problem-solving and decision-making

simple processes for problem-solving and decision-making

Problem solving and decision-making are important skills for business and life. Problem-solving often involves decision-making, and decision-making is especially important for management and leadership. There are processes and techniques to improve decision-making and the quality of decisions. Decision-making is more natural to certain personalities, so these people should focus more on improving the quality of their decisions. People that are less natural decisionmakers are often able to make quality assessments, but then need to be more decisive in acting upon the assessments made. Problem-solving and decision-making are closely linked, and each requires creativity in identifying and developing options, for which the brainstorming technique is particularly useful. See also the free SWOT analysis template and examples, and PEST analysis template, which help decision-making and problem-solving. SWOT analysis helps assess the strength of a company, a business proposition or idea; PEST analysis helps to assess the potential and suitability of a market. Good decision-making requires a mixture of skills: creative development and identification of options, clarity of judgement, firmness of decision, and effective implementation. For group problem-solving and decision-making, or when a consensus is required, workshops help, within which you can incorporate these tools and process as appropriate. Here are some useful methods for effective decision-making and problem-solving: First a simple step-by-step process for effective decision-making and problemsolving. See also the decision-making facilitative questions template. And definitely see the ethical decision-making quick guide. decision-making process 1. Define and clarify the issue - does it warrant action? If so, now? Is the matter urgent, important or both. See the Pareto Principle. 2. Gather all the facts and understand their causes. 3. Think about or brainstorm possible options and solutions. (See brainstorming process) 4. Consider and compare the pros and cons of each option - consult if necessary - it probably will be. 5. Select the best option - avoid vagueness or 'foot in both camps' compromise. 6. Explain your decision to those involved and affected, and follow up to ensure proper and effective implementation. Decision-making maxims will help to reinforce the above decision-making process whether related to problem-solving or not, for example: "We know what happens to people who stay in the middle of the road. They get run down." (Aneurin Bevan) "In any moment of decision the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing." (attributed to Theodore Roosevelt - more maxims on the quotes page)

JFDI - Just Frigging Do it (polite version). The decision-maker's motto. There are usually several right answers when you are faced with a complex decision. When you've found the best solution you can find, get on with it, make it work, and it most probably will. (More useful rules, acronyms and training ideas on the acronyms page) pros and cons decision-making method Another simple process for decision-making is the pros and cons list. Pro means 'for', and con means 'against'. In other words, advantages and disadvantages. This method also applies to all sorts of problem-solving where issues and implications need to be understood and a decision has to be made. Some decisions are a simple matter of whether to make a change or not, such as moving, taking a new job, or buying something, selling something, replacing something, etc. Other decisions involve number of options, and are concerned more with how to do something, involving a number of choices. Use the brainstorming process to identify and develop options for decision-making and problem-solving. 1. First you will need a separate sheet for each identified option. 2. On each sheet write clearly the option concerned, and then beneath it the headings 'pros' and 'cons' (or 'advantages' and disadvantages', or simply 'for' and 'against'). Many decisions simply involve the choice of whether to go ahead or not, to change or not; in these cases you need only one sheet. 3. Then write down as many effects and implications of the particular option that you (and others if appropriate) can think of, placing each in the relevant column. 4. If helpful 'weight' each factor, by giving it a score out of three or five points (e.g., 5 being extremely significant, and 1 being of minor significance). 5. When you have listed all the points you can think of for the option concerned compare the number or total score of the items/effects/factors between the two columns. 6. This will provide a reflection and indication as to the overall attractiveness and benefit of the option concerned. If you have scored each item you will actually be able to arrive at a total score, being the difference between the pros and cons column totals. The bigger the difference between the total pros and total cons then the more attractive the option is. 7. If you have a number of options and have complete a pros and cons sheet for each option, compare the attractiveness - points difference between pros and cons - for each option. The biggest positive difference between pros and cons is the most attractive option. 8. N.B. If you don't like the answer that the decision-making sheet(s) reflect back to you, it means you haven't included all the cons - especially the emotional ones, or you haven't scored the factors consistently, so re-visit the sheet(s) concerned. You will find that writing things down in this way will help you to see things more clearly, become more objective and detached, which will help you to make clearer decisions. pros and cons weighted decision-making template - example

This example weighs the pros and cons of buying a new car to replace an old car. The weighted pros and cons are purely examples - they are not in any way suggestions of how you should make such a decision. Our decision-making criteria depend on our own personal situations and preferences. And your criteria and weighting will change according to time, situation, and probably your mood too. Use whatever scoring method you want to. The example shows low scores but you can score each item up to 10, or 20 or 100 - whatever makes sense to you personally. Or you can use an 'A/B/C' or three-star scoring method, whatever works for you. Should I replace my old car with a new one? pros (for - advantages) better comfort lower fuel costs lower servicing costs better for family use better reliability it'll be a load off my mind score cons (against - disadvantages) 3 3 4 3 5 2 cost outlay will mean making sacrifices higher insurance time and hassle to choose and buy it disposal or sale of old car big decisions like this scare and upset me score 5 3 2 2 4

total 6 pros

20

total 5 cons

16

In the above example, on the basis of the pros and cons and the weighting applied, there seems to be a a clear overall (and quantifiable) advantage in the decision to go ahead and buy a new car. Notice that with this decision-making method it's even possible to include 'intangible' emotional issues in the pros and cons comparison, for example 'it'll be a load off my mind', and 'decisions scare and upset me'. A decision-making pros and cons list like this helps remove the emotion which blocks clear thinking and decision-making. It enables objectivity and measurement, rather than reacting from instinct, or avoiding the issue altogether. Objective measurement helps in making a confident decision. The total weighted scores are the main deciding factor rather than the total number of pros and cons, although there is not a scientific 'right' or 'wrong' way to consider the total number of pros and cons compared with the total weighted scores. If the weighted scores are indicating a decision which makes you feel uncomfortable, then check your weightings, and also check that you've not missed out any factors on either side of the table. If the decision makes you feel uncomfortable and this is not reflected in the table, then add it as a factor and give it a score.

Seeking feedback or input from a trusted neutral friend can be helpful in confirming your factors and their scores. blank pros and cons decision-making template You should be able to cut and paste this template into a text editor or spreadsheet. Add more rows as required. question/decision/option: pros (for - advantages) score cons (against - disadvantages) score

totals

totals

Note: The above methods are similar to - but not the same as - 'Force Field Analysis', an analytical theory developed by psychologist Kurt Lewin (1890-1947), originally to assess factors influencing group behaviour. The Lewin model is typically shown as a simplified diagram, with horizontal arrows alongside each factor pointing to the space between the columns. Explained above is an different and logically developed weighted decision-making method, not Lewin's Force Field Analysis. complex problems and decisions For more complex decisions and problems involving more than two possible options you can use several pros and cons tables in conjunction, to compare the overall weight of each option. In such cases the wording of the options is important, for example, if considering the best path for one's own career and work development the options might be:

be employed, working for a big company be self-employed, working as a consultant or freelancer from home start a business, with premises and staff

A situation like this can be approached by completing three separate pros and cons tables and then comparing the net effects (difference between weighted pros and cons) of each one. While this won't necessarily evaluate and compare all possible inter-related aspects of the whole situation, it will help to give great clarity and detached objectivity (detached as in unemotional), which can be very difficult to find when confronted with a complicated and big challenge offering several options.

Also consider that some decisions and challenges are difficult because you don't have the necessary knowledge or experience, in which case you need first to decide if the decision or challenge is actually appropriate and necessary for you at this stage. Some decisions have to be made whether you are ready or not. Others might not be as pressing as you imagine. Do not be forced into a change-based decision if having considered the implications carefully you decide that it's not the best thing to do. The decision to do nothing different, in the right way for the right reasons, is often a perfectly good option. Whatever you do - try to be as objective as you can be. Well prepared decisions are easier to make and to implement, and generally produce the best results.

A New Channel Strategy for Dell

The PC industrys increasing maturity pushed Dell to shift its longstanding direct sales model BASED ON THE RESEARCH OF SUNIL CHOPRA Dell impressed many in its early years with its distinct model of supply chain management, selling customized computers directly to customers to meet burgeoning PC demand. By using this innovative sales model, Dell became an industry and shareholders darling, a high-tech pioneer with seemingly limitless growth. Those days appear to be over: Dells profits and shares have dropped considerably from their peaks in recent times. And when corporate giants stumble, everyone takes note. Competitors look for weaknesses to exploit or lessons to learn. Investment analysts and the public observe maturing companies closely to decide whether to buy, sell, or hold their stock. Business professors study such firms to understand the forces that made them falterand what they can do, if anything, to recover. Such was the motivation for Sunil Chopra, Associate Dean for Curriculum and Teaching and IBM Distinguished Professor of Operations Management at the Kellogg School of Management, to examine Dells business situation and supply chain management strategy more closely. Specifically, Chopra posited that the computer manufacturer would have to shift its longstanding direct sales model in the face of the PC businesss increasing maturity. Chopra suggested that to stay competitive, Dell would have to consider selling through retail channels such as Costco or local computer stores. About six months later, Dell announced that it would offer Dimension PCs and Inspiron notebooks through Wal-Mart and Sams Club. And in September 2007 Dell announced that it would take this channel strategy overseas, selling computers through Chinas largest electronics retailer. But what was Dells rationale for the recent sales model shift? To answer this question lets consider the argument behind Chopras assessment. Channel Strategies in Mature Markets Chopras analysis of Dell appeared in an article in the October 2006 volume of Supply Chain Strategy, a newsletter published by MIT. Part of the motivation for the article was Dells stock price, which had fallen over 30 percent in the previous year (Figure 1) while rivals such as Hewlett-Packard had performed much better. In the article Chopra acknowledges that Dell could still enjoy competitive advantage from customizing computers and selling them directly to consumers, but notes that the market for such offerings has shrunk, largely because customer needs and related supply chain costs have shifted in the mature PC business. As such, Chopra endorses a hybrid model that embraces both direct and reseller channels for Dell, noting that the general lesson is that your choice of sales channel should depend on the type of product

you are selling and its level of maturity. In separate communication Chopra is quick to note that he was not the only observer advocating a sales strategy shift for Dell; others, including several analysts, endorsed a similar model. Figure 1: Dell stock price, October 2005 to October 2007

Chopra presents two major factors underlying Dells arrival at this crossroads: channel tradeoffs and PC market dynamics. With regard to the former, he suggests that direct sales channels like Dells (or Amazon.coms), have much lower facility and inventory costs than retailers (e.g., your local Borders bookstore) but higher transportation costs; retailers, in contrast may have instantly available products and offer more comprehensive support, but cannot profitably stock as many different products as direct sellers. Chopras general point: product type and lifecycle stage will always influence both customer needs and supply chain costs. As such, companies cannot select one channel and expect it to always be successful. To sustain advantage they must align their chosen channels strengths with product and market characteristics. This is especially true given the PC and consumer electronics industrys dynamics over the last decade. According to Chopra, while the speed of integrated circuit development has remained relatively constantdoubling about every 24 months, in line with Moores lawthe relative value that consumers derive from each more powerful computing chip has diminished considerably. For example, a three-year-old computer today is capable of handling most common business applications such as Microsoft Office. This technology trend has clear implications for customers needs and, in turn, business models for computer sales. According to Chopra, when Dell first emerged consumers valued customization highly, and surplus stock quickly lost value, making assembly-to-order and centralized storage more profitable than selling pre-configured PCs in retail stores. But todays customers are willing to choose from a smaller number of off-the-shelf PCs, and are less concerned with customization. And, as PC prices have plummeted, inventory of standardized models turns quickly, and is less of a factor in profitability. These shifts have converged to dampen dramatically the value of the direct sales channel built around centralized inventory storage and PC customizability. So it is no surprise that Dells profits and market share have flagged recently. The inevitable conclusion, Chopra writes, is that Dell will be forced to consider the retail channel as it moves forward. Chopra presents two potentially complementary routes by which Dell could go retail. The first, a hybrid business model, combines direct and retail sales channels to serve both broad segments

of the computer market: those seeking standard models and those placing a premium on customization. Using this approach, Dell would continue selling direct but also offer a selection of pre-configured computer models through retail stores. The second model, most effective when customization is valued, involves the retailers performing the final product configuration, thus decreasing inventory costsbecause supplies are maintained in component formbut increasing assembly capacity costs. Chopra notes that this model has been used successfully in India, where customization is valued and technicians inexpensive to employ. The bottom line, as Chopra notes, is that channel choice must be related to customer needs and product characteristics. As such, he concludes that Dell would be best served by a hybrid model that includes the centralized channel for wider variety and the retail channel to move popular standardized PCs and other products. Dell Makes a Decision Apparently Dell shared much of Chopras thinking. In a New York Timesarticle on May 25, 2007, the manufacturer announced that it would begin offering two PC models through Wal-Mart stores in June. In a subsequentNew York Times article, Dell announced that it would sell Inspiron notebook computers through Wal-Marts Sams Club outlets. And most recently the company announced that its computers would be available in major Chinese cities through fifty Gome Electrical Appliances stores, Chinas largest electronics retailer, starting in early October 2007. Dell also plans to extend its international retail strategy by opening its first retail store in Russia. Although the actual number of Dell products offered through the initial retail channels is smalljust two low-end Dimension PC models were to be available at Wal-Mart, for example the symbolic importance of the move is significant, reflecting a rethinking of the direct sales strategy Michael Dell pioneered and rode to great fame and fortune. In an April memo to employees, Dell, who returned in late January 2007 as the firms chief executive, suggested, The direct model has been a revolution, but its not a religion. (NYT 5/25/07) This sentiment is in line with Chopras belief that Dell would have to look beyond its bread-and-butter sales model to sustain profits in todays mature computer market. Another Dell executive was quick to point out that the limited move to retail was not an indication that the direct-sales model was broken (NYT5/25/07). In fact, Dells hesitation to enter the retail channel may have resulted from unsuccessful or inconclusive past experiments. In the early 1990s Dell products were available through Best Buy, Costco, and other retailers, but the company stopped this distribution in 1994 due to low profit margins. Last year Dell opened a mall-based store in Dallas where customers could see and use computers or other products, but ultimately had to order these online through the store rather than taking them home with them. Despite clearer motivation for Dell to enter the retail channel today, as Chopras article makes clear, some industry observers point out the risks of this move. They dont want to get their brand name too closely associated with Wal-Mart, a Forrester Research analyst points out, citing the danger of Dells products being viewed as the markets value-end. (NYT5/25/07) Others note that it may take some time for Dell to realize much financial gain from its retail offerings, given their limited nature. Risks aside, Dells move into Wal-Mart, while retaining the centralized direct sales model, is a clear response to the trends Chopra points out, and the tactic completely aligned with his endorsement of a hybrid channel model. As another industry analyst suggests, Dell is finally listening to its customers. (NYT 5/25/07) Either that or taking the time to read the occasional Supply Chain Strategy article by a Kellogg professor.