8 Steps in the Decision-making process for Effective Management 

You’ll learn the 8 Steps in the decision-making process for effective management in this article.

Indeed, the importance of decision-making in management is great. But when managers want to act on any preconceived idea, they process it. So that they can eliminate or reduce the possibility of making costly mistakes that can shatter their firms.     

What are the proven steps organizations’ leadership teams and managers adopt when trying to make quality decisions? 

Interestingly, that’s what this article proposes to answer. To clearly explain the practical steps your leadership team can employ to make better and result-driven decisions in your workplace. 

8 steps in the decision-making process for effective management 

Step #1: Identify the Problem the decision wants to address

Decisions are not an end in themselves; but a means to an end. That’s to say, you take decisions out of the need to do so. 

So, the first step in these decision-making process for effective management is identifying the problem. It could be a decline in the sales for your business, insufficient human capital, the underperformance of staff, or any other possible cause.

Once you’ve identified what is causing pain to your organization, it takes you to the next step. 

Step #2: Do a background study of the problem

Here, you want to start with a background study by gathering essential information about the problem your team has identified. At this stage, you and your team have to start garnering data you could find about the issue. 

Your data source could be primary or secondary. For example, assume that your identified problem is a decline in sales. 

In this case, your primary source of information will be your team members and your customers via interview or a survey. While secondary information could come from reading books, consulting journals, or reports online. 

Either way, you aim to find out the possible causes of the decreased sales your firm is experiencing. And you may eventually discover part or all of the following as the cause for your decreased turnover: Lack of foresight and planning, poor delegation in business, an unconducive work environment or terrible work ethic, absence of technology, etc. 

Step #3. Create a list of possible solutions

Now, it’s time to work on the observations you got from the background research you just concluded. And then start outlining the possible actions your team needs to take to address the issue. 

In this cited case, for the sake of explanation: decrease in sales. 

So your possible list of actions may include:

• Organizing leadership training and seminars for leaders and sales team
• Make the environment more conducive to work
• Establishing and maintaining an excellent work ethic that will not hamper productivity
• Use the technology to replace manual efforts

Step 4. Get your team to assess them 

Twentieth-century American author Helen Keller once said, “Alone we can do so little; together we can do so much.” 

So as a manager, you must get your team (or leads) together to assess the situation to know if your outlined proposed decisions above are worth pursuing. So you may want to adopt one of the six techniques for decision-making. 

Employing a pros-and-cons list approach, brainstorming sessions, cost-benefit analysis, or others may be perfect. The goal is to ensure your team carefully evaluates these alternatives and comes up with a priority list. 

Step 5. Assess results generated 

This step is more or less a round two of step 4. The goal here is to streamline your list, considering fundamental factors such as finance and other resources at your disposal. 

That’s because before you can execute any idea, you’ll need part or all of this: money, human capital, and necessary tools, equipment, or assets. Resources are scarce, causing managers to make informed economic decisions.

For instance, still with our example, say the management of your business has decided to provide your sales team with hands-on training in sales and make the organization’s work environment more work-friendly. But you realize that you can achieve that in three ways, using the cost-benefit analysis decision-making approach. 

First Choice: It will cost you $200 to achieve a probable 60% ROI on this amount

Second Choice: It will cost you $137 to achieve a probable 20% ROI on this amount

Third Choice: It will cost you $57 to achieve a probable 10% ROI on this amount. 

Which of the options will you opt for? 

That takes us to the next point. 

Step 6: Pick the most preferred alternative

At this stage, you’ll need to pick out the alternatives that arrived in the previous step. 

You most likely would go with the first choice if it were a situation for you in real life.  

That’s because the option offers unparalleled ROI for your investment. It’s what any manager would do for your team– in its unique situation– upon determining the issue you want to decide on. 

Step #7: Execute the idea

An idea will remain an idea if one takes no action on it. In the 8 steps of the decision-making process, the idea execution stage is the point you finally take action on a particular idea. Depending on your situation and what you want. 

Step #8: Evaluate your final decision and its consequence

Here, you’ve already made the decision. So what you and your team should do is assess the impact of the decision you took. For example, say you had executed the first choice and probably made an ROI of 40% on your $200.

While that appears as a shortfall compared to your estimation, it’s a win-win for you. But you would have also learned a powerful lesson in business: it is wise to plan, but your decision may not go as planned. 

How managers make decisions effectively

From the explanation above, you now see why a manager shouldn’t make rash or impulsive decisions. Rather he should take time to come up with different alternatives. And then carefully investigate them and find the best solution to the problem in question. 

Don’t hesitate to explore some of the techniques for decision-making in management. 

Meanwhile, here are some tips to help you make effective decisions as a manager: 

1. Determine the problem statement 
2. Create a realistic goal that serves as a solution to the problem you’ve identified
3. Gather reliable information and data to help you weigh possible alternatives
4. Make the decision
5. Evaluate the outcome of the decision; so you can make better decisions in the future.

Why is decision-making important in the workplace? 

Many think decision-making is only important to managers. But in reality, everybody needs it in their personal and professional life.  

In other words, the ability to make informed and wise decisions is indispensable for employees and managers to develop in a workplace.  

That’s because it helps them take control of their life, time, and other resources. On top of that, it allows them to achieve successful outcomes in whatever they choose to do. 

Final Thoughts on the steps of the decision-making process

The 8 steps in a decision-making process aren’t much different from the scientific approach to solving a problem. That tells you that its importance isn’t limited to corporate management. 

You can use it to resolve a personal issue too. From fitness and relationships to finance challenges. But the question is, will you be patient enough to follow the step-by-step decision-making process? Without trying to skip one or two? 

To wrap up, let me leave you with a quote from Peter F. Drucker, which you can reminisce on: 

“Whenever you see a successful business, someone once made a courageous decision.”