The Five Steps in the Decision-Making Process

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  • 0:01 Making Decisions
  • 0:49 Clarify the Question
  • 1:34 Gather Information
  • 2:38 Evaluate the Options
  • 3:26 Act on the Final Decision
  • 4:18 Review the…
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Lesson Transcript
Instructor: Tara Schofield

Tara has a PhD in Marketing & Management

Being able to make good decisions is one factor that makes a good manager great. There are five steps you can take to make decisions and improve the quality of those decisions. This lesson will walk you through the steps.

Making Decisions

Think of something you did today. Where did you eat lunch? What did you wear? Everything we do requires a decision. Sometimes we make those decisions consciously, and at other times we seem to make decisions almost without thinking by relying on our instincts. However, in business, using a rational decision-making process can help us make better decisions with more rigor and better analysis.

Making good business decisions takes more than just luck and gut feel. It is one of the most critical skills a manager or business owner can have. By understanding the process of making decisions, managers can achieve more consistency and higher levels of performance in their companies. The five-step decision-making process can help guide you through the process of making good decisions and reviewing possible options for your business.

Clarify the Question

The first step in the decision-making process is to clarify the question. Make sure you understand what you are trying to accomplish and the desired end result. Determine the objective or goal of the decision in this first step.

Let's look at the steps in action: you own a small chain of laundromats and are trying to decide whether to add dry cleaning services to your business. The question is: what is my end goal for adding dry cleaning services to my business? You may also ask yourself, am I trying to grow revenue and, if so, by how much? Am I trying to improve customer service? Will that improve my rate of customer retention? Clarifying the question is an important first step in making a good decision.

Gather Information

The second step in the decision-making process is where you gather information and options. Gathering information is vital to understanding the factors that will affect your business, such as the availability and costs of equipment and how any changes will affect personnel. In this step you develop potential options based on the information you have gathered.

Continuing with our example, you would use this phase to gather details about the cost of adding dry cleaning equipment, the type of training your staff will need, and what building and plumbing adjustments would need to be made in your laundromats. You'd also look at different dry cleaning equipment and techniques to help you understand what is available and which set-up would be best for your facilities. Based on this information, you would develop several options for purchasing the equipment.

Purchasing new equipment may be one option, while leasing the equipment might be a second option. A third option may be to buy used equipment from a dry cleaner that is going out of business. You also need to decide between a small dry cleaning operation or industrial-sized dry cleaning equipment.

Evaluate the Options

The third step in the decision-making process is to evaluate the options. Having gathered the data, you can start analyzing the options and determining the pros and cons for each possibility. During this phase, you consider your company's needs and limitations as well as the possibilities associated with each option. You then narrow down the options by eliminating the choices that clearly will not work for your company or whose disadvantages outweigh the advantages.

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