The Seven Steps of Decision Making

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  • 0:52 Decision Identification
  • 1:16 Collect Information
  • 2:07 Alternatives
  • 4:24 Implement Choice
  • 4:44 Review & Assessment
  • 5:50 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
Effective decision-making is an essential skill for every manager. In this lesson, you'll learn about a seven-step process for effective decision-making. You'll also have an opportunity to take a short quiz after the lesson.

Decision-Making Process Defined

Manuel is opening a new restaurant and has to make some important decisions. For example, he needs to decide whether to rent or buy a building for his restaurant and whether to purchase new or used commercial grade appliances for his kitchen. He'll also have to decide on the type of cuisine to serve and his target customers.

In making these decisions, Manuel will engage in a decision-making process, which is a cognitive process where one selects a choice among available options. We can generally break the decision-making process down into seven discrete steps. Let's look at Manuel's decision-making process in some detail.

Step One: Decision Identification

The first step of Manuel's decision-making process is realizing that a decision must be made. Manuel wants to open a restaurant. He realizes that he needs a physical location for his kitchen and a dining room for his customers. Therefore, Manuel must decide on a manner in which to acquire a space for his restaurant.

Step Two: Collect Relevant Information

Now that Manuel has identified the decision that he must make, he needs to collect the relevant information. He needs to collect information in order to make an informed decision. Manuel will turn to research to find the information.

It's also important that he knows what type of information is relevant. He'll need information on restaurant spaces and real estate options, such as purchasing and leasing. He'll also want information on his target market.

Manuel may buy some books about starting a restaurant or check some out at the local public library. He may also turn on the Internet and do some research online. Manuel may also try to pick the brains of some successful restaurants for advice.

Step Three: Identify Alternatives

Once Manuel has collected all the relevant information, he can determine his alternatives. Manuel could rent a building or purchase a building for his restaurant. He also must consider different locations. Should he rent or buy in a trendy downtown shopping district, in an older area of town undergoing a hip renaissance or in a suburban area with a high concentration of families?

Step Four: Analyze and Weigh Alternatives

After Manuel has identified all of his options, he needs to analyze them. He will do this in light of his overall goals, the feasibility of each alternative and the costs and benefits of each alternative. For example, Manuel may want to open a trendy fine dining establishment catering to young, urban professionals.

He also has to consider feasibility. Manuel may not have the funds available to buy or lease space in the trendiest part of the downtown foodie scene. One of the most important things he will do is weigh the relative costs and benefits of each alternative. For example, there will be advantages and disadvantages in owning a building compared to leasing space. The costs involved in owning may well outweigh the benefits for a new restaurant.

Step Five: Select Among Alternatives

Manuel will next pick the best alternative based upon his analysis in step four. Generally speaking, he'll pick the most feasible alternative that meets his goal and has the most benefits for the least cost. For example, he may opt to lease a building in an old but trendy area of town that is undergoing an urban renewal with up-and-coming young professionals as its occupants. This alternative reaches his target market better than suburban locations and is cheaper than the rent downtown.

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