How to Improve the Quality of Your Decision Making
In the previous blog post, we explored how making good decisions can lead to good outcomes. In this entry, we will dive deeper into exactly what characteristics constitute a good decision.
Ideally, we want to make decisions that are high in quality. Quality is defined as the “degree to which a set of inherent characteristics of an object fulfills requirements.”(1)
What, then, are the requirements of a decision? Why do we make decisions in the first place? Think about a world in which decisions didn’t exist. We would just float through life without the ability to select products and services we find more preferable than others, pursue goals that are meaningful, or allocate resources for current or future use… we really couldn’t do anything at all. Decisions are how we exert control over our lives – selecting means to achieve our ends in accordance with our preferences and values. Decision making is fundamental to purposeful human action. The requirement of a decision then is that once put into action, it should, to the extent possible, achieve the objectives held by the decision maker.
If we make decisions to achieve our multiple personal or organizational objectives, then we should establish a set of criteria (or inherent characteristics from above) by which to judge the quality of those decisions. Howard (2) describes this very concept of decision quality, defining six characteristics of decisions. When these six elements are strong, the decision provides a better probability of realizing a good outcome (i.e., our objectives), than if the characteristics are weak. The six elements of decision quality are:
1. Appropriate Frame – The frame is a distinction made by the decision maker regarding what is, and is not, under consideration. What is the decision about? When does the decision need to be made? How rigorous does the decision need to be? Are there other stakeholders whose inputs need to be considered?
2. Creative Alternatives – The alternatives in a decision are the various elements that are assessed and prioritized. If the decision is about where to go for dinner, the alternatives might be an Italian restaurant, a Mexican restaurant, or a fast-food burger restaurant. You need at least two or more alternatives to have a decision.
3. Reliable Information Including Models – Making good decisions requires having good data about the problem. Buying a car is difficult if you don’t know information like how much different makes and models cost, what gas mileage they get, what they look like, etc. Moreover, a decision maker needs to construct an idea of how an action today will affect the future objectives that are important.
4. Clear Preferences – If we liked everything equally, decision making wouldn’t be necessary. We would just be indifferent to all alternatives. But in reality, we all have preferences. For instance, some people like chocolate ice cream, and other people like vanilla. All else being equal, we prefer paying less for something than more for the same item. Understanding our preferences is an important aspect of making sure we are happy with the outcomes of our decisions.
5. Correct Logic – The logic of a decision refers to the way the previous three elements are combined, usually mathematically, in order to arrive at a conclusion. Formal decision models follow certain rules that ensure the answer makes logical sense. Why use a model that you can’t trust to give reasonable results?
6. Commitment to Action – Howard reminds us that “decisions are not found in nature, they are creations of the human mind.”(2) If our decisions stay locked away in our minds and are not translated into action, they have little, if any, practical value. Decisions are made to guide action.
A high quality decision is one where all of these elements are strong. For instance, having high quality data doesn’t help much if the overall framing is poor – you will just end up with a detailed answer to the wrong question. Not thinking of creative alternatives may leave a substantial amount of value on the table.
Decision quality is a skill that takes practice. To learn more about how to improve the quality of your organization’s decisions, visit www.collierresearchsystems.com.
(1) International Organization for Standardization. 2015. “ISO 9000:2015 Quality management systems — Fundamentals and vocabulary.”
(2) Howard, R.A. 2007. “The foundations of decision analysis revisited.” In: Advances in Decision Analysis: From Foundations to Applications. Edwards, W., Miles, R.F., and Von Winterfeldt, D., (eds.). Cambridge University Press: Boston, pp. 32-56.