Better Decision Making For Small Business
By Mark Swartz
Monster Contributing Writer
Making decisions is at the heart of running a business. But for every potential reward, a possible downside risk is attached. Hence the fear of failure that comes with forced choice.
The more important a given decision is, the harder it becomes to select which way to go. Consider the serious consequences of expanding your operation, investing in a new product, taking in a partner, or hiring more staff.
Gathering data and seeking input can help. However it may also lead to analysis paralysis. That’s why rational deliberation and quicker, more intuitive insights should be combined. Doing so via a process with defined steps can lead to better outcomes.
Myths About Decision Making
Popular culture is filled with images of decisive people. A boss who barks orders with unshakable confidence. Staff having “eureka” moments with sudden, absolute clarity. From there everything proceeds swiftly.
That’s not how decisions are usually made. Normally they are clouded with degrees of uncertainty. There is almost always some second-guessing after the fact. Who hasn’t chosen a particular path only to regret it later?
Why Poor Decisions Are So Easily Made
Working under excessive pressure. Not enough resources. Limited time and information. All of these can lead to bad choices.
According to organizational decision-making expert and author Bernard Bass, four prime factors produce sub-optimal outcomes. In general, organizational decision-makers…
- are sidetracked by alarm bells of problems instead of identifying signals for opportunities;
- pay more attention to perceived wants of bosses than to actual needs of colleagues, subordinates and the organization;
- expediently pick the first alternative that minimally meets acceptable standards;
- Choose options that tend to support previous decisions within the organization.
Benjamin Franklin’s Basic Approach
A simple way of finding signal in the noise is to use Ben Franklin’s method. The renowned 18th century inventor would list the advantages of yes, and advantages of no. His basic system of risk management works and has been frequently cited by management instructors.
Add to this an understanding of the downside of your decision. What is the worst that can happen if you are wrong? Can you (and the company) live with it? If not, the gamble may not be worth the risk.
A Six Step Decision Making Process
For important business choices, a more robust process may be helpful. The following approach provides a useful framework for making effective choices.
- Determine the problem and identify the goals to be accomplished by your decision.
- Engage your intuition. Note your instant feelings on the situation and write them down.
- Collect data. Don't be obsessed with researching every piece of available information.
- Identify the actions needed to accomplish your established goals.
- Develop a list of pros and cons for each possible action (each pro and con need not be weighted equally). Monitor your emotional reactions to each option.
- Enlist the opinions of others and then combine logic with an intuitive judgment about the best action to perform.
When to Delay Making Major Decisions
If you are over-tired, not feeling well, emotionally upset, or feeling impatient, you are prone to error. Wait a day or two, if possible, until you are your regular self. You should be healthy and have clear head; strong emotions or fogginess will impair your decision-making ability.
In addition, try to avoid acting purely on impulse. Today’s brilliant insight may be offset by tomorrow’s facts. Mixing gut feel with hard data and the opinions of relevant others takes a bit of time, but can be essential in arriving at optimal decisions.