Decision-making. Four ways to make a big decision

Decision-making
Four ways to make a big decision
by Gina Trapani

Humans can be surprisingly bad at making logical choices, especially when decisions involve too many factors for our puny brains to comprehend at once. The process of making a big, hard decision can involve lots of teeth-gnashing, gazing off into space, fear of regret and visions of the worst case scenario. But it doesn't have to be that way.
Today's feature covers four time-tested decision-making methods. Armed with these babies, even the most difficult decision can get made before you can say "paradox of choice."

Make a weighted pros and cons list.
A good old pros and cons list is a great way to start with any decision. However, some pros are more pro than others, and some cons are worse than others. Also, the implications of a choice should be considered.
The PMI (Plus/Minus/Implication) method includes weights for pros and cons and adds an implications column. A possible implication counts as an interesting point to consider, ie, if I get this particularly vocal dog who I love anyway, she might bark all night and keep me awake.
Use a positive or negative number to weight each plus, minus and implication. When the list is complete, add up all the weights. Compare the totals of each choice and go with the largest one. In the case of a yes/no question, if the total is positive, it's yes - if not, it's no.

For example:


The total here is -1, so the answer is no, I should not move to Austin without getting a job first.
For decisions with more than two choices, several PMI tables should be created, one for each possibility, and the totals compared. Read more about the PMI method at Mindtools.

Create a grid analysis of multiple criteria.
Often the right choice depends on a combination of criteria. Which person has the most qualifications for the job? Which car does all the things I need it to? For multiple criteria, use a decision grid to see how each option stacks up against the other based on the points that matter the most.
For example, say you're choosing between three different apartments for rent, and certain things especially matter in your new living situation:
cost
location (ie, nearby mass transit)
an extra bedroom to set up a home office
storage space (for your canoe, bike and skis)
a 'pets allowed' policy (you've been thinking about getting a dog)
Create a decision grid where each criteria is a column and each option is a row. Enter a weight into each cell which indicates how much the apartment fulfills the specific criteria, like so:



Now, each one of these criteria matters to a different degree. For a particularly affordable apartment with no storage space, you could get a self-storage locker; if the perfect place didn't allow dogs, you might put off getting a pooch a few more years; however, being near mass transit is very important. Add another row above the options and add a weight to each criteria (ie, Location and cost high, Home office medium, Storage and Pets low.) Then multiply each option's criteria score times the criteria weight and add up the score for the total column:



In this example, 123 Main Street scores the highest - which is not the obvious choice to a prospective renter who ranks location very high. Even though it's not in the best location, it fulfills the other criteria enough to balance that out. If you're dismayed with the result because the location isn't great, you didn't weight location high enough. Tweak the criteria weights to see different results.

Calculate expected value of every outcome.
When a choice can give rise to more than one outcome, one approach is to choose the one with the highest expected value based on the likelihood of success and how much it will benefit you (and conversely, how much failure will hurt.)
For example, if you move to L.A. and join a band, there's a slim chance you'll become a hugely successful rockstar. That possibility might mean the world to you. There's a much larger chance you'll be a starving artist waiting tables with other disgruntled wanna-be movie stars and that outcome could hurt pretty bad - or it could be a risk you're more willing to take than others. Multiply the likelihood of your rockstar success times the value of that success, and compare it to the likelihood of failure and how much it will negatively affect you. For several choices, go with the higher number.
WARNING: Mathematics ahead.
For each option, answer these three questions on a scale of 0 to 1.0:
How likely is succcess?
How much will success benefit you?
How much will failure hurt?
Using those numbers, calculate the expected value using this formula:

Expected Value = (Likelihood of Success * Benefit) - ((1 - Likelihood of Success) * Negative Effect)
For example:



In this case, I rated the benefit of success for starting a new company very high and the likelihood of success 50/50. Success "working for the man" is low at .3 since there's not a whole lot of upward mobility at my BigCo cubicle gig, and the benefit of success is 50/50 (salary and benefits but not a whole lot of excitement.) Since the chances of success and benefits of success are so much higher, in this case, I should start my own company.
The core of this decision-making model is nailing these numbers. In this example, if the job market is stable and a consistent salary and family health insurance is important to you because you have 3 young children who will be going to college in 20 years, "working for the man" has a high probability of success as well as strong benefits and turns out to be the choice with the highest expected value. Things might be different for a single, aspiring entrepreneur with less to lose in a market which is particularly good to startup companies.

Trust your gut.
As any good self-help book or Yoda would say, the answers are within you, my friend.
If you're absolutely stuck in deadlock on a binary decision, trick your gut into telling you what to do. Get out a quarter, assign each outcome to heads and tails. Flip the coin, call it in the air, and then pay attention to which outcome you WANT the coin to land on. Or, decide to go with whatever outcome the coin lands on. If you wish you could flip again, go with the other outcome.
The key to making a smart decision is giving yourself the time to gather all the information you need, and a confident, proactive approach with a method you trust. A daunting decision doesn't have to wrest you into an analysis paralysis death grip. Use a logical decision-making method to help you evaluate your choices and pull the trigger.