Analytical Thinking And Decision Making: Importance In Business And Management
The Process of Analytical Thinking
Analytical thinking is the process through which visual components of critical thinking enable an individual to solve problems quickly and more efficiently (Wisler 2018, p. 90). It is the step by step approach given to the analysis of an existing problem, breaking it down to manageable components. It involves the gathering of relevant information and pin pointing of the vital issues related to the information. An effective critical thinking also requires the comparisons of relevant data while making identification of all the possible causes of the existing trends and patterns before drawing conclusions. The process of analytical thinking therefore comprises of gathering information, identification of the problems, and organization of the gathered information, analytical thinking and visual thinking. There is a thin line between analytical thinking and decision making (Kraust 2016, p. 26). Decision making is a process in which individuals decide on the cause of action. It is involves making a selection amongst many possible choices. While decision making is give a broad view, analytical thinking is narrows down the decision main process to include critical thinking and critical analysis of the factors revolving around the decision making. In an organization setup, analytical thinking and decision making are vital part of daily operations of the organization. The organization has to make daily decisions that may affect the well being of the organization on daily basis. It is therefore vital for the strategic management of the organization to employ analytical thinking in their daily decision making processes
Importance of decision making
Decision making is vital not only for the business managers but also for every other individual as they go about their daily activities (Jiao 2016, p. 8). In a business set up, decision making is important not only in the implementation of the managerial functions but also in the formulation of management policies, selection of the best alternatives and successful operation of the business. A successful decision making process can help the business face economic challenges while ensuring the growth of the business and help the entity achieve its objectives. Furthermore, it is through decision making that the business can facilitate innovation and come up with ways of motivating employees.
There are a wide range of resources available for an organization. The resource may include human resource, machinery, market information, finances even materials (García-González & Alvarez 2014, P. 24). The mangers have to make prompt decision on how to use the available recourses to achieve maximum returns. The decisions that the organization make determine how efficient the recourses are used. For optimum utilization of the available resources, it requires analysis of the production patterns and the proportion mix of resources that yields maximum returns. It is through decision making that a business entity can make changes in their use of resources to achieve improved output realization.
In a business situation, there are times when the management is faced with a decision to pick one among several alternatives (Cotterill 2014, P. 78). While there may be a number of alternatives that are suitable for the business, it is upon the management to decide upon the best option. However, there are considerations and data to refer to before making key decisions affecting the business. Since a problem may have various solutions, it is therefore paramount that the entity should make use of financial records, statistical data together with accounting tools in making decision. The decision making process therefore becomes very important for the company in ensuring that the option that they settle on is the best option available for the business.
Importance of Decision Making
The success of the managerial team relies on the decisions that they make (Lamata, Pelta & Verdegay 2018, P. 375). Poor decisions lead to low performance of the business while prudent decisions lead to improved or relatively high performance. Since the performance of the managers is more often measures by the performance of the units that they head, the decisions they make are key in their evaluation. Decisions making therefore is not only a tool used for making choices among a variety of options but also lay the foundation upon which the performance of the managers is evaluated. This does not only apply to the top level management but also to the middle level management.
One of the pervasive functions of the managers is decision making with an aim of meeting the business’ goals and objectives (Carder & Ragan 2016, P. 89). All the managerial functions starting from planning, managing, motivating staff and marketing among others involve decision making. This is an indication that decision making is spread across a number of areas in an organization or business. It is the decision that is made by the manager that is taken by all the staff. In the absence of decision making, none of the management functions can progress.
Since decisions making is one of the most complex jobs that managers have to do, it is important that they employ the adequate tools and follow working procedures in the process of coming up with a decision. In the process of making a decision, there are seven key steps that are followed by the managers. The first step involves the identification of the decision to be made. The first stage is followed by gathering of information revolving around the decision. The next step is to identify alternatives from which the decision can be made. After the identification of alternatives, the evidence gathered on each of the alternative is weighed. It is at this stage that the narrowing down of the available alternatives (Carder & Ragan 2016, P. 378). After weigh the alternatives, the selection is made among the available alternatives. The following step is the implementation of the selected alternative and it involves taking of action on the decision. The last step in the process is the review of the decision. In the final step, the management pays attention to the consequences of the decision. It is the consequences that point out if the decision was a success of a failure on the side of management.
The basic principles of decision making process are the same for the various techniques and tools (Jonassen 2012). However there are a number of tools and techniques that are applicable in the process of decision making. Some of the tools and techniques employed in decision making are as follows;
- Decision matrix.
A decision matrix is employed after the identification of all the possible options. It is at this stage of the decision making process that the management is required to come up with a matrix entailing a table that contains all the available options on the first column and all the factors that have impact on the decision of the first raw. The managers are then requires to weigh the importance of each of the factors and score and make scores. After the manager is done with the making, tallying is dome for each of the options to determine the best option. The following image shows a sample of a decision making matrix.
Utilization of Resources through Decision Making
T- Chart is a vital tool when weighing the pros and cons of an option in decision making process (Regan 2016, p. 90).When using T-charts, chats are drawn for every available option with pros of one column and cons on the other column. All the positive aspects of the option are noted on the pros side while all the negative aspects of the option are also noted on the cons side of the chart. After noting down all the pros and cons on an option. Each side of the T-chart is summed up. The option with more pros is them selected for implementation. The following image is shows a sample of a T-Chart.
The decision tree is a technique that requires the decision makers to contemplate on each of the options giving all the possible outcomes in each case. The decision tree is drawn starting with the decision that the manger wants to make (Mumcu & Mahoney 2018, p.89). The decision is represented by a square drawn on a large piece of paper. From the square, lines are drawn representing all the possible decisions. The decisions are written along the lines originating from the square. At the end of each line is a circle from which more lines originate representing the possible outcome of each decision. The elaboration of the line is made above the line like it was done with the outcomes. This process is repeated for as many possible decision and outcomes as possible. The following is an example of decision making tree.
The Pareto analysis techniques greatly depend on the individuals making the decision (Mees 2016, p. 24). It makes use of a large number of possible decisions from which the final decision is to be made. The alternatives are then weighed and prioritized in the order in which they should come from the first one to the last one. Through prioritization, it is possible to tell which intervention will have the maximum impact if implemented. The option with the most desirable impact is then selected for implementation.
SWOT is an abbreviation of strengths, weaknesses, opportunities and threats (Ullman 2011, p. 4). The analysis takes into consideration the strengths, weaknesses opportunities and threats of every possible decision. The factors are weighed for each possible decision and the decision with most desirable factors is selected. The decision makers have to weigh the decisions and pick on the decision that has less weaknesses and threats. At the same time the decision should have the maximum number of desirable strengths and opportunities.
Like SWOT, PEST is an abbreviation that represents political, economic, social cultural and technological changes. The technique takes keen analysis of the mentions aspects in the industry to come up with a decision (Ullman 2011, p. 6). The decision must me politically acceptable, economically suitable and in line with the socio – cultural environment as well as the level of technology applicable in the industry. The decision makers are faced with the challenge of weighed all these aspects for every possible decision. It therefore means that they only select the most suitable decision option from among a variety of options.
Tools and Techniques for Decision Making
Cost benefit analysis technique is majorly used by manufactures and producers of goods and services. In takes into consideration the costs involves in the production process and measures them against the benefits that can be derived from the production process (ursal, Omar, & Nawi 2016). Cost benefit analysis is mostly used in the scenarios where the management has to make a decision on the type of good or service to products or the type of production method to use among other decisions. The costs and benefits of all the available options are weighed against each other to select the most suitable decision. The selected decision should offer the maximum benefit at minimum cost.
The consequences of decision making are key in the determination of the effectiveness of the decision making. The consequences can either be effective, ineffective or less effective. The following features are in indication or an effective decision making process. The first feature of an effective decision making is the positive impact that the decision has on others. In decision that affects other people like the employees and the customers of a business; positive response from the members indicates that the decision was effective. Furthermore, people would like to copy the decision and apply it in their businesses. It may be obvious that a business would only copy a strategy or decision that is proved to be working and therefore the fact that another entity copies a decision that is made is an indicator of effective decision. It is also said that good decisions foster opportunities.
With positive results, new opportunities present themselves. For instance, the business may get an opportunity for expansion or the business branch may get higher targets to meet which presents an opportunity for further growth. The presence of such opportunities following a decision is a sign that the decision was effective. Another feature of an effective decision making is inclusivity of all the concerned parties. The decision making process is not done in the absence of other members of the decision making team. On the contrary, all the people involved in the decision making process should have full knowledge of the decision. Additionally, the decision should be executable. The decision should be clearly understood to avoid cases of uncertainty about the decision (Bentley, Price, & Cummings 2014, P. 303). Decisions that present others with new insights that they did not have before indicates that effectiveness in the decision. Other than other people understanding the decision, the decision should also be executable. Proper comprehension of the decision makes it easy to execute the decision. If the implementers of the decision find it hard to implement then it means that the decision id less effective or ineffective. However, the ease of executing a decision signals that the decision is effective. An effective decision is also systematic. This does not only apply to the manner in which it is implemented but also in the manner in which the decision is reached. Closely linked to systematic application is the accountability of the decision (Sobeeh, & Ebaied 2015, P. 273).
Effective decisions do not hide from accountability and all the details are always open and easily accessible. In the cases of ineffective decisions, accountability is always a problem and the information regarding them is also made scarce by the people in charge. Other than that, an effective decision should also be pragmatic. The decision must not be made depending on one’s emotions towards the decision but based on acceptable and proved decision making technique. In such a decision making, the individual should be given the last consideration after all the important factors are factored. Finally, an effective decision making process involves self awareness. It is therefore vital for an organization or a business entity to evaluate them taking into consideration their strengths and weaknesses and making decision based on the self analysis. Decisions made based on the self analysis are more likely to be effective than the decision made without the consideration of honest self analysis.
There are a number of decisions that managers of a cereal farm have to make. The success of the farm depends on the decisions made by the managers and therefore it is vital that the managers critically analyses their decisions using the available decisions making tools to ensure that the decisions that they make are efficient for the farm. The decisions range for what to produce, what quantity to produce, when to produce, for whom to produce, what method of product distribution to use, which payment methods to adopt for the clients and what method to use in communicating to the client.
A cereal farm has a wide variety of serials to produce. The options of the farm mangers might include beans, peace, green grams, etc. The farm has to make a decision on what type of serial to produce taking into consideration the suitability of the climate in the region, the market availability for the cereal, availability of production resources among other factors. The management will then have to weigh the available option and come up with the best option among the alternatives.
After selection of the type of serial to produce, the farm management has to make another decision on when to do the production (Schrift, Parker, Zauberman, & Srna 2018). At this stage, the options of the manager would be during rainy season or during dry season. If the management settles of the dry season, they will be faced with another decision on what type of irrigation to use for the production. Depending of the type of serial that the farm has decided to produce one of the conditions will best suit the crop and it is upon the management of the farm to make the decision.
After the production of the cereals, the management has to decide on the most efficient way of distributing the output to the clients. In this case, they might have the options of the clients coming to pick the cereals for the farm or transporting the cereals to the customers. If they choose to transport the products to the customers, the next decision that they have to make is on the mode of transportation to be used in the transportation. In this case, they have to choose between road and railway transportation. It is upon the management to make a decision on the most efficient way or reaching the customers with the product.
What method of payment should the customers use?
Upon delivery of the products, the customers will need to make payments for the products. There are two options through which the customers can use to pay for the products. The first option is through direct deposit if the amount worth of the goods directly to the farm’s bank account or pay for the products using cash. The other option could involve the use of both options at the same time. The management has to consider the most preferred method of payment and the most efficient for the firm in making this decision.
How to communicate with the clients
Communication is vital for any business entity. While there are several means of communication, the business must be keen to use the most efficient among the alternatives. The farm can communicate through written letters, phone calls, emails, and telegram. In the modern world, the farm can also consider the use of social media to reach the customers. Like the other decisions that the farm management has to make, there are number of considerations to be made before the farm can decide on a particular mode of communication. The selected mode of communication should not only be efficient for the farm management but also acceptable by the customers. Since communication is two way traffic, the customers may also want to communicate to the farm management and therefore, the decision on the mode of communication should be widely consulted not only with the farm but also with the customers. While the farm will use the mode of communication to send invoices, he clients will be using the same mode of communication to make orders.
Smart is an abbreviation for specific, measurable, achievable realistic and timely (Ullman 2011, p. 6). The analysis is used in determining the viability of a decision made. It therefore means that an efficient decision should not only be specific and measurable but should also be achievable, realistic and timely. Considering the decision problems discussed above, the analysis tool can aid in selection of the most appropriate option among the alternatives. When deciding on what to produce, it has to be one of the options that the farm has. Furthermore, the farmer has to define the quantity that should be plant for example, the farm management may decided to Plant ten kilograms of been seeds. It is also important to note that the quantity of seeds planted is subject to availability of land for production (Schrift, Parker, Zauberman, & Srna 2018). Since the planting of crops go with seasons, it is vital that the management also takes into consideration the time they decide to plant. However, the management must take into consideration the effect of rain in beans production and the effect of too much sun shine of beans production. From record, it is possible for the management to tell which season yields more than the other. After production, the management then has to make another decision on the distribution patterns. At this stage the management has to decide on the method of transportation to use in the distribution as well as when to make the supplies.
It would be efficient if the farm uses motor vehicle for delivery as compared to train. In order to add value to the customers, it would be recommended if the delivery is made at the door steps of the customers (Gee 2013, p. 57). This is not possible with trains and therefore the farm should decide to use motor vehicles for delivery. The selection of the method of payment is also vital at this stage. The most effective method of payment that the farm should use is the use of direct bank transactions. It reduces the burden of having to deposit cash to the bank and also efficient for the majority of the customers who prefer to use credit cards. The amount of money paid is also reflected at the back immediately after the transaction and therefore, the farm can easily account for their sales. Finally, the decision on communication should be a combination of phone calls and email. Since the business relations involve official documents, it will be necessary to use email which is a method that is modern and commonly used. The email can be used for making orders and also sending invoices. Phone calls can supplement the email when there is need for an immediate response to an inquiry.
The strengths and Weakness of the analysis
The analysis technique employed in the decision making above has both advantages and disadvantages. The first advantage is that it makes it easy to forecast the success level of the decision depending on the available alternatives. For instance, it is on record that under irrigation, beans do better in sunny seasons than in rainy seasons. It therefore means that the farm is able to tell which decision will yield more even before implementation of the decision. Another advantage is that a very stage of the process has its own goals to achieve (Louderback & Antonaccio, 2016, P. 90). Therefore, the success of the project is a combination of the success of several decisions that are made along the way. Furthermore, the decisions are divided into smaller attainable portions. One major disadvantage that the analysis technique has is the fact that it does not have a provision for combination of two alternatives to achieve the best results. It looks at each alternative independently and therefore only allows selection of on alternative. For instance, in the selection of the mode of communication the farm the analysis dictated that only one mode is selected. However, a combination of the two means of communication would yields better results than any one mode of communication. Furthermore, the approach is generally ambitious and does not cater for any uncertainties. It therefore means that there is a possibility of failure die to uncertainties regardless of the best decisions made.
Conclusions
Decision making techniques are vital in the in any business entity. The success of the management is always weighed using the consequences of the decisions they make. However, the managers have tolls available for them to use in the decisions making process. Some of these tools and techniques include PESTEL analysis, SWORT analysis, and Cost-Benefit analysis, among others. Each of the techniques available for takes into consideration the available options and pick the best option available. However, each of these techniques has their strengths and weaknesses. It therefore means that these strategies are not perfects and therefore the managers should look beyond just the techniques when making decisions.
List of References
Bentley, KJ., Price, SK & Cummings, CR. 2014, ‘A Psychiatric Medication Decision Support Guide for Social Work Practice with Pregnant and Postpartum Women’, Social Work, vol. 59, no. 4, pp. 303–313, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=eft&AN=98636520&site=ehost-live>. bsco
Carder, B & Ragan, P 2016, ‘Decision Making’, Professional Safety, vol. 61, no. 3, pp. 57–60, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=113475664&site=ehost-live>.
Christensen, A. L. and Woodland, A. (2018) ‘An Investigation of the Relationships Among Volunteer Income Tax Assistance (VITA) Participation and Ethical Judgment and Decision Making’, Journal of Business Ethics, 147(3), pp. 529–543. doi: 10.1007/s10551-015-2957-x.
Cotterill, ST 2014, ‘Developing Decision-Making for Performance: A Framework to Guide Applied Practice in Cricket’, Journal of Sport Psychology in Action, vol. 5, no. 2, pp. 88–101, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=s3h&AN=97048252&site=ehost-live>.host.com/login.aspx?direct=true&db=eft&AN=129594127&site=ehost-live>.
García-González, L & Alvarez, F 2017, ‘The Effects of a Comprehensive Teaching Program on Dribbling and Passing Decision-Making and Execution Skills of Young Footballers’, Kinesiology, vol. 49, no. 1, pp. 74–83,
Gee, J. F. (2013) ‘Decision Trees for Decision Making’, Harvard Business Review, 42(4), pp. 126–138. Available at: https://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=6813426&site=ehost-live (Accessed: 30 October 2018).
Jiao, L. (2016) ‘Combining sources of evidence with reliability and importance for decision making’, Central European Journal of Operations Research, 24(1), pp. 87–106. doi: 10.1007/s10100-013-0334-3.
Jonassen, DJ ed. 2012, ‘Designing for decision making’, Educational Technology Research & Development, vol. 60, no. 2, pp. 341–359, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=eft&AN=73888568&site=ehost-live>.
Kraust, T. (2017) ‘Critical Thinking and Decision Making: How developing and honing these skills aids in better choices in technical design’, TD&T: Theatre Design & Technology, 53(4), pp. 26–36.
Lamata, MT, Pelta, D & Verdegay, JL 2018, ‘Optimisation problems as decision problems: The case of fuzzy optimisation problems’, Information Sciences, vol. 460–461, pp. 377–388, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=130837870&site=ehost-live>.
Louderback, ER & Antonaccio, O 2017, ‘Exploring Cognitive Decision-making Processes, Computer-focused Cyber Deviance Involvement and Victimization’, Journal of Research in Crime & Delinquency, vol. 54, no. 5, pp. 639–679, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=eft&AN=124002221&site=ehost-live>.
Mees, A 2016, ‘How Do Instructors get Good at Decision Making?’, Horizons (14620677), no. 74, pp. 24–27, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=s3h&AN=116676197&site=ehost-live>.
Mumcu, C & Mahoney, K 2018, ‘Use of Decision Tree Model in Sport Management’, Case Studies Sport Management (2167-2458), vol. 7, no. 1, pp. 1–3, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=s3h&AN=130594027&site=ehost-live>.
Ragan, P. (2016) ‘Decision Making’, Professional Safety, 61(3), pp. 57–60. Available at: https://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=113475664&site=ehost-live (Accessed: 30 October 2018).
Schrift, Ry, Parker, Jr, Zauberman, G & Srna, S 2018, ‘Multistage Decision Processes: The Impact of Attribute Order on How Consumers Mentally Represent Their Choice’, Journal of Consumer Research, vol. 44, no. 6, pp. 1307–1324, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=ufh&AN=128637149&site=ehost-live>.
Sobeeh, DE-D & Ebaied, AI 2015, ‘Application of a Decision Tree Model to a Business Case from Egypt’, Competition Forum, vol. 13, no. 2, pp. 273–286, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=s3h&AN=113046501&site=ehost-live>.
Ullman, DG 2011, ‘Robust decision-making for engineering design’, Journal of Engineering Design, vol. 12, no. 1, pp. 3–13, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=4645355&site=ehost-live>.
Ursal, AT, Omar, & Nawi L. 2016, ‘The Importance of Decision Making for Vendor Selection in Industrialised Building System’, AIP Conference Proceedings, vol. 1761, no. 1, pp. 020081-1-020081-4, viewed 30 October 2018, <https://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=117471405&site=ehost-live>.
Wisler, JC. 2018, ‘U.S. CEOs of SBUs in Luxury Goods Organizations: A Mixed Methods Comparison of Ethical Decision-Making Profiles’, Journal of Business Ethics, vol. 149, no. 2, pp. 443–518, viewed 30 October 2018, <https://search.e