Decision-Making Strategies: Choosing a Type of Decision

Learn the three types of decisions and how to choose the right type based on your situation.

There are three different types of decision that you can make.

The first is no downside. You would take this action no matter what the possible future environment is.

The second is favorable odds. Based on your certainty around the way the future’s going to play out, this decision should have a positive outcome. However, there’s a possibility it could have a negative outcome.

And the last type of decision is going for broke. The future is uncertain. Being right could bring huge upside, but being wrong could cause a lot of problems.

So for example, a no downside decision is hiring a new administrative assistant. This is no doubt, you need the help. The cost is low and the risk is low. And you could further reduce that little bit of residual risk by doing some job interviews, perhaps checking out the individual’s references, and even running a trial period where the individual comes on, does the job, and you see how they do.

A favorable odds example is reorganizing your entire department. It’s favorable odds that you’re going to have a good outcome because you have a good sense of your people, and the decision is reversible. Additionally, it’s a very small investment to make, to move people around and change their responsibilities. You still face some risk here. So the way you can reduce that is get input from other people on the way you’re going to reorganize, maybe get some of the team members input, and you can still reverse that decision.

Now, a big bet decision, a going for broke type of opportunity is spending $5 million to completely rebuild your company’s website in a rapidly changing and highly competitive market. This is a big bet. $5 million is a huge cost. You don’t know how your customers are going to react. The payoff is uncertain and you have a lot of risk because you don’t know how your competitors are going to respond. You need to reduce this risk as much as you can. So maybe you do some market research or launch a pilot website to see how your customers respond.

So remember a goal in all decision-making is to make the best decision while reducing the ambiguity and risk you face as much as possible. And by reducing that ambiguity, gathering more information, you’re going to reduce risk, and make better and safer decisions.

Want to learn more about decision-making strategies? How about taking an entire course on it? Go directly to the course and start learning decision-making strategies. The entire course is available at LinkedIn Learning. Enjoy!

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