When to Use Structured Decision-Making
SCIO Decision Intelligence Framework
One of the challenges in introducing a decision-making framework is understanding when structured decision-making makes sense. Many of our organization’s decisions lack formal structure and process. Of those that do, many fail to apply appropriate rigour given the decision type, complexity, and potential impact on the business.
Fortunately, there is some operational research to guide us in making the best decision possible at every opportunity applicable to simple or complex problems with low to high impact.
The Society of Decision Professionals (SDP), working with the Product Development and Management Association (PDMA), developed a decision complexity scorecard useful in choosing the level of structure warranted.
The scorecard consists of seven questions for a given problem-solving decision-making set. Answering yes to a question is worth one point. When all questions are added up, you have your score. A score of 1–3 means little structure is required — this occurs in about 15% of decisions. A score of 4–6 warrants moderate structure — this occurs in the majority, about 60% of the decisions. A score of 6–7 requires high structure and sophistication, perhaps with warranted professional decision support, for approximately 25% of the decisions.
Let’s explore our leaders' different decision types, divided into four classifications:
Simple Choices have both low relative complexity and impact, representing about 15% of our decisions. We apply low structure to these decision types. They are judgment-based and often tactical. We can use our intuition or simple mental models to think through the pros and cons of usually a yes/no or this/that type of decision. These decisions are often reversible because investments and consequences are relatively low.
Data & Analytics have a low impact but high complexity, representing about 30% of our decisions (roughly half of the 60% of the moderate set). We apply a moderate level of structure to these decision types. They are evidence-based and often tactical. Typically, the decision stems from data-driven calculations with cost-benefit evaluations, often prioritization schemes (satisficing, not optimizing). A combination of people and machines may do the problem-solving and decision-making. Our digital transformations cater largely to use cases for this decision type. The frequency of these decision types can vary widely from infrequent to frequent.
Business Rules have a low complexity but high impact, representing about 30% of our decisions (roughly half of the 60% of the moderate set). We apply a moderate level of structure to these decision types. Often, these decisions represent standing positions or orders which direct the organization's activities. Examples include documented policies, standards, business processes, and procedures. They can also include simple automation in artificial intelligence or machine learning. They are almost always experienced-based, using professional judgement and/or evidential data. They are tactical. These decisions are made infrequently but are applied many times over.
Simulation Models have high relative complexity and impact, representing about 25% of our decisions. We apply the highest level of sophistication for these decision types. They are often strategic to the organization as big hairy business or complicated technical problems. We use a thorough evidence-based approach with quantitative techniques and often optimize multiple solution alternatives against multiple business objectives to evaluate the best decision trade-offs. Generally, these decisions are made only once or infrequently, except for digital twins or other complex standing optimization models, which may be used often or continuously. The time, money, resources, and effort commitment to execute the action plan for this decision type often makes them irreversible.
This research suggests leaders should apply a mechanistic approach to decision-making for about 85% of their decisions. Is this the case in our operations? Likely, no. However, applying the right level of structure and discipline could benefit the organization’s collective decision-making ability. The Decision Intelligence Framework can support at least 85%, if not all, of your organization’s significant decisions.
Book a Decision Intelligence Framework demo with SCIO.
