Once you realize this chart represents the letters of the alphabet, and specifically the examples given at the top of the puzzle, it becomes a matter of following the five steps in order.
First is the number of loops in the letter. B has two, so must be the single line to the left. A, D, O, P, Q, and R each have one loop, so the center branch is one loop, and the right leg contains the remaining nineteen letters.
Next is the diagonal lines. Of the letters with no loops, eight have diagonal lines (KMNVWXYZ) and eleven do not (CEFGHIJLSTU), meaning that the diagonal line letters must branch to the left. For this puzzle, it turns out to be safe to assume that the same rule holds for the one-loop letters, though you can also wait until the following step to figure out which order the diagonal/non-diagonal letters go. (B, of course, is on its own branch, and we no longer have to do anything further with it.)
We can follow similar logic for the next three steps. It turns out that the correct order for step three is both straight and curved, only curved, and then only straight. Step four is merely in increasing order of the number of lines. For step five, the letters which do not appear in the given phrase branch left, while the letters which do branch right.
At this point, there are still a few letters which are in the same groups. V and X, M and W, L and T, as well as K, Y, and Z and C, J, and U. The “identical” letters are show below in alphabetical order, but that is arbitrary.
Most of these do not affect our final answer, but this little bit of ambiguity means that we know it must be BRANJH, BRANUH, or BRANCH. Of these, only BRANCH is a word, and a relevant one at that, so it is our answer.