There can be an overwhelming amount of information for a business to filter through on a daily basis. Below we’ll justify the information selected to support a business decision-making process which involves using qualitative and quantitative filtering techniques. These techniques allow us to make better, more informed decisions. Not all input is equal – some is of more importance than others, therefore a hierarchy of knowledge exists…
Hierarchy of Knowledge
- Gut Instincts – This filter can be based on experience or may be emotional. Sometimes if there is no other decision filters available, it is all you have to go on when making a decision. Expertise in the field can help, but it’s always somewhat of a gamble going with your gut.
- Data – Data in itself is just facts, stats and random inputs that hold little value. Using data to make decisions can lead to flawed conclusions based on incomplete information.
- Information – Information is data that has been processed and given context so that the data has more meaning which can lead to better analysis.
- Knowledge – When information has be created for analysis and has been tested and validated, this is knowledge. Knowledge can be put in to action as it is has a high degree of accuracy
Gut instinct or data level decisions can be made quickly but carry a greater risk. The information level carries a lower risk but where possible, it’s always advisable to make decisions with actionable knowledge.
Another factor one should consider when making decisions is the source of the input. More input from more people doesn’t necessarily add value to decision making. When seeking information from more sources, it’s important to seek it from people who are credible and not biased.
- Credibility – The track record of the source, the reliability, credibility of the source. Can the source provide data you want, or what you want to hear or will they provide unedited data.
- Bias – Is there a hidden agenda in the input received? Is the source providing input for yours or their benefit?
For example if a business is deciding whether or not it should change it’s brand colours to pink, it wouldn’t make sense to ask teenage girls at a Justin Bieber concert for input if the target market is middle-aged men who are in to health and fitness. Teenage girls in this case would be biased and not credible. Weight should be placed on the input of existing customers and target customers.
Decision Making Metrics
All businesses need to have some sort of methodology for making decisions. The following are a list of metrics that can be used to form a decision making framework:
- Situation Analysis – Why does this decision have to be made? What if the decision isn’t made? Who does the decision affect directly and indirectly? What data, analysis, research or information is there to validate your decision?
- Public Scrutiny – Any decision made will eventually become public, there are no private decisions. You have to look at how a decision can affect family, shareholders and employees. It’s usually wise to seek feedback before making a decision.
- Cost/Benefit analysis – Do the expected profits/benefits of the decision outweigh the expected costs? If the benefits fall short of expectations and the costs exceed expectations, what will happen?
- Risk/Reward – Do the risks outweigh the rewards or vice versa?
- The right thing to do – Belief in what you are doing is important but your values, character and integrity should never be compromised.
- Make the Decision – The ability to make the decision and take action is important. As the saying goes “done is better than perfect”. The longer you take to seize an opportunity, the less of a return you may get and if you wait too long you may lose out.
- Backup Plan – Sometimes situations work against you, it is always a good idea to have a backup plan or plan B in place should circumstances fail beyond control or reason.