The Five Key Decision Making Steps that Improve Process Strategy
Firms rely heavily on processes as “no service can be provided and no product can be made without a process, and no process can exist without at least one service or product.” Process strategy specifies the pattern of decisions that are made in various managing processes so that the process will ultimately achieve the company’s competitive priorities. Process strategy is further guided by operations strategy and the organization’s ability to obtain the resources necessary to support them and have an effective design process. Firms face four major process decisions that serve as the building blocks that eventually form the firm’s supply chain. These four processes are:
- Process Structure: determines the process type relative to the kinds of resources that are needed, how resources are partitioned between them, and their key characteristics.
- Customer Involvement: reflects the ways in which customers become part of the process and the extent of their participation.
- Resource Flexibility: the ease with which employees and equipment can handle a wide variety of products, output levels, duties, and functions.
- Capital Intensity: the mix of equipment and human skills in a process; the greater the cost of equipment relative to the cost of labor, the greater the capital intensity is.
Last semester I took Professor Coughlan’s Ethical, Social, and Legal Responsibilities of Business class. Much of this course was centered around decision making, the rational decision making steps, and the notion that an individual’s thoroughness in following the decision making process can result in a variety of outcomes. In our course, five key decision making steps were identified that enable both firms and individuals to make thorough, well thought out, and rational decisions if they are followed correctly.
- Identify the decision opportunity.
- Conduct a search for alternatives.
- Establish the decision criteria.
- Compares alternatives based on the criteria selected.
- Render choice based on the highest scoring option.
There are two important things to note about these steps. If a search for alternatives is not conducted and this step is not completed (step number two), then inadequate decisions are made as a result. Additionally, the third step, establish the decision criteria, can also serve as the first step of the decision making process and will guide the decision opportunity.
If the decision making process is thorough and the outcomes of the decision are excellent, then this outcome was expected. Further, if the decision making process is incomplete and the five rational decision making steps were not followed, then the poor outcome that resulted was expected.
The five decision making steps that were discussed in my Ethical, Social, and Legal Responsibilities of Business course can be employed by managers as they make decisions surrounding process strategy and process decisions such as process structure, customer involvement, resource flexibility, and capital intensity. The use of these steps will result in deliberate, thoughtful, and rational decisions.
Do you agree with the five rational decision making steps listed above? Do you ever make shortcuts? What steps do you take when you are making a big decision?
Lily, I also took Professor Coughlan’s Ethics class last semester, and enjoyed your comparison of the topics we covered in his class to this one. The five step decision process makes a lot of sense if you think about it rationally. We all go through this process in our head most of the times that we make a decision, whether we realize it or not. However, sometimes I send to skip Step 2 (conduct a search for alternatives) and just stick closer to the first option that I identify.
It will be interesting to see how the moral and ethical view of business is viewed in Operations Management as compared to Ethics. I expect that Ethics will play a large role in how company’s make decisions on their operations.
Lily,
I really like how you have incorporated your former class into this blog post. It is interesting to think about the exact steps that should be followed when making a decision about something. Obviously, this is a crucial part of any business. Even when I worked at a small convenience store as an inventory manager, we had to make difficult decisions every day and I can tell you, even if we did not know it, we were following this 5 step process to making decisions that you have listed above. There was a high amount of comparison of alternatives because that it is, in my opinion, one of the most important parts to decision making. One must know about all other potential alternatives prior to making a decision. If you do not know the alternatives, you have not done the proper research that the decision making process entails. Therefore, you have a higher likelihood to botching the decision at hand because you, most likely, could have had a better alternative. Furthermore, one must “Render choice based on the highest scoring option.” This is also a crucial part of the decision making process. Some people do not excel in this area of business even though it can be the most important part. You must weight all of your criteria for the decision making process to see what the best option is. A preference matrix is best, in my opinion, to decide what to do. We, as humans, are constantly making preference matrixes without knowing it. However, it is an extremely useful tool to use when there are a large amount of criteria and a great deal of money that will be going into the decision at hand. So I think the best idea is to write out the entirety of the preference matrix, decide what criteria you would like to weight the most and what criteria you would like to not weight as highly, and then make your decision from there with your cohorts.
Lily,
I would argue that the five rational decision making steps you listed above are more appropriately applied to larger purchases than smaller ones. If I am making a smaller purchase, I am way more likely to come to a decision quickly than taking the time to conduct a search for alternatives. While I do think decisions on larger investments follow these guidelines, in our world of instant gratification and one-click to order e-commerce, these steps are often bypassed to come to a quick decision.
Looking at the 5 key decision making steps you presented in your post, they seem as though while they can most likely be applied to all situations in some way or form, there are going to be barriers blocking businesses from following this process. As I have learned from a prior class, there are going to be times when your analysis will be too slow to use effectively. A manager may have to make his decision before he has all of his options laid out in front of him. This is where and why that bottom right square exists. The “lucky” square is there when either managers are too lazy, too slow, or just cant complete the analysis they need to value their options. I feel if this were to happen, the process structure would be hit the hardest if things were to go south.
The customer involvement can be easy to fix, as you can chose to not include the customer in the process at all. Also a manager can set up a way to receive feedback from customers to implement into the product fairly easily. Resource flexibility and capital intensity are tied to the initial process structure, which means if the process structure is ineffective or flawed, those areas will not be able to functions properly. My reason for separating those two elements from customer involvement is that customer involvement is easier to change than suddenly having to change how much machinery or equipment is needed in your processes, and you can’t be flexible with something you don’t have, so those are harder to fix if a plan fails or needs to be changed.
My point is that process structure is the starting point to how a business does business, and if the plan is incomplete or flawed, the other areas of the supply chain are heavily affected as well. If you cant run a full analysis, I wonder if there is a workaround. Maybe some sort of shorthand way to go through the process and still have it be somewhat complete.
Lily,
I agree that alternatives are incredibly important in a business process. They can provide cheaper, more efficient, or even more environmentally-friendly options for business processes within the supply chain.
Similarly, from a marketing prospective, alternatives are necessary for consumer decision purposes. In Principles of Marketing class, we discussed the consumer’s decision for alternatives including the consideration or evoked set, which can be compared to the option qualifiers learned from Operations Management. Alternatives are important for both customers and businesses are important. They are complementary because the business having alternatives ultimately creates alternatives for consumers.
Personally, these steps in the search for alternatives are taken during many of decision making processes, but it is made more subconsciously and more quickly than businesses do.
I really liked how you took concepts from another B-School class and applied it to what we’re learning now in class! There is definitely so much more to making business decisions than the general public probably is aware of.
You mention the Five Key Decision Making Steps from your other class which seems to be an easier way to make definitive decisions. These 5 Key Decision Making Steps force the managers or higher level management to look at their business at a more detailed level to really understand the areas that can be improved and the changes that would improve their company in the best way. Process structure, customer involvement, resource flexibility, and capital intensity are the areas of a business that make it flow efficiently and productively. Using these steps will hopefully lead to an efficient supply chain.
What I also think is interesting about these 5 Key Decision Making Steps is that they can be applied to companies of all levels. These points can be tailored to companies of all sizes, industries, and management styles and theoretically provide results grounded similarly.
In a sense, I use these 5 Key Decision Making Steps in my day-to-day life and especially when I am forced to make a big decision. First, and most obviously, you have to identify the area that needs the attention. According to the theory of the economic man, consumer are thought to be rational in the sense that they evaluate all the given information they have. That can be related to Step 2 – to evaluate alternatives. From these alternatives, we as individuals and companies at large have to prioritize the criteria that they value most. In my life, that could be location, price, utility or other criteria that I evaluate when I make purchases. The final steps would be to compare the options we have identified and ultimately making a final decisions.
Companies are constantly making decisions; whether small or big, it is important to evaluate all options, effects, and consequences. These two decision-making processes are very interesting to look at individually as well as how they can apply to each other. The steps in Process Strategy seem to be more conceptual and give a broad idea of what to examine in each step of the supply chain. However, it does not give criteria on how to make each decision. The steps also seem to focus more on the consumer and how they are effected by each decision. In comparison, the Five Key Decision Making Steps are more applicable to everyday decision and examines the alternatives more. The steps are more succinct and tell you exactly what to do. This list reminds me of what we learned in class on Tuesday with step #3 relating to determining the order qualifiers. Furthermore, a tool you could use in step #4 is a preference matrix to rate and rank your order qualifiers and winners.
Both of these decision making processes give very good guidelines for how to make a decision by themselves; however, I think it would be interesting to combine these two processes. Because the Process Strategy is so broad, it would be great to follow the Five Key Decision Making Steps when you are analyzing decision and strategies for the four process strategies. This way you are examining all of the broad ideas in each category with more detail and analysis.
When I personally make decisions, my process resembles the Five Key steps more. However, when I need to make a quick decision I will usually omit a couple steps. Instead of thinking about the alternatives before deciding on the decision criteria, I tend to think about what I want—the criteria—and then think about the possible options. It is also interesting to think about how quickly you can do this process in your head or how you can draw it out when you are making a major decision. It really is applicable to all decisions.