Importance Of Decision Making Processes In Business



This article shows you the importance of decision making processes in business.

It also shows you the processes involved in decision making.

  • Identify the problem
  • Analyze the problem
  • Gather information about the problem
  • Sources of information
  • Analyze the information
  • Figure out alternatives choices
  • Evaluate each alternative
  • Make a choice
  • Implement your choice
  • Monitor the performance of your choice
  • Ask for feedback
  • Positive feedback
  • Negative feedback
  • Address all issues observed
  • Implement your revised decision

Decision making processes in business are important things every business owner needs to master.

Simply put, decision making has to do with making a choice from several alternative lines of action.

In some cases, decision making processes can be quite easy.

In other cases, decision making processes can be really difficult, sometimes requiring external help.

That withstanding the processes involved, decisions must still be.

And businesses must be forge ahead.

However, in this article attention is focused on the most important processes in decision making.

Decision making process: Identify a problem 

In decision making, the first stage is to identity a problem that needs to be fixed.

The problem you want to solve can be caused by internal or external factors.

Moving forward, the problem to be solved must have alternatives or options from which you can make a choice.

Remember that economists tell us that without alternatives or options there will be no choice to make.

For example, if you have only one item of clothing you will have no choice to make.

In other words, you will be restricted to using the only one clothing you have.

Therefore, decision making is all about making choices from  several alternatives or options.

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Decision making processes: analyze the decision 

Having identified  a situation that requires decision making, the next step is to analyze the problem with a view to finding a solution.

Additionally, you will need to identify:

  • the actual cause of the problem.
  • The type of decision that will best solve the problem.
  • When and how the decision will be made
  • Who will make the decision.

It is said that a problem identified is a problem half solved.

In all cases, your overall priority is make a decision that will give you optimum solution.

Decision making processes: Gather info about the problem. 

The next process is to gather as much information as possible about the problem.

This stage of the process is very important because you are going to make a decision that can make or break your business.

Furthermore, you will need relevant, reliable and accurate information about the problem.

Doing this requires that you spend quality time sourcing for information.

This is because decision made on the basis of unverified data may not produce the desired result.

Sources of information

For you to make informed decision, you need credible information.

You can find credible information from the following sources:

  • The internet
  • Oral interviews
  • Industry publications
  • Surveys
  • Questionnaires
  • Or even personal observations.

Finally, you will need to ask questions and get answers as to how that or similar problem was resolved in the past by those who have experienced it before you.

Decision making processes: Analyze the information 

The next process in decision making is to analyze the information.

This time you will need to break down the whole problem into many separate parts with a view to finding a workable solution.

Furthermore, you will need to:

  • analyze every single bit of info that you have gathered
  • the importance or otherwise of every info you have receive
  • determine the impact of each part of the information on the problem
  • take only the useful part
  • and discard the useless part.

Most importantly, you should remember that if you do not know the root cause of the problem, you cannot make a valid and workable decision.

Decision making processes: Figure out alternative choices 

You can work out alternative ways you can take to solve the problem.

In decision making, this is one of the most important part of the process.

At this stage of the decision making process, you will need to consider many factors, including the following:

  • How many alternatives or options are available to you
  • The pros and cons of each alternative or option
  • The costs and benefits of each alternative or option
  • The short-term and long-term benefits of each alternative or option.

At this stage of the decision making process, all options are on the table.

Therefore, the rule of the thumb, as always, is that you must make a decision that will be in the best interest of your business.

Evaluate each alternative choice

In decision making, you will need to evaluate each alternative that the problem will throw at you.

Somehow, some of the alternatives may have the same or very close values.

Consequently, decision making becomes even really difficult.

Moreover, you should not  go for an option just because it will cost little money.

On the other hand, you should not just discard an option because the costs are high.

Therefore, you need to use wisdom, not sentiment, to make a decision that will be in the best interest of your business.

However, if you find it difficult to arrive at a workable decision, you should feel free to seek advice from your mentor or those who have been there before you.

After all, only the best is good for you.

Decision Making Processes: Make a choice

Making a choice is the most critical aspect of decision making process.

The ultimate goal of the processes is to make a valid and optimal decision that will take your business to where you want it to be.

In other words, your decision should be based on facts and figures; not sentiment.

To help you at this critical time, there are two well known strategies you can use in decision making. They are called Rule 24 and Rule  72.

Rule 24 simply means that you can use 24 hours to think and find a workable solution to the problem.

Rule 72 means that you can spend 72 hours to arrive at a decision.

However, should the problem become overwhelming, you can seek help from outside.

Remember that decisions made on the basis of trial and error can have positive or negative impacts on your business.

Decision making processes: Implement your choice

Now that you have made a choice from the various options generated by your analysis, it is time for you to implement your choice.

Remember that you still need to keep all the working papers you used during your analysis.

This is because you might have need to refer to them again in the future.

Looking back on those papers, once a while, will help you to ensure that you are not abandoning your earlier findings.

Monitor the performance of your choice

In business, it is one thing to make a decision but it is quite another to implement and see the decision through.

Therefore, you must monitor the performance of your decision to make sure that the decision is on the right track.

Most importantly, you will need to make changes here and there to ensure that your business succeeds.

Decision making processes: ask for feedback 

In decision making process in business, you need to ask customers for their feedback from time to time.

This will enable you to know whether  or not your decision is effective.

Positive feedback

If you get positive feedback from your customers, you can improve on the positive feedback you get.

In other words, you should embrace the concept of continuous improvements.

Even the big companies practice continuous improvements to enable them remain competitive in the marketplace.

Decision making processes: Negative feedback

Decision making in business require that you know how to deal with negative from customers.

This is because feedback will normally point out to you any observed weaknesses in your business processes.

Moreover, if you receive negative feedback, you should accept it good faith.

Bill Gates was quoted as saying “your most complaining customers are your greatest source of learning”.

When you do receive negative feedback concerning your products or services you should:

  • go back to the drawing board,
  • work it out
  • find out what went wrong.

Most importantly, you should make sure that you evaluate all feedback you get from the field.

Decision making processes: Address issues raised

After receiving criticisms, suggestions and complaints, you should revisit the decision to address all issues raised in the feedback.

You  can also reach out to all your working papers to see if there was an important point you missed out when you were analyzing the information you gathered.

Relaunch your revised decision

After you have considered and made all the necessary fixes based on the feedback you got from your customers, you can then implement the decision again.

In conclusion, note that even the most successful companies are still looking for better and cheaper ways of improving the fortunes of their businesses.

Therefore, you will need to continually monitor and update  your decisions.

This will enable you to solve current and future problems.

Good luck.

Related: 26 Best And Most Effective Small Business Management Tips Entrepreneurs Need To Succeed In Their Businesses:


By Samuel Ijenhi,

B. Sc. Accounting (University of Benin)

Benin City, Nigeria.

Founder: Ijenhi Business Solutions


About Samuel Ijenhi

A graduate in Accounting, University of Benin, Benin City, Edo State, Nigeria.
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