How to use Analytical Reasoning to score more in XAT Decision Making

Monday, December 21st, 2020

XAT Decision Making analytical reasoning

An Analytical Guide to  XAT Decision Making Process

Decision making is an integral part of management. It is a cognitive process of selection of a belief or course of action among several possibilities. You have to act rationally while decision making and foresee the outcomes of all the options available and its alternatives. And as aspiring future business managers, time and again you have to face situations where you have to take major decisions by carefully examining the problem and considering all the pros and cons, the long-term and short-term impacts of your decision. And that’s why in XAT, an entire section is devoted towards decision making and around 21-25 questions are asked each year. In XAT, the questions are asked usually in two formats in which real-life problem are provided to you in form of passages followed up with either a single question or multiple questions where, as a protagonist, you have to choose the ideal course of action for the problem. These questions involve two of other skills from different section i.e. Reading Comprehension and logical reasoning. So, this gives you a dual advantage that you get to prepare for this section along with the other two. Though there are also other aspects and in this blog, I’ll highlight all the key factors that are needed to be assessed before deciding the solution of the given problem.

In XAT, the problems are usually on the following issues

  • Ethical Dilemma questions
  • Management Issues
  • Financial Issues
  • Miscellaneous


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    Decision making is a perspective concept. Not all individuals analyze the situation, in the same way, each one may have a different interpretation and might have the varying course of actions. But in the exam, only one answer is correct and you have to judge that answer among the options which all seem correct in the provided perplexity. You have to carefully examine and go through the situation then assimilating all the facts, defining the parameters, developing the cause and effect relationship, apprehend the impacts and choosing an ideal decision that is in the best interest of the firm. And yes, you have to do this entire process for 20-25 questions within a strict time constraint as you have to do other sections as well! So, how to do this?

    The following points are some tips to simplify the above problem and will channelize your thinking in a direction that will make it easier for you to take a rational and correct decision in stipulated time.

    1. Initiate Stakeholder Analysis: Stakeholders are those people or a group of people who can be directly or indirectly majorly affected by your choice of actions. These are the people who have to bear the fruit or the burden of the decision you took. Stakeholder analysis is a significant part of decision making as ultimately all the decision you take effect in some or other way to the people who are or can be involved in the present circumstances. Firstly, you should be able to identify these key stakeholders. To identify them ask questions to yourself like
      • Who are the people who might suffer huge monetary losses or profits in the process?
      • Is there any social group or community that is being directly impacted?
      • Are any NGO’s or activists are involved in the impending decision?
      • Can there be a possibility of loss of jobs, homes, livelihood for someone or group of people after the decision is taken?
      • Does the govt. or its subsidiaries get directly involved in the decision-making process and are the major influencing factor?

    The above questions are the few ones that help you list out all the majorly impacted people or group of people. The mindful thinking and speculation on how the interests of each of these individuals are altered by looking through their glasses will help you to form a clear picture about the rewards and risks they’ll face as soon as your decision is set into motion. Using this technique will help you evaluate all the gains and losses from each of the options available to you in the question and you can select the best of them

    1. No unethical business: Ethics are morals and principles that involves systematizing, defending, and recommending concepts of right and wrong conducts. In the business world, Ethics are generally accepted standards of responsibility and conducts in which any relationship/ partnership is handled. Nowadays the moral code of conduct holds a high place in the society and business and by now way these ethical standards should be compromised in the way of some more sound and practical decision-making. A small ignorance of these moral conducts might give you a major blow to the reputation of the company itself and brings the firm into the limelight for all the wrong reasons. In XAT, especially you should rule out all unethical options even if you find them more logical and sensible and is minorly unethical. This practice of discarding the unethical practices will further filter out the alternatives you in the exam.
    2. Ignore personal biasedness: Sometimes when real-life caselets are given and the situation might involve some personal belief or experience regarding that and you wish to react to that situation in some particular fashion and norms you believe are just and apt. But, this is where you are going wrong. You should not forget at the time of decision-making that it’s not you who have to act but the manager or the protagonist in the question have to devise the solution to the problem. Thus, your reasoning shouldn’t be blindsided by any cost on the basis of some personal prejudice or biasedness. The thought making process must be based on rationality, impartiality, and balance.

    For ex: Being a girl you might have read and personally face the gender discrimination in various aspects of your personal and professional life. But that doesn’t mean in the exam, this inclination towards womanhood and their upliftment cloud your judgement while making decision in the real-life scenario presented towards you in the exam such as consider you being a manager and in your team a girl has accused one of her co-worker of sexual harassment and you have to decide what to do? Whether to right away fire the guy on the basis of the words of the girl or give him a benefit of a doubt and dig deep into the matter. In this kind of situation, you have to make sure that because of your personal experience or beliefs and you do not be emotionally driven and fire that employee. You should analyze each and every aspect of a problem given to you and listen to his side of the story as well. And then respond accordingly.

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    1. Overlook severe and extreme measures: You should always neglect the options that can cause severe damage to any particular group or individual in the disputes where there are other options available that could avoid such extreme viewpoints and maximize the gain for everyone. The decision should be balance in nature and always minimizes the damage is correct where there’s no need of taking these harsh decisions and a middle path could be adopted that is good for all.
    2. Always acknowledge organization goals and objectives: While making any decision you should be constantly aware of the organizational goals and objectives such that no stupid or reckless decision at the expense of organizational goals. Instead, you should be very calculative while decision making and act ingeniously so that the path you assume not only have short-term benefits but also proves to be fruitful in the long term. Also, the organization is above any individual and by no means its image should be tarnished and hampered. As in recent age of globalization, it doesn’t take long for a minor news to circulate and became the headlines of next day’s newspaper and a troll on social media. So, you should be very cautious and meticulous while making decisions that can cause any harm to the public image and goodwill of the organization.

    The above points will help you sieve all the choices of actions that are presented in front of you and provide you the best-suited action that is not clouded from prejudice, takes into account the interest of stakeholders, ethical in nature, upholds the image of the employer, etc.

    Let’s do some examples that will provide you a better understanding of how to proceed in these types of situations using the above tips and points.

    Example 1: Ram was an operations manager in a social development organization and observed deep-set caste discrimination all around him. Observing that caste based discrimination was endemic in his organization, he decided to quit and start his own NGO. In his organization, he employed people from all the castes and tried to eliminate caste-bias. Over the years, his NGO expanded and started working with various sections of society and started supplying material to organizations dominated by those of supposedly higher castes. As part of his team, he builds a squad of sales representatives consisting of people from diverse backgrounds, including the lower castes. As his representatives were from diverse backgrounds, including lower castes, he soon started experiencing resistance from his clients as they objected to the presence of representatives from the lower castes.

    Ram is struck in an ethical dilemma now. With more than half his employees from lower castes, he can no longer send them to his clients. He is under pressure to change the demography of his organization. On the other hand, if he does so, he defeats the very purpose of building his organization in the first place.

    What should he do as a socially aware entrepreneur who knows his social responsibilities?

    1. Shift to businesses and areas of the work which face no such stigma.
    2. Reduce the number of lower-caste employees.
    3. Let the current situation continue and hope for the social climate to improve.
    4. In future, hire only people from the caste that pose no such problem.
    5. Try to juggle his assignments in such a manner that he does not send people from the lower castes to those clients who object.


    Solution: The above question is the part of the ethical dilemma. Now you have 5 options available to you and but only one is correct. As told earlier let’s first find out the stakeholders involved in this situation. Who are the major people whose interest is dependent on your decision?

    The major stakeholders for you when you step into Ram’s shoes are his NGO, the lower caste employees, and his clients. Now the option 1 says to change his course of business to some other type. But that would not be apt decision to make as it will directly hamper his NGO itself and would give a major blow to his sweat and blood that made his NGO so successful in the current state. So, this option should be right away discarded.

    Next in line is to reduce the number of his employees but that’s unethical in nature and against the major objective of opening up the business. Also, this would give a major setback to those employees as they will lose the source of their livelihood. So, this is also not the right decision as well. Again, the fourth option is also not the correct one as this was not the objective of his NGO and thus will be rejected.

    Similarly, the 3rd one is a vague solution and does not offer any concrete solution to the problem and if the business is to be continued in the same fashion Ram will eventually lose all his higher caste clients.

    In the end, we are left with the final choice and this is the right one as if we begin following this routine it will serve the dual purpose i.e. neither you would have to lose your clients nor has to fire your low caste employees and your business will keep running smoothly.

    Example 2: The city of Nagar has a population of 10 million, 2 million amongst whom are rich, 3 million poor and 5 million belong to the middle class. Saundarya Cosmetics manufactured and sold beauty product to the rich class at a premium price. Its products were very popular with customers.  Many people from the middle and poor segments of the population aspired to buy these products but could not afford because of the high prices. Of late, sales growth has been stagnating in the rich segment.

    Which of the following is the best option for Saundarya Cosmetics to maximize long-term profits?

    1. Sell the same products at lower prices to middle and poor classes.
    2. Sell similar products, of different quality standards with different brand names, to middle classes and poor classes.
    3. Sell its products under different brand names to middle and poor classes.
    4. Continue to target rich only and hope that today’s middle class would be tomorrow’s rich class.
    5. Target middle class as it is the largest segment and forget about the ric

    Solution: The above question is part of the financial issue. We will use the similar reasoning as we did in the above example over here too. In this case, the stakeholders are the firm selling Saundaraya Cosmetics, the existing rich customers and the potential market base i.e. middle and the poor class people.

    Now selecting 1st and 5th options would not be right for the company as doing so will be bad for business. Since, if the same products are sold to middle and poor at cheaper prices the firm will lose its existing clients the rich ones and also the firm will make losses if they sold high-quality products at lower prices. In a similar way, 5th option is also not viable for the firm too and they have to bear large costs of following this strategy.

    Here the 4th option is also very vague and is based on some future expectation that seems too unlikely be true in near future. Thus, this decision will also not see the light of the day.

    The best course of action that is available to you at hand is the second one. As if you sell the similar products but of different quality with the alternative brand name to middle and poor class will increase your customer base, not at the cost of existing clients. The rich class will continue buying the superior quality products and thus it will maximize the profits of the firm and hence no damage caused.

    I hope these examples have provided you an approach and outlook you should follow to solve the questions and choose correct options in the decision-making process. This concept is something that you won’t learn in a day. In the exam, you can get any kind of situation that could be baffling to an extent that either all the answers will seem to be right or no answer will justify the situation. But as you solve diverse examples and problems then you’ll evolve and develop a deeper understanding of different roles and dilemmas won’t remain dilemmas anymore.

    Other posts related to Decision Making

    Making sense of the XAT Decision Making Ability section
    XAT Decision Making Tips – Identifying key stakeholders and their interests
    XAT Decision Making Section – Golden Principles for tackling questions related to Management Issues
    5 Steps to tackle Ethical Dilemma Questions in XAT Decision Making Section
    XAT Study Plan – Decision Making Preparation in Three Weeks
    Target XAT – Strategies to attempt Decision Making Section


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