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Big decisions usually come after a considerable amount of research – discussions about the options available, about the criteria for choosing between them, and about the pros and cons of each possible choice.
These kinds of investigations can take months. After you and others have invested so much time in choosing the best option, the last thing you'll often want to do is reject the whole idea, and stay with things as they are now.
But is going ahead actually the best thing to do? Or has the environment changed since you first started considering the change, so that your preferred option is no longer worth going ahead with?
Is the cost of making the change greater than the benefit you would receive from it? Or has your organization's cash flow recently suffered, so that you now can't afford to make the change, even if it's valuable and useful?
When deciding whether to go ahead, you have to realize that the time and money you've already spent on the project are "sunk costs" – costs that cannot be recovered, and that you need to put behind you for decision-making purposes. You must evaluate whether or not you should go forward objectively, dispassionately, and on the basis of where you are now. It can take a lot of intellectual maturity to do this!
There are a number of tools that you can use to make good go/no-go decisions. This article helps you identify the right tool for the right situation.
Understanding Decision Making
Uncertainty is one of the largest obstacles you face when making a decision - after all, very few decisions are made with full knowledge of the consequences. With this in mind, our article on Decision Making Under Uncertainty gives you some good approaches that you can use to manage it. Whatever approach you use, it's most important to have a methodical process for making the decision, and to use solid decision-making tools. With these in place, it's much easier to do what needs to be done each step of the way.
With go/no-go decisions, as with any kind of decision making, your steps begin with defining the problem, developing criteria for a successful solution, and generating alternatives. (You can learn more about these steps in our article on the Dynamics of Decision Making.) From these potential alternatives, you can choose your best "go" option.
Tip:
Where you need to make your decisions in a team environment, read our article about Organizing Team Decision Making. With teams, you need to pay as much attention to collaboration and participation among team members as you do to evaluating the options, if you're going to avoid the many potential problems that go with group decision-making.
Go Versus No-Go
For go/no-go decisions, you have to choose between two options: to go ahead, or to do nothing. To make good decisions, you need to use two groups of tools:
- Tools for exploring the options.
- Tools for making the decision.
We look at these below.
Exploring the Options
With these tools, you're making sure that you fully understand the options that you're considering. In particular, you need to check for expected and "unexpected" consequences if your "go" option is implemented, and do the same if you decide not to go ahead.
- Risk Analysis – Every decision you make has risk, whether you decide to go ahead with change or whether you choose to stick with the status quo. You need to understand the risks you're taking fully if you're going to make a good decision, which is why Risk Analysis is so important.
The amount of risk you're willing to take depends on your own attitudes to it, as well as the type of decision. And whether you make the decision alone or with a group also influences the amount of risk you're willing to take. Groups are often more willing to take risks - sometimes in a negative way – because responsibility is spread among all members of the group. Again, see our article on Organizing Group Decision Making for ways of avoiding this. - Impact Analysis – Impact Analysis is closely associated with risk analysis – this is an in-depth approach for brainstorming the possible positive and negative "unexpected" consequences of a decision. Here, you assess each option based on the likely impact it will have on the organization and its stakeholders: What could happen if you go ahead with a change? And what could happen if you keep doing what you're doing now?
- Six Thinking Hats – Like it or not, people have different decision-making styles, and these can bias the decision-making process. The Six Thinking Hats approach provides a formal way of using some of the most common styles (data driven, intuitive, pessimistic, optimistic and creative) to look at a decision, so that you can get the full benefits of each style. Again, apply this approach separately to the go option and to the no-go option to give a balanced exploration of each.
- Use of Beckhard and Harris's Change Equation – This approach helps you think about the strength of your case for change, and how that affects the likelihood of a successful implementation. It assumes that, for a change to be successful, dissatisfaction with the status quo, multiplied by the desirability and practicality of a change, has to be greater than the resistance to change:
Dissatisfaction x Desirability x Practicality > Resistance to Change
So, for go/no-go decisions, you need to determine whether there's sufficient dissatisfaction with doing nothing to justify making changes, and that change is desirable to people and practical to implement. If any of these three things isn't in place, then the whole left side of the equation equals zero – and that means a difficult road ahead for any changes you may propose. Click here to find out more on this. - Force Field Analysis – Force Field Analysis helps you to capture what's going on within your organization to either support or weaken each of your choices. Personal interests, egos, laziness, and a strong desire to keep the status quo are forces that can stop even the most brilliant plans for change, as are honest sources of opposition, for example, when the change conflicts with the organization's culture and values.
On the other hand, there may be plenty of positive forces for change that can offset the negative forces. By completing an analysis like this, you're not only able to predict your likelihood of success, but you can also identify opportunities for increasing the positive forces and weakening the negative ones.
Tip:
See our article on Change Management for tips on improving the chances of success, if you decide to go ahead with implementing a change.
Tools for Making the Decision
Once you've expanded your understanding of the decision that you're taking, it's time to make the go/no-go decision.
The approach you use here depends on the scale of the decision, and its context.
For large, financially-based decisions, there's a whole discipline of financial evaluation that your organization's finance department will be familiar with. This is a specialist subject that is beyond the scope of this article. If you're not a finance specialist, the best thing to do here is to get the help of your finance department to make sure that these evaluations are structured correctly.
For smaller financial decisions, and for decisions that have non-financial elements to them (most decisions are not exclusively financial), there are a number of good techniques that you can use to make decisions:
- Cost/Benefit Analysis – Cost/Benefit Analysis is often the place to start with this type of decision making. List the costs of each option, based on the risks and impacts you identified earlier. Then make your best assessment of the value of the benefits (you can express these in purely financial terms, or you can include more subjective measures as well). This gives you a quick reckoning of whether your best option is worth implementing.
- Cash Flow Forecasting – Cash Flow Forecasting takes this approach to the next stage, by thinking about how your decision will play out over time. This approach helps you to evaluate the monetary impact of making a change, or staying with the status quo. Your decision ultimately has to make sense financially, and you need to know if the change will be sufficiently profitable to justify all of the consequences of the decision.
- Decision Trees – These are useful where the outcomes of a decision are particularly uncertain – for example, when you're launching a new product, it can be hard to predict future levels of sales. Decision Trees help you bring probabilities into decision making, helping you take account of uncertainty.
- Paired Comparison Analysis and Decision Matrix Analysis – Used together, these tools help you assess the relative importance of many different decision-making criteria, and then assess your go/no-go decision depending on how each ranks according to these criteria. This makes them great tools to use when many different factors need to be taken into account. Click here to find out about Paired Comparison Analysis, and here for Decision Matrix Analysis.
Tip 1:
For more on financial evaluation of your options, see our Bite-Sized Training: Project Evaluation and Financial Forecasting session. In it, you'll learn how to create a cash flow forecast, and we'll introduce you to two fundamental project evaluation measures: Net Present Value and the Internal Rate of Return.
Tip 2:
For particularly important decisions, consider "auditing" your decision-making process to make sure that it's logically sound, and that you haven't overlooked any key factors. Two tools can help you here: the Ladder of Inference, and Blindspot Analysis.
Key Points
Decisions are part of everyday life. Often, your decision is whether to go ahead with a solution, or accept the status quo and do nothing. These are called go/no-go decisions, and they involve a thorough investigation of the problem from start to finish.
By treating exploratory work as a "sunk cost," and by following a clear process to decide between taking action and maintaining the status quo, you can ensure that the decision you make is the right one.
By using a go/no-go approach to decision making, you'll make sure that inaction is a proactive, conscious choice and not simply the result of the inability to make a decision. Similarly, it helps you ensure that decisions to go ahead are made for good reasons, and not just because a project already has 'momentum' within your organization.
