Atop the Information Mountain

• By Errol Wirasinghe, Ph.D.
• Apr 01, 2003

DECISION-making embraces every facet of your life. Whether you are in sales, education, health care, energy, finance, marketing, pharmaceuticals, or politics, you will be required to make crucial decisions.

Following the Information Technology revolution, today's managers receive real-time data on manpower, sales, budgets, cash flow, financing, inventory, supplies, transport and distribution, share prices, market saturation, future pricing, currency fluctuations, geopolitical and regulatory issues, and more. They face multi-dimensional problems and must integrate mountains of information into the decision-making process. Unfortunately, the more information and the more choices we have, the more difficult decision-making is. The sheer volume of information overwhelms individual decision-makers and makes previous decision-making methods ineffective and obsolete.

Because of these factors, we now have a decision-making crisis in the business world--there has not been a substantial improvement in the decision-making process itself, and managers are saddled with slow, cumbersome, outdated decision-making tools.

When it comes to decision-making, common sense and experience are vital tools; however, they alone are not enough. Psychologists have proven that the human mind can process only about seven bits of information at one time. However, today's managers must process much more than that; management needs new training and the tools to make reliable and consistent decisions while maintaining control of the process.

How do you make tough decisions, such as which candidate to hire, which marketing plan to roll out, or even where to locate the next branch office? How do you know when you've made a right decision? Do you only know when you've made a bad decision because of the negative consequences you experience? Before you make another decision, fine-tune your decision making process with the following steps.

1. Study the problem and define your objective.
We often believe we have a good idea of the problem at hand (the decision to make), but understanding the problem is not the same as understanding the objective. As you review the problem and decide your course of action, you need to determine what your ultimate goal is. For example, if a drop in sales revenue is negatively affecting bottom-line profits, the natural reaction is to push for an increase in sales. But increasing sales is not the only option. How about reducing costs, seeking new markets, product diversifying, acquiring a competitor, etc.? By looking at the big picture, you can devise an unambiguous objective and make your decision easier.

In order to uncover your objective, ask yourself the following questions:

• What is the problem?
• Is this a problem?
• Why is a solution required?
• Who is affected?
• How does it manifest?
• When did it first manifest?
• What are the consequences?
• Is it a transient or recurring problem?
• Under what conditions does it occur?
• Are there obvious causes?
• Is a solution worth the cost/effort?

2. Identify all relevant criteria (factors) that affect your problem.
The criteria relating to your decision are all of the circumstances that could be contributing to the problem. For example, in the sales revenue drop example presented earlier, some factors that may affect the problem include the economy, the sales literature, the marketing campaign, the product design, an aggressive competitor or the merger of two competitors, changes in consumption patterns, technology, etc.

As you consider your criteria, pay attention to two main issues. The first is to select the most appropriate criteria. This is vital to making the best decision; too often decision-makers take a lighthearted view of this step and pay a very dear price later on. Too many or too few factors will compromise your decision.

Contrary to popular belief, all identified factors do not have the same significance or importance. Thus, the second issue is to determine how important each criterion is (assign weights) compared to the others. Because your final decision will depend heavily on the relative value you place on your factors, the weights you assign to each should truly represent your desires. Of course, you can do this using common sense and experience, but that defeats the purpose.

I recommend the pairwise comparison technique, which consists of comparing the criteria against each other, in pairs. This process will also help you identify prerequisites, obligatory criteria, and desirable criteria.

3. Creatively identify the candidates (all available options or solutions).
After identifying criteria, list all of your available options, from the ones that seem the most logical to those that seem ridiculous. Remember, you're not deciding at this point; you're simply listing your possibilities, so write down everything you can think of. Whatever you do, do not jump to conclusions and think, "My options are obvious." Many experts who claim to have the answers have been proven wrong.

For example, the commissioner (1844) and the director (1899) of the United States Patent Office recommended that the patent office be closed down. They reasoned that everything that could be invented had been invented, and there was no longer any real need for such an office. Many people gave credence to this recommendation because it came from people who supposedly knew the most about the patenting business. Today we know just how wrong they were. The point: Don't limit your options. List and analyze everything.

In the early 1990s, Brother (a Japanese typewriter company) started taking away market share from Smith-Corona, which had been the undisputed leader since 1886. Smith-Corona concluded the problem was low-cost Asian labor, and hence moved manufacturing to Mexico. Brother moved its manufacturing from Japan to the United States. Same problem, same timeframe, different decisions. Shortly thereafter, Smith-Corona filed for bankruptcy protection.

The aim-preset© technique is used to identify all possible solutions. This stands for: Accept, Isolate, Modify, Problem, Replace, External, Sacrifice, Environment, and Time. When you go through these steps, you will explore all possible solutions.

A--Can I simply accept the problem and learn to live with it?
I--Can I isolate the product/system from the influence?
M--Can I modify the product or the system?
P--Is it possible the solution might be in the problem?
R--Can I degrade the product and replace it?
E--Can I eliminate or mitigate the external cause of the problem?
S--Can I use direct or indirect sacrificial techniques?
E--Can I change the environment in which the problem thrives?
T--Will the passage of time resolve the problem?

4. Gather information pertaining to your options and include any new factors you may have discovered.
Begin by looking at each of your proposed solutions and develop the pros and cons as they apply to each. Be descriptive in each of your pro/con judgments. Depending on the pros and cons you list, you may have to gather additional information. If so, question the information being provided to you.

Questions to ask include:

• Is the source of the information legal, moral, and ethical?
• Are the measurements credible?
• Is the source/person reliable?
• Does the provider have a conflict of interest?
• Will the information be valid for the period under consideration?
• Is the problem serious enough to merit further verification of information?
• Is the information relevant to the objective under consideration?

Beware of eyewitness accounts or "I heard this from a reliable source." Seek definitive proof wherever possible. When did a jury accept an eyewitness account over a laboratory report?

Often during the information-gathering phase, you will identify new criteria you need to consider. Add these to your original list. Finally, do not cut corners as you evaluate your options, especially if a bad decision is likely to have serious consequences.

5. Rank your options and make your decision.
With your solutions spelled out on paper and the pros and cons of each listed, you can analyze your options and identify the best route to take. Use the pairwise technique to rank your options: Consider one criterion at a time, and then compare each candidate against the others, in pairs, and assign points. Once you have exhausted all criteria and candidates, multiply the points assigned to each candidate with the corresponding criteria weights to determine its rank. When you make your final decision, based on the information you have uncovered, do not second-guess it. It is your decision and you need to develop faith in it and be in harmony with it.

As you execute your decision, keep in mind the timing of your decision. For example, if you decide to approach your supervisor for a favor, you would intuitively wait for a moment when he/she is not under pressure and is in a good mood. Yet, when it comes to implementing a well-thought-out strategy, many people completely forget how critical timing is. They become emotionally attached to the decision and try to execute it immediately.

It is also important to be aware that what is urgent might not necessarily be what is important. Urgency is time-related; it requires immediate action. Importance is driven by values. If ignored, important items could turn into urgent items. Finally, do not forget the perishable nature of the information used to arrive at the decision. Sometimes the solution can become obsolete by the time you are ready to make your decision, or the selected option is no longer viable by the time you are ready to execute it.

Decide Today
Just because today's business world is complicated doesn't mean that decision-making must be complicated, too. Take a systematic approach to all your daily decisions to ease the stress and frustration decision-making brings on. The optimal decision depends on how you assign weights to the criteria and how you assign points to the candidates. It is strongly recommended you do this using the pairwise technique.

By following the process discussed above, you'll make more reliable and consistent decisions that positively affect your company's growth and profitability.

This article originally appeared in the April 2003 issue of Occupational Health & Safety.