Some treat good decision-making as an art form, others as a science. Reality is somewhere in the middle. All real decisions are made under conditions of uncertainty, and their outcomes belong to the realm of the unknown.
There is a great deal that companies, and individuals, can do to refine their decision-making processes, thereby limiting the likelihood of making bad decisions.
In "Decision Tools to Keep You on the Right Path," published in the latest issue of the IESE Insight business review, IESE Prof. Rafael de Santiago shows that tools such as decision diagrams play important roles in decision-making. They can help managers to structure problems, carefully consider alternatives and calculate the risks involved.
However, decision diagrams are by no means fail-safe guarantees that the right decisions will be made all the time. No matter how good they are, they still depend, to a large extent, on human judgment. The author suggests a number of practical strategies for limiting the influence of these human biases on decision-making, both at the individual and organizational levels.
The article is based on several well-known studies and experiments the author used in his classes.
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