What Are Decision-Making Frameworks And Why Are They Important?

Frameworks are the lifeline of every case – whether in real life or in a case interview. They help navigate complex business scenarios in a simple, structured, and pragmatic manner while being rooted in hypotheses and concepts like 80:20 and the pyramid principle. One of the important types of cases you will experience in case interviews is “decision-making” cases. In these cases, you will be presented with a business situation that requires the client to make a decision. You as the consultant would be asked to provide a recommendation on the decision to be made. A solid decision-making framework will help you decide while ensuring your analysis is thorough and systematic.

Unlike broader decision-making frameworks used in real life business situations, which often encompass a wide range of variables and long-term considerations, the decision-making frameworks more applicable for case interviews are much simpler. They are designed to help candidates quickly hone in on the most pertinent aspects of a business problem, structure their thoughts, communicate their hypotheses in an impactful way, and get about the business of analysis to reach a recommendation and hence, the end of the interview. You are looking at a total decision time of 15-min (in the interview) vs weeks or months in real-life.

In case interviews, candidates can encounter a variety of decision-making scenarios – from determining whether a company should enter a new market to deciding the best growth strategy moving forward. The challenge lies not only in making these decisions, but also in articulating the process and reasoning behind them – all in about 15-25 minutes of the interview time. This is where mastering decision-making frameworks becomes crucial. They provide a logical structure for breaking down complex problems, guiding candidates through a step-by-step process to arrive at a recommendation.

In this article, we will look at one of the most common decision-making scenarios you might face in interviews – and a simple & intuitive way to create a framework that can help you crush those interviews. I hope that the article also gives you the learning, insight, and freedom to create your own decision-making frameworks.

The Decision For Yes or No - A Classic Decision Scenario In Consulting

A yes or no decision is one of the most commonly occurring archetype of decisions in business situations. If you look deeper, a simple yes or no can take the form of several subtypes – that are all still asking for a yes or no. Some such examples include:

  • Should the client do XYZ action? Yes or No?

  • Should the client invest in XYZ company? Yes or No?

  • Should the client enter XYZ market? Yes or No?

  • Should the client exit XYZ market? Yes or No?

  • Should the client launch XYZ product? Yes or No?

  • Should the client add an extra machine to their production line? Yes or No?

  • Should the client open a new factory? Yes or No?

  • Should the client enter this new XYZ business? Yes or No?

  • …the list can go on and on…

This is beginning to sound interesting. How can so many cases be of just one broad type? If you wish to prove it for yourself, feel free to open up your casebooks and try to map some of the practice case questions to the broad statements above. Note that these statements are still quite broad. But your casebook questions will map quite well I’m sure. There will be some other cases that will ask you to brainstorm ideas and diagnose reasons for profitability decline – but they are not decision-making cases – so park them aside for now in regard to this article.

Before we proceed further in this article, I want you to be fully convinced by yourself that cases like market entry or an M&A decision are actually business decision cases – and hence you would do well to think of them from a much broader lens rather than remembering hyper-specific frameworks for every business scenario. Once you start looking at these cases from this perspective of decision-making – you can bring numerous of cases under a single umbrella.

In fact, many candidates can find decision cases more challenging than other cases because decision cases require going beyond simple analysis, and into deduction, inferences, and logical assessment of the analysis outcomes. In a regular diagnostic case, you are asked to find possible reasons for declining profitability, and that’s about it. Alternatively, in an idea-generation case, you would be asked to brainstorm ideas to turnaround the situation. But taking a decision altogether is a different level altogether.

One of the other reasons candidates find decision cases more challenging is because they are not thinking about them as decision cases. If you get asked about a decision to invest in a company, most candidates will quickly jump and start applying their “M&A framework”. That’s fine to say, but do you really need an M&A framework as your first step? Or you need a decision framework as your first step? Think about it.

Once you are fully convinced about the merits of thinking about a decision-making framework first, instead of getting bogged down by different frameworks for market entry, M&A etc. – we will move ahead. In the remainder of this article, we will look at some common decision frameworks – and then we will also look at “one” framework to rule them all. Reducing and simplifying frameworks will help you keep your practice lean and effective.

How Can You Define The Basis For Decision-Making?

Let us look at some commonly seen decision frameworks and understand how they work. Once we are through them, in the next section we will look at something more relevant for case interviews.

The Cost-Benefit Analysis For Decision-Making

CB analysis is one of the simplest decision frameworks around. Here is how the decision-making process works in this framework:

  • Do the benefits outweigh the costs?

  • If yes, then the decision is a yes. If no, then a no.

Note that “cost” and “benefit” are the high-level buckets. How you break it down has to depend on the subtype of the case. How you list down the benefits and costs can vary in every case. It may depend on the sector, company type, problem type, and other factors. For example, if the situation was around investment, the benefits would include “return-on-investment (ROI)” as a parameter. Instead, if the situation was around implementing a new initiative, the benefits could include profit, market share, and customer satisfaction as some parameters.

BCM Analysis – What are benefits, costs and mitigations in the decision-making process?

This is an extension to the CB analysis. Here is how the decision-making process could work in this framework:

  • Do the benefits outweigh the costs?

  • If yes, then the decision is a yes.

  • If no, then do the mitigations reduce the costs to be less than the benefits?

  • If yes, then the decision is a yes. If no, then a no.

The BCM framework goes a layer deeper and formally recognizes that costs (or whatever is the opposite of benefits) may be lowered with appropriate mitigation mechanisms. For example, when launching a new product, a high initial investment might be lowered and mitigated by first doing a small-scale pilot launch to test market response.

SWOT – Take a look at the strengths, weaknesses, opportunities and risks of the decision

SWOT analysis is another popular framework (perhaps too popular) – but one that is often misused, unused, or underused. It needs to be correctly tweaked and formulated for each different business scenario. And it may NOT be applicable to ALL decision situations. For example, in a situation of market-entry, the decision-making process in this framework could proceed in the following manner:

SWOT Analysis
  • Are the strengths of the client tangible and material enough to meaningfully break into the market?

  • Are the weaknesses of the client easy to improve upon to not matter materially?

  • Are the opportunities in the target market big enough to help the client achieve its business targets?

  • Are the threats in the target market containable and manageable?

  • If the answer to all the above is yes, then it is a strong yes

  • If the answer is no to 2 or more, then no is mostly the right way to go

  • If the answers are somewhere in-between, then you need to either deep-dive, find a dealmaker/dealbreaker reason, or get an executive decision to move ahead

Now you see, suddenly decision-making is not so black-and-white anymore. There are shades to it. There are possibilities. There are decisions dependent on a dealmaker or dealbreaker. For example, Amazon entered the Indian e-commerce market despite knowing full well that it would bleed a lot of cash for a very long time. The decision was based on the dealmaker's premise that the Indian e-commerce market was in its initial stages with a few domestic players only, and it was growing very rapidly. So, entering the market early and strong would increase Amazon’s success in e-commerce for the second most populous country in the world. The decision was a no-brainer for Amazon, and all they had to do was prepare well for it. On the other hand, Apple waited till 2023 to open its first Apple Store in India – only because they realized their high-priced products didn’t have the right market or audience in India until that time. Only in the last 2-3 years have Apple products been seen in a tipping-point popularity in the country. So while Amazon’s early entry was based on the premise of establishing deep roots early on in a large market, Apple’s late entry was based on dissonance in the consumer for their products until a certain point.

PESTEL / DESTEP / STEEPLE

No, those are not typos. They are just variations of a broad category of opportunity assessment frameworks that can help in decision-making. Here is what each of them mean (note that different variations might exist):

decision making frameworks - PESTEL, DESTEP, STEEPLE
  • PESTEL – Political, Economic, Socio-cultural, Technological, Environmental, Legal

  • DESTEP – Demographic, Economic, Socio-cultural, Technological, Environmental, Political

  • STEEPLE – Socio-cultural, Technological, Economic, Environmental, Political, Legal, Ethical

If I “remove duplicates”, I am left with the following unique parameters:

  • Political

  • Economic

  • Socio-cultural

  • Technological

  • Environmental

  • Legal

  • Demographic

  • Ethical

And I could call it “STEEPLED”!

This type of framework works different from CB, BCM, and SWOT in a number of ways.

First, STEEPLED (or its peers) are more suited to evaluating decisions through their impact on a broader or wider scale as opposed to only for a business. They are a perfect match for policy decisions. But they may not be so for an investment decision as much. It all depends on what are the focus parameters.

Second, one can think of STEEPLED as being transversal compared to CB or BCM. Let us look at this table below to understand what I mean. The STEEPLED framework provides pillars for your benefits and costs and makes your BCM analysis much more structured and comprehensive. We see that this is an example where 2 frameworks collide and work together to give you a holistic way to assess a business decision.

STEEPLED

The FLOS Framework - Consider financial, legal, operational and strategic parameters

With a good amount of practice, you can adapt and apply any of the above frameworks to your case interviews. However, for business situations, the frameworks listed above can sometimes be a bit too wield. They are too spread out, and they don’t talk explicitly about business aspects. To focus better on business situations more commonly found in case interviews, let us try to look at another type of decision framework.

Presenting FLOS – Financial, Legal, Operational, and Strategic parameters. In principle, FLOS works in a manner similar to PESTEL or STEEPLED, in that it provides a good basis for pillars of evaluation for the business decision. The difference is that the pillars in FLOS are much more explicitly suited to business situations. When you combine it with CB or BCM analysis framework, it can give you a very potent framework for a comprehensive business decision. Here is how the analysis table would look like:

The FLOS framework

Understanding the FLOS framework

Let us see how the FLOS framework addresses business requirements:

1. Financial aspects of the decision: Is the decision financial beneficial?

  • Does the decision present a return-on-investment (ROI) higher than the target?

  • Does the decision lead to revenues that outweigh the costs?

  • Does the decision lead to a profitability that is better than the target?

  • Does the decision help stem any losses taking place?

  • Does the decision help achieve a successful financial turnaround?

  • Does the decision have better financial outcomes v/s other decision options?

  • Are the financial requirements of the decision within the company’s budget?

  • Will the decision create any negative/adverse financial effects for the company?

  • Is the market sizeable/right enough to create the right financial outcomes for the company?

  • Is there any financial aspect of the decision that is a dealmaker or dealbreaker?

2. Legal aspects of the decision: Is the decision legally permissible?

  • Is the company legally allowed to take the decision and implement it?

  • Are there any legal prerequisites that make it very challenging to implement the decision?

  • Is there any possible legal backlash from the decision that can create negative/adverse impact?

  • Is there too much hassle in managing the legal fallout from the decision?

  • Is there any legal/reputational risk from the decision?

  • Is there any legal aspect of the decision that is a dealmaker or dealbreaker?

3. Operational aspects of the decision: Is the decision operationally feasible?

  • Does the company have operational capabilities to implement the decision?

  • Can the company overcome and operational shortcomings to implement the decision?

  • Is the implementation very complicated from an operational perspective?

  • Is there a high risk of operational failures known to happen in the decision?

  • Is there any operational aspect of the decision that is a dealmaker or dealbreaker?

4. Strategic aspects of the decision: Is the decision strategically sound?

  • Does the decision align with the company’s overall strategy?

  • Does the decision give a strategic advantage to the company?

  • Does the decision help the company achieve strategic objectives?

  • Is the decision the best possible alternative strategically?

  • Will the decision create the right strategic perception for the company?

  • Is there any strategic aspect of the decision that is a dealmaker or dealbreaker?

Example of the FLOS framework

In order to further better understand the implementation of the FLOS framework, you can head over to PrepLounge’s case library and check out the “BCG Final Round: Stadium Naming Rights” case. This case talks about the decision to bid for stadium naming rights, and the first part of the case is around evaluating the decision as a yes or no.

I will leave it up to you to check out the full case and use it for your practice and learning. However, for your immediate reference and convenience – I am sharing the framework from that case:

Key decision: Should NeuBank acquire stadium naming rights?

1. Financial Feasibility: Will this initiative be financially beneficial for NeuBank?

  • Will the financial returns from the naming rights investment meet NeuBank's expectations?

  • Will the naming rights bid create any financial distress for NeuBank?

  • Are stadium naming rights typically within NeuBank's budget?

  • Are naming rights a cheaper method of customer acquisition vs NeuBank's current practices?

  • Will naming rights increase NeuBank’s shareholder value?

2. Legal Factors: Are there any regulatory or legal issues for NeuBank in the naming rights?

  • Are there existing legal or regulatory restrictions that prohibit NeuBank from acquiring stadium naming rights?

  • Are there potential reputational risks to NeuBank if the home team does not perform?

  • Can NeuBank effectively manage the potential risks associated with this initiative?

3. Operational Considerations: Is this initiative operationally feasible for NeuBank to execute?

  • Does NeuBank have the operational capability to manage the logistics of naming rights?

  • Does NeuBank have the necessary resources to implement and manage this initiative?

  • Are the operational changes required for this initiative, feasible for NeuBank?

  • Can NeuBank establish an on-site presence for cross-promotions of services at the stadium?

4. Strategic Alignment: Does this initiative align with NeuBank's strategic objectives?

  • Are naming rights compatible with NeuBank’s current strategy?

  • Are naming rights strategically effective for entry into Ohio?

  • Will naming rights foster the right perception of NeuBank in Ohio?

  • Will naming rights offer strategic cross-promotion opportunities for other NeuBank services?

  • Is the current stadium in Ohio the best choice for naming rights?

Next steps - How To Use Decision-Making Frameworks Successfully In A Case Interview!

Here are some key actions you can take on your journey towards decision-making enlightenment:

  1. Understand and acknowledge that “decision-making” covers a wide variety of cases and can span across market entry, investment, and other categories. Note that in the same case types you can also encounter brainstorming and diagnostic cases. So don’t expect every investment case to be a decision-making case – maybe it turns out to be a diagnostic case. Do write to me if you would like to understand how that could happen
  2. Understand the various decision-making frameworks discussed in this article – including the classical CB/BCM and PESTEL/STEEPLED frameworks

  3. Understand and acknowledge that the FLOS framework better addresses business situations compared to PESTEL and STEEPLED frameworks. 

  4. Understand how the FLOS framework works as discussed in section 4.1 of this article. If you have any questions/doubts then please do send me a direct message on my coaching profile.

  5. Try out the Stadium Naming Rights case and experience the decision-making process yourself.

About the Author

Agrim

BCG Dubai Project Leader | I will transform your thinking about Consulting Interviews

  • Professional Experience: BCG, Opera Solutions

  • Languages: English

  • Location: United Arab Emirates

Agrim is an interview coach, former BCG Project Leader, and Solutions Analyst at Opera Solutions. He is a Specialist in PEI / Fit / Unorthodox Cases / CV / Market Sizing. Agrim helped a lot of candidates to land offers from McKinsey, BCG, and Bain. He is an expert in the Middle East (Saudi Arabia / Dubai / Qatar / Abu Dhabi / Oman / Kuwait). As a consultant, Agrim worked as a Project Leader at BCG for four years. Before that, he was a Solutions Analyst for Opera Solutions for two years. 

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