Decision Making in Business - A Basic Guide
I recently gave a presentation at a Thrive Connect meeting online. You can view the video below or on their YouTube channel. The presentation was based on the article below. You can also find the flow charts that appear in the video further down this page. They can be enlarged by clicking on them.
Decisions aren't just for special occasions
Decision making is a part of everyday life. From deciding what clothes to wear to where we will live and work, our lives are packed full of moments when we must make a decision. Some feel like they weigh more heavily on us than others. In those situations we can find ourselves feeling reluctant to make a choice. Or, at its extreme, we might feel paralysed and unable to move one way or another. For some, the events of the Covid pandemic have made decision making more difficult than usual. Even if we make a decision, will it still be relevant further down the line?
In a sense, however, this is no different to other decisions. Choices we make are not necessarily permanent and the opportunity may arise for us to change our mind and alter course. We also are fooling ourselves if we think that having certainty is necessary for business decisions. Certainty is an illusion. We can never know what might happen. The arrival and effect of the pandemic is a case in point. Up until then, many of us thought we were operating in a realm of certainty…. so why weren’t we ready?
Tough Times can Make Decisions Tougher
Living in more volatile times can make choosing more difficult. It can make planning, budgeting and the daily tasks of running a business that bit trickier. We haven’t lost certainty – we simply are more aware of how uncertain life is and we have lost our usual frame of reference. What we think of as certainty is often more of a personal or cultural comfort zone. So, how do we go about business despite our misgivings and the apparent chaos that surrounds us?
Not Deciding is in fact a Decision
For the moment, let’s park our decision and sit in the apparently more comfortable space of not having to choose. Making a choice means opting for something. But, it also means rejecting something else. Choices involve preferring one path over another. So, one of the reasons it can be so hard is that we don’t want to reject possibilities. We want to leave the door open and hedge our bets. Perhaps if we don’t decide then everything will somehow go away or work out ok. But, will it? Take a look at the chart below.
This shows us that “no decision” is not actually a neutral place to be. It is in fact choosing at least one of the options that branch off from it. Whether we do so consciously or even realise this to be true is irrelevant. By trying to avoid making a decision, we are in fact landing ourselves with one of these scenarios, like it or not.
Not deciding is in some cases simply giving away control. It is allowing something else, someone else or just plain old luck to control our destiny. Effectively, we are abdicating responsibility and putting someone else in charge. Is this really what we want?
In some situations, the result will be the default course of action. Whatever is happening now that we were considering reacting to will go on merrily without us. We have effectively chosen to allow things to see their course. It also means that we are unlikely to make progress. Our goals don’t tend to get nearer by merely hoping they will. Action brings us closer to achieving what we want. Not deciding is inaction at best or possibly acting against our own interests at worst.
Then we have to acknowledge that not making a choice can actually make things worse. It might feel as though we are on a more peaceful path as we’re avoiding conflict, for example. But, that problem that we were trying to solve won’t go away on its own. Not acting can cost us time, money and relationships. Yes, conflict can be bad. But, a lesser conflict in the short term may avoid a more serious one if things are left to simmer.
Priorities Assessment for Decision Making
The chart below is a simplified framework for the process of making a decision. It is not completely all-encompassing and is only intended as a basic guide. The starting point is the diamond in the top left corner – “Does it serve your purpose & goals?”
Making Decisions Based on Goals
The set of 5 diamonds along the top row is intended to be a logical flow to the process going from left to right. We start by measuring our decisions against our purpose and goals. This is something that is equally applicable to us as individuals as well as in a bigger business context. If something is going to take us away from where we want to get to and away from being who we want to be then there has to be a very good reason for us pushing ahead. Perhaps this decision is causing us to question our aims. Most often, this is unlikely to be the case. So, we can probably weed out a lot of unhelpful courses of action early on if we test them against our goals.
The Role of Business Culture
If we are not sure or have decided that “yes” it does serve our purposes to proceed with this line of thought then we need to consider it against the broader culture of our business. Is it something that will fit? Just because it worked somewhere else doesn’t mean it will always work. Do we have the will to support the action needed for this line of decision? If we know all the workforce will be against us, we have to be very sure that we want to impose something counter-cultural.
Do we have the Resources?
Then we need to ascertain whether we have sufficient resources to implement the decision. This could be in terms of money, personnel, time, premises or anything else that might be required. If we don’t have what we need then we have to work out if we can somehow get hold of it, e.g. borrow money. The project could well be dead in the water if we can’t meet the resourcing requirements. The final option is to look at a scaled down version to see if it would still be worthwhile to do what our resources permit.
What Decision gives best Value?
We need to decide if we are getting good value by taking a course of action. By this, I don’t just mean good value for money on a purchase. Value can refer to positive effects on our business in a variety of ways. Again, we may want to scale things down if it isn’t representing sufficient value in its current form. This step is all about analysing the benefits to our business of taking a decision in a particular direction weighed up against the resource requirements.
It is Decision Time!
After all of this, it may not be the right time to commit to going ahead. If not, but we still think it is good value, then we can set ourselves a reminder for a time when we think this will be better suited.
If everything regarding the implications of our decision making points towards a positive outcome that is worth doing now then we make that decision and get on with it. I have put action together with the decision as once we decide we don’t want to waste resources by effectively dropping back into the “no decision” box of the previous diagram. If we don’t follow up on our decisions then we risk things moving beyond our control, stagnating or causing other problems.
What about Feelings when Making Decisions?
So far we have remained very strongly rooted in the logical, reasoning aspect of decision making. However, as we all know, there are other factors that we need to take into account. Chief among these, I think, are our emotions. All of us make purchases at some point in our lives, if not regularly, on the basis of how we feel about it. Some people have thought that emotions have a negative influence and create an unwanted bias so are not to be trusted. Whilst there can be some truth in this at times, I certainly do not believe that we should discount them.
Emotions are rapid sub-conscious reactions to stimuli. If something reminds us of a positive or negative past experience then our emotions will often follow suit. This can be a useful subconscious warning system that reads signals that our conscious brain hasn’t given attention to. We may get an uncomfortable feeling around someone despite all the rational decision process apparently signalling a green light. I don’t believe we should ignore such feelings or “intuition”. Likewise, occasionally we may make a decision that doesn’t seem to tick all the right boxes but somehow feels right. I’m not saying that we ignore the rational process. Rather, the most prudent course of action would be to take both logic and feeling into account and to scrutinise both to see if they are being honest with us.
Decision making is something that involves our whole person. It can be a physical act that moves our bodies. It can be admitting that we have strong feelings that make us feel physically good or bad, but don’t quite know why yet. We are likely to make better decisions if they are as well-informed as possible. So, we can and I think should use all the data (including feelings) at our disposal. Now, I would also advocate testing those feelings. Are they ill-founded? Are we mis-remembering something or conflating our present circumstances with memories of past experiences that aren’t really relevant? Similarly, are we bending the logic to fit our feelings? Are we really measuring against a good set of criteria or just winging it? When setting the direction of a business and committing massive resources on the basis of a decision we want to be sure that we are looking at everything as clearly as we can.
Sure about Your Decision?
But, then we’re back to certainty again, aren’t we? Well, not quite. We want to manage our risks by making well-informed choices. But we will never be in a position to know 100% for certain that our feelings or the data we hold are not in some way misleading us. There is a certain point we reach when we have to either believe it all adds up or not. Time may show us to be right or wrong. But, we can have the courage of our convictions to act on the best of information to act in a way that takes us closer to being who and where we want to be.
© Joe Lenton, January 2021 No part of this post may be reproduced without permission including the images
If you would like to read more about how to go about choosing your “move” in business then do take a look at “Doing Business Like a Grandmaster”