One cannot make effective decisions when one doesn’t know the key steps to take. A detailed decision-making framework can help to rationalize problem, determine the solution, identify the right action, and receive feedback.
To know these steps, we can turn to one of the best management minds of all time, Peter F. Drucker. In 1967, he wrote his famous article on decision making in The Harvard Business Review that still stands the test of time.
His writing on executive leadership, management, and decision-making are extensive, so we are going to focus on his view and recommendations in his article.
The Six Steps
According to Drucker, a leader needs to take certain steps to ensure that the decision is effective. These steps, however, will not “make” the decision but if they are ignored, the decision will not solve any problem. So, here are the six steps he recommends:
Every step outlined by Drucker is equally important to effective decision making. Let’s review each of them to define their significance.
Step 1. Problem Classification.
According to Drucker, there are four categories in which all issues faced by executives fall:
- Generic. Includes situations that already occurred in the past, so decision making process for them can be repeated.
- Unique. Issues must be resolved individually because they are unprecedented.
- Truly unique. Issues that have never occurred in the company.
- Issues that appear to be unique but really are generic
For business executives who need to make effective decisions, this step outlines the strategy for approaching various issues. For example, all categories of issues (except the truly unique) can be solved with generic solutions developed at the company. On the other hand, unique situations require individual treatment and unique solutions. It means brainstorming time.
Step 2. Problem Definition.
At this stage, the executive has to identify the situation. Drucker claimed that many people underestimate the importance of problem definition and proceed with an incomplete understanding of the situation.
To ensure that the definition is complete, he recommends to check whether it encompasses all observable facts that characterize the issue. For example, a college administration might review the performance of students on paper writing to evaluate the effectiveness of their teaching strategy. In other words, an executive needs to look for both confirmatory and dis-confirmatory evidence.
Working until one has a complete understanding of a problem is a legitimate strategy. That includes asking questions like “what is this all about?” and “what solution is pertinent in this situation?”
Step 3. Boundary Conditions.
A decision maker has to define the minimal goal of the decision. According to Drucker, one typical issue in management decision making is a condition when the boundary conditions change while the decision is being implemented.
One of the examples of this condition is an economic crisis.
Step 4. What is Right?
Drucker proposes to choose a decision that meets the maximum number of boundaries from the beginning. Given that it is impossible to meet all of them, the decision maker is advised to start with the best decision and then compromise further.
Many people make a mistake by trying to tailor the decision to certain people. For example, they start by asking questions like “what decision is acceptable to the boss?” This is a wrong focus.
Step 5. Building to Action.
A decision is a commitment to action. According to Drucker, a decision cannot be considered as one until a manager acts upon it. Four questions are proposed here.
The first one asks about the people who need to know the decision. The second includes asking what action needs to be taken. The person responsible for taking the action is the focus of the third question. Lastly, Drucker proposes to ask what has to be done to ensure that the people can take the action.
Step 6. Feedback
Drucker strongly suggests that a feedback mechanism should be developed to evaluate the results of a decision. “Decision makers need reports and figures,” he wrote. “But unless they discipline themselves to go out and look – they condemn themselves to a sterile dogmatism.”
Even though Drucker wrote his famous article in the 1960s, his principles are still relevant. Indeed, business executives can use this strategy to deliver effective decisions because it provides a detailed framework to follow.
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