The Four-Step Decision Making Process as a simple way to arrive at rational decisions

Contents

1 Introduction

2 CompanyProfile

3 Four-Step Decision Making Process
3.1 DescribingSituation
3.2 Listing Possibilities
3.3 Choosing Selection Criteria
3.4 Acting after Agreement

4 Summary

Table of figures

Fig. 1: Four-step decision making process

Fig. 2: Selection criteria

Fig. 3: Relationship outsourcing and core competence-orientation

Fig. 4: Selection criteria - evaluation

1 Introduction

In the days of globalization, dynamic markets, increasing competition and customers needs making a decision and/or choosing an alternative is becoming progressively more difficult.

Especially in case of complex decisions individuals often think that they cannot cope with it - in spite of their known common sense. Making a decision means balancing multiple objectives and is nearly always accompanied by conditions of uncertainty; uncertainty regarding the future, the consequences of the different alternatives or even due to the variety of goals. But regardless of the respective case to be considered - the more information the “decision makers” have, the better will be the decision.

However, not only the action itself is relevant and decisively - also the selection criteria, which help to orient oneself within the variety of different possibilities and - therefore - guide the decision making. Moreover, particularly these criteria force us to choose not only among the possible courses of action but also among the means ofevaluating such actions.

The purpose of the decision making process is to find the best promising of all possible alternatives - subject to the respective goals ofthe “decision makers”.

A successful decision making process should use and pass through some basic steps of decision making. A simple model to follow might be the four-step decision making process that is explained in the following.¹

This essay is to give an entire overview of the four-step decision making process as the art of balancing different objectives including its single steps. In order to illustrate them, each of those stages is supported by a current example of a decision that is currently to be made at — Based on a short company profile giving some background information regarding the company , chapter 3 concentrates on the decision making process itself. In the following each of the process steps is theoretically explained and practically accompanied by the mentioned example. The essay ends with a brief conclusion summarizing all results and findings.

2 Company Profile

The company was originally founded in — by and taken over by today’s group in — built up several subsidiaries all over the world, e. g. North America, Great Britain, Mexico, Spain, France, China. The company develops, designs, manufactures and supplies powertrain assembly systems including the associated gauging and testing technology for the worldwide automotive manufacturers (OEM² ) and their sub-contractors. The product range comprises all components for the manual, semi-automatic and automatic assembly of engines/transmissions/ axles, sub-assemblies like cylinder head and steering as well as the entire technology for integrated measurements and the final function test. Today, the parent company in employs approx. 900 own employees and generates a turnover capacity of 150 million Euro (fiscal year 2008/2009).³

3 Four-Step Decision Making Process

The four-step decision making process as a unity of different stages is characterized by lots of dynamic interactions and consists of the following interrelated steps:

Abbildung in dieser Leseprobe nicht enthalten

Fig. 1: Four-step decision making process (Source: Meridian Group⁴ )

This model contains the essential basics for making decisions - regardless of the respective subject. However, the objectives - and therefore the criteria and the alternatives to be determined - always depend on the individual company- related characteristics (like line of business, size, strategy, products etc.).⁵

3.1 Describing Situation

What are the issues or problems?

First of all it is elementary to get familiar with the exact problem requiring a certain decision. The current situation needs to be described in order to provide as much (reliable!) information as possible to the decision makers.

The international crisis expanding from a financial to a worldwide economic crisis has weakened especially the automotive industry and their suppliers, like For this reason the group has imposed investment restrictions on all subsidiaries. In order to return to former strength/power several measures have already been taken, e. g. new management board, concepts of lean organization, new project-oriented structure of the entire organization - all supported by an external consulting company.

With regard to these structural changes, the consulting company questions the profitability of the in-house manufacturing. Based on different concepts of the consulting company, the management board now has to decide about the future of the mechanical manufacturing department, which is a strategic decision for or against an outsourcing process.

3.2 Listing Possibilities

What are the possible alternative actions?

The decision makers start searching for alternatives, preferably for those approximating the ideal. The most suitable and best promising alternatives being available and realizable/feasible within the defined schedule of the decision making process are to be discovered. As all alternatives are compared with the ideal, those which are the farthest away are removed from further consideration.

Beside “available” and “realizable” the word “possibilities” contains another condition - actions can only be serious alternatives, if they are “possible” (in the sense of “allowed” due to potential specifications). The totality of all alternatives is the basic decision makers can choose of.

To avoid going into detail and to simplify the subject regarding all possible options, the following alternatives can be defined for —

1. Keep the mechanical manufacturing in-house and use the advantage of flexibility and own know-how, examine and improve single processes and create a possible (financing/cooperation) concept to renew the machines in order to be more competitive.
2. Outsource the mechanical manufacturing - incl. employees and entire equipment - to one (preferred solution) or several external companies⁶ (depends on the scope potential investors are interested in).

3.3 Choosing Selection Criteria

What is important for the organization?

As already mentioned in the beginning - not only the action and/or alternative itself is relevant but also the selection criteria supporting oneself while asking: How should l/we choose?

By means of those “navigational guidelines”⁷ our decisions become more reliable and can be made with greater confidence and understanding.

[...]

¹ See Cooke, W. P.: 1985, p. 325f.; Zeleny, M.: 1982, p. XVf.; Drummond, H.: 1991, p. 12; Eisenführ, F./Weber, M.: 1999, p. 1ff.; SRH Riedlingen University: 2008, p. 14f.

² OEM - Original equipment manufacturer

³ See company profile ---------- (January 2010); (03.02.20l0), http//:www -----

⁴ See Meridian Group (18.12.2009), http//:www.meridiangrp.net

⁵ SRH Riedlingen University: 2008, p. 14f.

⁶ Hollekamp and Thomsen/Moser distinguish between internal (transfer of products/services to affiliated company, e. g. subsidiary) and external (transfer of processes to legally and economically independent company) outsourcing.

⁷ Zeleny, M.: 1982, p.XV