Decision Making 101

Photo credit: Jens Lelie

Definition

Decision making is the art of forming a good opinion and taking appropriate action when there is a possibility that your opinion may be wrong and your action may be based on bad information. In this context, the term “possibility” is identical to the term “risk.” Without risk, the decision-making process would be simple. A decision that has no risk implies any decision you make will be correct and any action you take will be based on complete and accurate information. This post is for those of us who recognize that risk will probably influence all decisions and actions.

Types of Risk

Most decisions and actions are affected by one or more of the following types of risk:

  • Uncertainty – risk that some or all of the information used to form an opinion is inaccurate. This type of risk includes acts of God, acts of war, acts of terrorism, and other unpredictable events.
  • Complexity – risk that the situation is so complicated it cannot easily be undertsood.
  • Consequences – risk that a wrong decision is costly in terms of money, time, and/or life.
  • People – risk that others may innocently or intentionally interfere with your actions.
  • Environmental – risk that certain decisions and actions are unlikely at a given location.
  • Data – risk that information available at the time is neither complete nor accurate.
  • Operational – risk of supply disruption.

Strategies for Dealing with Risk

The classic strategies that people use to control various types of risks include:

  • Avoid – stay away from risky decisions.
  • Reduce – take action to reduce the likelihood or impact of risk.
  • Transfer – purchase insurance in case the risk is realized.
  • Accept – conclude that the cost of dealing with risk exceeds the cost of risk should the risk occur.
  • Ignore – pretend that risk will not impact decisions or actions.

Scenario

Prior to my brain injury, a team of consultants developed a plan they thought addressed every conceivable risk and the appropriate mitigation strategy should the planned risk occur. We spent several thousand hours collecting customer requirements, designing software to meet the requirements, testing the software to confirm it met requirements, and training internal and external users. The team was ready to launch the software. We sent email and fliers to thousands of potential users of the software, we notified executives and V.I.P.s, and we held training sessions at dozens of locations over a period of two months. Minutes before we were supposed to launch the system so everybody could access their ideal software over the internet, a car slammed into a nearby pole. The impact snapped the power line to the building where our computers and software were located. We could not launch the system until the power was restored.

Questions

What did we do right? What did we fail to do? What are the learning opportunities from the scenario? What could we have done to reduce the risk? How is the scenario described in this post similar to a scenario in your life? What can you do today to improve your decision-making skills? How can you completely eliminate risk from all of your decisions and actions? Why is it unreasonable to completely eliminate all risk? Which type of risk is most prevalent in your life and what is your strategy for dealing with the risk?

 

2 Comments

  1. I have learned a few lessons from the school of hard knocks. Life can be unpredictable. Risk can be avoided, but not totally eliminated, and, not making a decision, is a decision in which there are negative consequences. Having been a struggling, overwhelmed, ready to crash human who is unable to make a decision, I understand the fear of making a wrong decision, and not feeling adequately armed with research necessary to avoid mistakes.

    1. Esther, even though the fear of making a “wrong” decision or the realization that you did not have all the information you wanted may have delayed your decisions, how did you feel once you made the decisions? What are you doing to make faster and better decisions in the future? What can you recommend to people whose fear and lack of complete information prevents them from making timely decisions?

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