• Category
  • >Business Analytics

7 Steps involved in the Decision Making Process

  • Vrinda Mathur
  • Jan 27, 2022
7 Steps involved in the Decision Making Process title banner

Robert Frost wrote ‘Two roads diverged into a wood, and I took the less traveled by, and that has made all the difference’. But unfortunately this is not the case in business setups. 


‘Lets just take the path and see what happens’ is not the advisable approach organisations need to follow in order to achieve their objectives and goals. Decision making processes are such models that provide a framework for the business in order to achieve their targets. 



What is the Decision Making Process?


Decision making is the core foundation of every business organisation. Decision making is required in each and every step of the organisation. Be it decisions related to procurement of goods, investments to be made, or decisions related to the day to day functioning of the organisation. 


Whether it is a small scale business or a large scale business, in order to achieve growth, effective decision making plays a major hand. A decision making process simply refers to a series of steps involved or taken by an individual in order to determine the best course to meet their needs and objectives. 


In the business context, it is a set of steps taken by the managers or authorities of the enterprise to determine a defined path for business initiatives and to set specific action in motion. 


Business settings involve multiple decisions regarding strategy or an initiative. It is a system or a model of process which individuals can follow to ensure to make the best choices among the various options available in the market. A decision making model makes it easier to choose the best fit option by providing guidelines and helps the business to fulfill desired objectives. 


Effective and successful decisions result in profits for the firm, whereas ineffective and unsuccessful decisions result in losses. As a result, the most important process in every business is corporate decision-making.


(Speaking of Decision Making, check out the Role of Business Analytics in Decision Making)



Steps involved in Decision Making Process


The business decision making is a step by step process allowing the organisations to resolve problems by weighing, examining alternatives and choosing a suitable path for them. This process also enables an opportunity at the end to weigh whether the decision was suitable or not. 


Though there are many alternative steps available on the internet most commonly used and defined steps are: 

The image depicts the Steps for Decision Making which are mainly to 1) Identify the decision,2) Gather information,3) Identify alternatives4) Weight the evidence5) Choose among alternatives6) Take action7) Review your decision.

Steps for decision making


  1. Identify the decision


The first and foremost step involves identifying the problem that needs to be resolved. Clearly defined decisions help in achieving goals by measuring and evaluating them appropriately. If you tend to misidentify the problem you may tend to make wrong decisions and end up wasting resources, time and efforts. 


  1. Gather information


Collecting some pertinent information before you make your decision is a must. Once the issue has been identified gathering relevant information about the same is necessary. 


Perform an internal assessment, providing insights on where your organisation has succeeded and had failures in areas related to your decisions. References should also be collected from external sources like market research, studies, case histories etc. 


  1. Identify alternatives


When you have collected relevant information, the next step is searching for probable solutions to the problems discovered. There is usually more than one solution available. This step involves listing down all the probable solutions for further consideration. 


  1. Weigh the evidence


Once multiple alternatives have been identified, weigh the evidence for pros or cons against the multiple identified alternatives. Evaluate whether the conflict identified in step-1 would be resolved through the use of which alternative. Identify pitfalls for each of the alternatives, and evaluate them against possible rewards. 


  1. Choose among alternatives


Once you have weighed and evaluated all the alternatives, it's time to choose the best option out of all the available alternatives. This is the point of decision making wherein you actually make a decision in selecting the alternative. The decision made here would be the final decision in order to resolve the problem identified in step-1. 


  1. Take action


You are now ready for some positive action by beginning to implement the alternative chosen in the above step. Develop a plan to make your decisions tangible and achievable. Develop a project plan related to your decision and then assign tasks to your team respectively. 


  1. Review your decision


This is the final step, it's time to consider the results of your decision and evaluate whether the issue has been resolved or not. If the issue has yet not been resolved you may have gathered some more information and  repeated some steps of the process. 


(Suggested Read - Steps to perform Business Process Analysis)



Types of Decision-Making models


Common types of decision making models: 


  1. Rational model


Rational decision- making is the most popular type of model. It is a logical and sequential model focusing on listing as many alternatives as possible.


After all of the possibilities have been written out, they may be compared to see which is the best. These models frequently include advantages and disadvantages for each option, with the options listed in order of priority. 


  1. Intuitive model


These decision-making models assume that the decision-making process has no true logic or justification. Instead, the process is guided by an inner sense of what is the best option — or intuition. Intuitive models, on the other hand, are not purely reliant on gut feelings. Pattern recognition, similarity recognition, and the importance or prominence of the option are also considered.


  1. Recognition primed models


These decision-making models combine logical and intuitive decision-making. Its distinguishing feature is that the decision maker evaluates only one alternative rather than balancing all of them.


  1. Creative model


Users get facts and insights about the problem and generate some first solution ideas in this decision-making paradigm. The decision maker then goes into an incubation phase, during which they do not actively consider the possibilities. 


Instead, they let their unconscious guide them through the process, eventually leading to a discovery and solution that they may test and complete.


Recommended blog - (What is a Business Cycle?


Tools for Decision Making


The decision-making tools assist you in mapping out all of the viable options for your choice, as well as their costs and likelihood of success or failure. These apps help you make the best choices possible by simplifying the decision-making process and creating a graphic.


The following is a hand-picked list of Top Decision Tools, along with popular features and links to respective websites. There is both open source (free) and commercial (paid) software on the list.


  • SWOT Diagram


SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT Diagram is an important management application that helps any organization to assess its current situation. It works as a basic guide for strategic planning.


  • Decision making diagram


Decision making diagram are graphs that allow you to visualise your decision. It is one of the most effective decision-making tools for estimating future actions based on outcomes and risks. This graphic may be used to design team strategy.


  • Decision matrix


A decision matrix is a strategy that uses values to help you discover and assess a system's performance. The parts of a decision matrix demonstrate how outcomes are influenced by various factors.


  • Pareto Analysis


Pareto Analysis is a decision-making approach. It's also known as the 80/20 rule, which states that 20% of your actions will account for 80% of your results. It is used to prioritise potential modifications by identifying and resolving issues.


(Check out - Business Intelligence Tools)

When making a judgement, one should constantly consider the good and bad business implications and favour the favourable results.


This prevents the firm from suffering losses and allows it to continue to develop steadily. Avoiding difficult decisions may appear to be simpler at times, especially if you anticipate a lot of conflict as a result of making the difficult option.


 However, the only way to keep control of your corporate life and time is to make decisions and accept the consequences.

Latest Comments