10 Importance of Decision-making and 6 Techniques Explained 

We make hundreds of decisions every day. From what to eat, attire to wear, places to go, and time to spend with family members to decisions related to our careers.

That’s to tell you that decision-making processes are important but, of course, part of our daily lives. Either in our personal or professional lives. 

Meanwhile, you’ll agree that reading this post is the outcome of your decision to thumb through it.

True, right?

In 2020, a survey showed a 12 percent increase in the global implementation of data-driven decision-making compared to 2018. Now, even with this clue, you may still be asking, what is the importance of decision-making in management?

No worries, because that’s part of what you’ll learn in this article. But in addition to that, you’ll learn six decision-making techniques managers adopt in running their businesses– which you can also apply in your life.

But first, let’s briefly get the meaning of decision-making. 

What is Decision making?

Indeed, this isn’t an academic paper. So you wouldn’t be bombarded with a hundred possible meanings of decision-making.

In simple terms, decision-making is a deliberate process involving choosing between alternatives after careful (or careless) consideration. Yes, the outcome of the decision will tell the story in terms of consequences.

No wonder Lois McMaster Bujold once said:

“When you choose an action, you choose the consequences of that action. When you desire a consequence, you had damned well better take the action that would create it.”

10 Importance of decision-making in management you should know 

The entire process and functions of management, such as planning, organizing, and controlling to coordinating, are tied to decision-making. Yet many still want clear answers to this question: what is the importance of decision-making in management?

Here are 10 Importance of decision-making in management:

1. Enhanced productivity

It’s the goal of every business organization to achieve optimal productivity. But that won’t happen without decision-making.

Yes, making quality and strategic decisions about issues like the state of the work environment, employees’ payroll and wellness, the use of adequate technology, and other relevant factors can profoundly impact business productivity.

That’s true because when staff are at peak performance, it translates to the overall productivity of the management of a business. And that usually means more revenue to its bottom line.

In a study of why people quit their jobs, “lack of career development” and “inadequate compensation” took the top positions as to why employees leave their jobs. 

You see, managers can’t afford to make sound decisions regarding these subjects because they have a direct relationship with the motivation level of their work. 

2. Efficient use of resources 

As you may have learned from an economics class in high school, economic resources are scarce. But it didn’t stop there. We also learned that scarcity leads to the following economic problems: what to produce? How to produce? And for whom to produce?

That’s true. And, of course, that’s what the management team of most business organizations, whether big or small, goes through. 

As such, managers need quality decision-making. And to achieve that, resources should get allocated to each unit and staff. In other words, productive resources like time and other physical assets should get tracked.

3. Identifying and seizing opportunities

In the corporate world, opportunities keep springing up as new technologies get introduced. And some of these developments come screening in your face: “it is time to increase your customer base; scale up your business, or start a new business or product line.” 

But seizing these opportunities would depend on how a manager can make quick, sound decisions.

When decision-making is excessively delayed than usual, opportunities slip out of our hands. Whether in our personal or professional life. While you don’t want to make a rash decision as a manager, you don’t have to decide at a point when it’s pointless. 

A typical example is in the cryptocurrency world. I’m not a Blockchain magnet, but some acclaimed crypto experts will tell you that the best time to buy a particular coin is when it’s experiencing a dip. All things being equal. Because they believe making a purchase when its price has skyrocketed is pointless.

Now you, there’s what is called timing to every opportunity. However, disclaimer: that’s not some crypto investment advice. Okay? 

4. Getting the best hands to join your team

According to an article published by the Statista research department, the total number of unemployed persons worldwide is about 214 million people. 

While you may feel that figure could be more, the fact remains that this reality affects the recruitment process. Imagine about 300 people applying for a single.

That’s outrageously high. But then, it’s the reason decision-making is so important in management. It will help management or its recruiting team to map out recruitment strategies on how they employ the best.

And would mean deciding on what to include in the job posting of an advertised role. Which may be the roles and responsibilities of the job and the process of screening the most qualified candidates.

Again, all these involve a series of decision-making.

5. Development of new products and services

Recall when you started your business with your idea. A lot of research and feasibility study poured into the process before you eventually started.

And all that wouldn’t be possible without a series of decisions, including deciding on your product or service’s unique selling point and doing competitive market analysis. Also, you sourced for capital for your business.

Similarly, there’s a need for decision-making in management, when trying to create new products or services for your business.

6. Save time and money

Upon the attainment of efficient utilization of resources from making informed economic decisions, the effect is the elimination of wastage.

Thus you efficiently utilize resources like time, human capital, and finance toward achieving the corporate goal.

7. Adopting better marketing strategies

There’s no place as dynamic as the marketplace. Aside from the competition, consumers need to keep changing correspondingly with technology.

For that reason, business managers lookout for better marketing strategies capable of crushing their competitors. So that they make sales and income.

It could be deciding to tweak one or two strategies in the execution of social media campaigns or advertisements.

8. Preventing conflicts and maintaining good work ethics 

Management often starts with planning but doesn’t end with it. It. It involves the execution of plans. So, as part of the management team of your company, one of your responsibilities may be developing an appropriate code of conduct and a good work ethic.

Conflicts will get minimized when there’s a strong work ethic, even as everyone gets committed to a common goal. 

9. Achieving business growth

What do you think will follow when the management of a firm has achieved productivity and efficiency through decision-making?

More money?

Of course, an efficient organization can generate more revenue than a business that pays no attention to the importance of decision-making in management. But in that, it achieves business growth and scalability.

10. Determining, reviewing, and achieving objectives

It takes decision-making for Domino pizza to make and deliver your pizza each time you place an order, the same way it took you decision-making to place the order.

You get the point. In management, every function depends on decision-making. If it were not so, nothing would happen.

In other words, your team can identify, achieve, or/and rework your goals through decision making . And then, the cycle of managerial processes continues.

6 Important Techniques of decision making

While the decision-making process is typical and important to individuals and businesses, there are a couple of techniques. 

But here 6 important techniques of decision-making you adopt:  

1. Pros-and-Cons Approach

Pros -and-Cons Approach is a technique that involves examining both the good and bad sides of a proposed set course of action that is under consideration. Because of how scrutinizing this technique is, it’s also known as dialectical Inquiry. 

When adopting a particular decision-making technique in a group, it’s better to divide the participants into two. One will address the pros and the other group the cons in the form of a debate. 

In other words, the two parts of this group would carefully argue for their point. And why they think their idea should get accepted at the expense of the other. The goal is to determine the possibility of both decision outcomes. In terms of advantages and business impact. 

2. The Decision tree 

This decision-making technique tends to be more visual because it adopts a tree-like representation. And this tree shows choices (decisions) and their possible consequences.

For example, say your business is about to decide on advertisements and a promotional campaign you plan on implementing. But your team is contemplating running the ads on Facebook or Linkedin. You draw a decision tree to visualize the considerations you should put into perspective to pick one. 

3. Scientific Method 

Unlike the trial and error approach, the scientific decision-making technique follows the traditional process of the science of problem-solving. It involves the following steps: 

• Formulating a problem statement
• Background research to generate a hypothesis
• Experimenting to test the validity of your hypothetical proposition(s)
• Collection of data through observations (interview, questionnaire, or any other means)
• Interpret the results from findings or data collected
• Draw up a conclusion on your hypothesis

This technique is highly factual and not based on intuition. You can apply it in your personal life to solve some of the problems you face. It’s sometimes referred to as a heuristic method. 

4. Cost-benefit analysis approach

Through this technique, your team can weigh the worthiness to qualify for decision-making, considering its financial implication. 

As a decision-making technique, it precludes any form of bias. That’s because it allows you to scale the importance of a decision based on its economic benefits. Not on emotion or any other personal factors. 

For instance, you weigh the worthiness of traveling for a meeting that will cost you $100 and 2 hours against a virtual meeting. In this situation, a cost-benefit analysis can help out. 

If you opt for the former, you may have the privilege of physically meeting other professionals in your field. But on the other hand, the latter may cost less than $20 to participate in the meeting virtually. Which would you opt for? 

While that may not sound like a perfect example, you should ask yourself these questions: 

• What can my team and I get for doing this? 
• If we purchase this item, what ROI does it have to offer? 
• If we put an additional 20% on an advertisement, can we get a 50% ROI? Or, at worst, 20%? 

If NO is your response to those questions after your cost-benefit analysis of a potential decision, then forgoing it should be your best bet. 

5. Possibility Rank approach

This is a technique that your team can use when you want to make a unanimous decision on an issue or problem whose outcomes are in different shades. It primarily adopts a voting system, which can be executed via a survey, email, or live online meetings. 

That way, your team can prioritize the ideas or choices according to the rank they’ve earned from the voting.

6. Brainstorming 

A brainstorming session is another decision-making technique you and the team can adopt. Through this method, members are at liberty (and, of course, expected) to crack ideas to solve a specific issue or problem. 

Aside from the fact that people share their ideas and thoughts without fear of judgment, it’s a superfast approach for idea generation. Through brainstorming, there are collaborative efforts from your team members to generate innovative ideas. From which a few or one shall be selected or remodified later on as the best solution. 

A final thought on the importance of decision-making and possible techniques

The significance of decision-making cannot get overemphasized. No decision making, no action taking. Thus, it’s safe to say that the world thrives on decision-making. 

However, with the 10 importance of decision-making and the 6 decision-making techniques explained in this post, you can start making high-quality decisions for yourself, your team and your business.