Consider the negative and the
positive of each.
• Rate the risk of each alternative. Rate the degree of
uncertainty of the choice by using percentages, ratios,
rankings, grades or any such form.
• Make the decision! Apply your preferences and choose the
path to follow. Implement the decision and then evaluate the
implementation.
Risk-Taking in Decision-Making
Develop Your Decision Making Skills by Paul Parcon

Some points:
• Only risk-takers are truly free. All decisions of consequence
involve risk.
• There is no such thing as permanent security.
• You are supposed to be afraid when you risk.
• Risking normally involves a degree of separation anxiety, the
anxiety you feel when you are removed from something that
makes you feel secure.

Tackling risk in decision-making

• Decide whether the risk is necessary or desirable.
• Risk for the right reasons and when you are calm and
thoughtful. Don’t take a risk when you are emotional.
• Have a goal. Have clear purposes in mind.
• Determine the possible loss as well as the gain – know
exactly what the consequences of failure will be.
• Make an accurate estimate about the probability of each
case.
• When possible, take one risk at a time.
Risk-Taking in Decision-Making
Develop Your Decision Making Skills by Paul Parcon

• Use imaging or role-playing to work through the various

possibilities, successes and failures.
• Use a plan, a timetable with a list of steps to take.
• Act decisively as soon as you’ve evaluated the risk and
decided to go for it.
• Don’t expect complete success – be realistic.
• Dismiss extremely remote or unrealistic possibilities that are
highly/extremely improbable.
• Avoid catastrophes whenever possible (at any reasonable
cost).
• Recognize the tradeoffs – neither deny the risks in living nor
worry excessively about life.
• Maximize expected values – go for the greatest probability of
the greatest good.
Personal Biases in Decision-Making
Develop Your Decision Making Skills by Paul Parcon

Here are some of the more common biases:

• Selective search for evidence – disregarding facts that
support conclusions we do not favor.
• Premature termination of the search for evidence – we tend
to accept the first alternative that looks like it might work.
• Conservatism and inertia – unwillingness to change thought
patterns that worked before.
• Experiential limitations – the rejection of the unfamiliar.
• Wishful thinking or optimism – we tend to want to see things
in a positive light and it can distort our perception and
thinking.
• Recency – neglect of older information and favoring of more
recent information.
• Group think – peer pressure to conform to the options held
by a group.
• Repetition bias – willingness to believe what we have heard
most often.
Decision-Making Techniques
Develop Your Decision Making Skills by Paul Parcon

• Pareto analysis – choosing the most important changes to

make. This uses the Pareto principle, which states that by using
20% of work you can generate 80% of the advantage of using
the entire job.
• Grid analysis – making a choice where many factors must be
balanced. Decision matrices are most effective where a number
of good alternatives exist and each must be taken into account.
• Plus/minus/interesting (PMI) – weighing the pros and cons of
a decision. More than just helping select a course of action, PMI
helps determine if the choice is really going to improve the
situation.
• Force field analysis – understanding the pressures for and
against change. A useful technique for looking at all forces for
and against the decision and a specialized method of weighing
pros and cons.
• Six thinking hats – looking at a decision from all points of view.
This forces one to move outside of one’s habitual thinking style
and get a more rounded view of any situation.
• Cost/benefit analysis – evaluating quantitatively whether to
follow a course of action. Add up the value of the benefits of a
Decision-Making in Groups
Develop Your Decision Making Skills by Paul Parcon

There are two major approaches to decision-making in an

organization, namely:
• Authoritarian – the manager makes the decision based on
the knowledge he gathers, and then explains the decision to
the group to get their acceptance.
• Group – the group shares ideas and analyses and agrees
upon a decision to implement, in either a free discussion
format (in which the problem is simply put on the table for
people to discuss) or a structured discussion (which ensures
systematic coverage). This can be better in some
circumstances because people prefer to implement the ideas
they themselves think of.

A critical aspect for decision-making groups is the ability to

converge on a choice. They may do so through politics (the
power or ability to influence the individuals in a group) or
decision rules such as unanimity, majority or consensus.
Decision-Making in One’s Personal Life
Develop Your Decision Making Skills by Paul Parcon

Many different kinds of decisions exist, from the very concrete to

the very vague. Either way one can usually choose how to
implement whatever decision one makes.

Here are three factors to think about when making personal

decisions:
• Responsibility – some decisions are not choices at all; they
are requirements and one is responsible for them.
• Spontaneity versus impetuousness – there can sometimes
be no reason at all to act on a whim or make a quick choice.
While it can be healthy to be spontaneous, one has to guard
against being impetuous and foolhardy.
• Long-term effects – decisions one makes now may have
effects that stay with one a long time.
Decision-Making in Healthcare
Develop Your Decision Making Skills by Paul Parcon

Decision-making is a crucial element in the field of medicine. Both

the doctor and the patient have to determine what is wrong,
what is best for the patient, and how to act accordingly, and
health policy makers and insurers have to decide what to
promote and what to discourage.

Here are the steps of making a decision in the health care field:
• Benefits of the action
• Risks in the action
• Alternatives to the prospective action
• Nothing: doing nothing at all
• Decision
The Family Decision-Making Process
Develop Your Decision Making Skills by Paul Parcon

To increase your chance for a positive decision-making

experience:
• Respect each family member as an individual.
• Be open to others’ ideas and suggestions.
• Actively listen to others’ points of view.
• Select a time when all family members who may
be affected by the decision are able to
participate.
• Communicate effectively by listening.
• If feeling out of control, wait until you are able to
communicate in a calmer manner.
The Buyer Decision-Making Process
Develop Your Decision Making Skills by Paul Parcon

Buying Behavior is the decision process and acts of people

involved in buying and using products. This process can be
affected by various personal, psychological (motives, ability,
knowledge, personality) and social factors (family influences,
reference groups and the like).

The process consists of:

• Want recognition
• Search for information on products that can satisfy the
buyer’s needs
• Alternative selection
• The decision – whether or not to buy the product
• Post-purchase behavior
Multiple Criteria Decision-Making
Develop Your Decision Making Skills by Paul Parcon

In many situations there are many, often conflicting, objectives

that make decision making quite problematic. The goal would
be to choose the “fair” alternative that aggregates the
preferences of the decision makers to balance these
objectives in a fair way.

The Analytic Hierarchy Process (AHP) is a mathematical

decision-making technique that uses very simple calculations
to assign numerical values to factors and alternatives. Simply
decompose the goal into its constituent parts, progressing
from general to specific. Then assign a relative weight to
each one and, after weighing the criteria and collecting the
information, put it into the model. Scoring is on a relative
basis and is synthesized through the model.
Decision-Making in Corporate Finance
Develop Your Decision Making Skills by Paul Parcon

Corporate finance is an area of finance dealing with financial

decisions made by corporations and the tools and analyses
used to make these decisions, for the long- and short-term.

Companies may have to decide regarding:

4. Capital investment – which projects receive investment,
whether to finance investment with equity or debt, when or
whether to pay dividends to shareholders.
5. Financing – management must decide the “optimal mix”, the
capital structure resulting in maximum value.
6. Dividends – management also needs to decide whether to
invest in additional projects, reinvest in existing operations,
or return free cash to shareholders.
Decision-Making Among Athletes
Develop Your Decision Making Skills by Paul Parcon

Athletes are faced with countless numbers of choices and options

that shape their future. The ability to focus and not let
unnecessary distractions affect one’s goals is an essential
part of success in athletics.

Responsible decision-making in sports involves:

4. Basing decisions on accurate, current information.
5. Being aware of one’s responsibilities.
6. Showing consideration for the wellbeing and needs of others.
7. Incorporating a clear and positive sense of one’s physical,
financial, social, mental and legal wellbeing into the decision.
Be a Wise Decision-Maker
Develop Your Decision Making Skills by Paul Parcon

Here are ten basic steps to make wiser decisions.

2. Define, as specifically as you can, the decision that needs to
be made.
3. Write down as many alternatives as you can think of. Let
your imagination run free.
4. See where more information about possible alternatives can
be found.
5. Check out your alternatives. Find out more about the
specifics of each option.
6. Sort through all the alternatives. Evaluate them to see which
one/s work best for you.
7. Visualize the outcome of each alternative.
8. Do a reality check. Cross out those that are least likely to
work.
9. Which alternative “fits” best? Review the remaining ones and
decide which of them are most comfortable.
10. Get started! Get moving once you have made your decision.
11. Be sure to review your decision at specified points along the
road. Remember that you can always change your mind.
Common Decision-Making Mistakes
Develop Your Decision Making Skills by Paul Parcon

Here are some mistakes to watch out for.

2. Relying too much on “expert” information. Experts are only
human and have biases and prejudices like the rest of us.
Seek information from a lot of different sources.
3. Overestimating the value of information received from others.
They may not know as much about the problem as you may.
Their values may be different. The bottom line is that it is
important to keep their opinions in perspective.
4. Underestimating the value of information received from
others. We may tend to discount information we receive from
individuals such as children, low status groups, blue-collar
workers or even women. We should not do so as information
from these and other such groups can help us gain a better
perspective of the problem as a whole.
5. Only hearing what you want to hear or seeing what you want
to see. Be aware of your prejudices and expectations, and
stay open to everything coming your way.
6. Not listening to feelings or gut reactions. Tune into your
intuition and you will make better decisions in the long run.
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Develop Your Decision Making Skills by Paul Parcon

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