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The Business of Better Decision Making

The Business of Better Decision Making
​We all want to make good choices, and it’s especially critical in business. Recognizing the surprising factors that influence your decisions will help you become a better leader.

If you’re running a business, most of your job is about making decisions.

What services should we offer?
Should I invest in new technology?
Should we focus on a niche market?
Should I make that new hire before we land that big contract?
Should I lay people off?
Should I seek outside investment?

Sometimes the answers are straightforward and easy to land on but more often than not, there’s a great deal hanging in the balance between the right decision and the wrong one. And it can be scary. Very scary.

Decision making has always fascinated me. Which is probably why, on a lazy Sunday browse through a local magazine stand, the Harvard Business Review’s most recent edition of Onpoint caught my eye (OK, maybe it also caught my eye because the cover design features a rainbow of candy).

This special issue is dedicated to the art of decision making, jam-packed with a collection of articles on the same theme from previous issues of Harvard Business Review.

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It’s 136 pages of fascinating and actionable research about how business leaders make decisions, how things can go horribly wrong, and options for making more effective decisions.

Much of it is common sense that often gets ignored due to ego, fear, time constraints, the pressures of a rapidly changing business environment, and just plain old human nature. It’s a good reminder for checking our biases at the boardroom door to focus on transforming information into action.

There’s so much good stuff in The Art of Decision Making that I almost couldn’t decide which articles to focus on (see what I did there?).

I selected two to summarize that I thought might help set us on the good-decision making track, but I highly recommend picking up a copy for yourself.

Nine Habits that Lead to Terrible Decisions

Two researchers, Jack Zenger and Joseph Folkman, created a leadership development app that ended in failure. At that point, they examined how their own decision making process led to such a disappointing outcome.

They asked themselves, “What causes well-meaning people (like us) to make poor decisions?”

So they looked at data from more than 50,000 leaders to compare the behaviours of those perceived to be making good decisions with those perceived to be making poor decisions.

They came up with nine of the most common characteristics that lead to poor decision making, ranked from most to least significant:

1. Laziness

It seems so simple but coming in at number one, being lazy can be the most detrimental to the decision-making process.

For example, not doing background work like checking facts, gathering data, getting input from multiple sources. People tend to rely too heavily on past experiences to inform their future decisions. It’s basic stuff but apparently it’s the #1 killer of a good decision.

So remember what Mom told you 8 million times and, “Do your homework!”

2. Not expecting the unexpected

Nobody wants to be the Debbie Downer in a meeting and list all the reasons why an idea might fail, but apparently too many people are too busy staring at the bright side of life to notice that the bottom is about drop out from beneath them. Bad things happen. A lot.

Instead of being so in love with your decision that you turn a blind eye to reality, take the time to consider what might go wrong. It can be your insurance policy to the future.

It doesn’t necessarily mean your idea is a bad one but it can help you decide whether it’s worth the risk or not.

3. Doing Nothing

It can be overwhelming to face a big, critical, complex problem.

More than that, it’s downright terrifying.

Which can make it easy to swing too far the other way and just constantly look at data and keep doing research, spinning your wheels in a muddy ditch of ‘what if’ so long that you miss the opportunity to make a move. Avoiding a decision can be as harmful as making the wrong decision.

So take a deep breath, look at the facts, consider the risks, and move forward. Otherwise you, and your business, will be left behind.

4. Being Stuck in the Past

There’s a lot of be said for experience and learning from established practices but often poor decisions are based on information that is out of date. People get used to a “if it ain’t broke, don’t fix it” mentality without realizing that they’re no longer able to even recognize when something is “broke.”

It’s critical to good decision making, and the success of your business, that you remain open to change.

5. Not Having a Clear Strategy

It’s easy for bad decisions to pose as good decisions when there’s no strategy to provide context. A strategy can act as your road map to help you decide whether taking one route over another will get you to your destination faster or sidetrack you, burning through resources and leaving you at a dead end.

Use your defined vision and strategy as the litmus test for decisions.

6. Too Many Decision Makers

What’s the expression? Too many cooks spoil the broth? Some decisions are never made because everyone is waiting for someone else to do something. Sometimes this can be an excuse to avoid taking responsibility for a decision, “Oh, I can’t make that decision about which campaign we’re moving forward on until I hear back from Marketing.” Then you ask Marketing and they say “Oh, we can’t decide what recommendation we’re making until we hear from Research.”

While it can be very important to gather input from other people, at a certain point, and in certain situations, you need to cut through the red tape and act.

7. Being a Lone Wolf

Drawing on the experience, expertise, and input of others is a critical factor in good decisions. But there are people who either don’t factor in the time for outside consultation, or they lack the networking skills to access the information.

Sometimes people don’t seek the opinions of others because they don’t want to share the glory. This can backfire spectacularly if the decision ends up being the wrong one as the blame will end up sitting squarely on your shoulders, and yours alone.

Involve others, listen to their input, seek out their expertise - it will make your life, and your decisions, easier in the long run.

8. Lack of Technical Knowledge

Industries are complex, business is complicated, and you can’t be expected to know everything about everything.

BUT, without at least a basic understanding of the technical aspects of your business, product, or service, how can you judge whether a decision is a good one or not?

Research shows that the best leaders have indepth knowledge and expertise, and if they don’t, they surround themselves with the right experts to help them.

Always be learning, always be asking, always be listening.

9. Poor Communication

A good decision is going to go nowhere fast if it isn’t communicated properly to the people who need to execute it, or the people who are most affected by it. You need to effectively communicate the what, where, when, and how of your decision if you want your team, your investors, and your customers to get on board with you.

Good communication, as in almost every situation, is the key to giving good decisions their best chance at success.

3 Ways to Create a Decision Making Process

So it’s one thing if you have a decision-making process but how do you empower your team members to make critical decisions that stay on strategy?

In their article called, “Simple Rules for a Complex World”, researchers Donald Sull and Kathleen M. Eisenhardt suggest taking a page from the playbook of companies that continued to prosper during the turbulent internet boom, like Intel and Cisco.

They based their decision making on simple, specific strategies instead of complicated frameworks.

Team members would identify a single critical process where a bottleneck was stopping things from moving forward —like approving a new product feature, or making a new acquisition — and then develop a few guidelines to remove the bottleneck, or at least work around it.

This allowed employees to make agile decisions in a rapidly changing environment while still staying focused on the overall vision and strategy of the company.

Through their ongoing research, Sull and Eisenhardt summarized this process into three simple steps:

1. Set Corporate Objectives

Ask yourself: What are we trying to achieve? Profitability, growth, cost-cutting, social good?

Any decision made should be focused on getting you closer to achieving your goals. If not, maybe it’s not the right move.

2. Identify a Bottleneck that Keeps You from Achieving those Objectives

Look at your business and figure out where the opportunities or investment exceed the resources available, like time, money, people. It could be this is where you’re being held back from achieving the objectives you set out in Step#1.

Next, look at what action (or at least a step in the right direction) can help you remove or manage that problem.

3. Create Simple Rules for Managing the Strategic Bottleneck

Now, look at what experiences your company has had with that action.

What worked?
What didn’t?
Why?

The rules created at this point should bridge key decisions with your corporate objectives.

A Proposify Decision

Kevin and Kyle, Proposify’s co-founders, used this process earlier this year to decide whether or not they should take on a round of investment.

They had been heavily advised to take on investment and the conventional wisdom is to take the money even when you don’t need it because later you might. It was definitely a big decision and one that could influence the future of the company.

The guys had always been clear about what Proposify’s corporate objectives were: Simply put, we’re focused on being a growth company, but not growth at the expense of happiness.

With a venture capital term sheet in front of them, Kevin and Kyle could see the bottleneck. As reasonable as the terms for investment were, the guys knew that it would limit their freedom to make their own decisions about the direction of the company later on, and thereby potentially limiting Proposify’s happiness.

Based on this, they decided they could bootstrap on their own for the time being and still accomplish the things they wanted.

The result so far is that Proposify is still growing and doing it on our own, and we haven’t diluted our stock which will make us attractive to other investors later, when we’re ready.

While this three step process may seem too simple, it’s critical to the process that you keep it that way even if you’re confronted with a complex problem. The research shows that when people are given way too many options, they’re fearful of making the wrong decision and end up doing nothing.

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Conclusion

Despite what you may think, The Harvard Business Review OnPoint is NOT paying me commission. These articles are genuinely interesting and, er um, on point.

The idea is that decision-making is a process, not a one-time event, which is a real shift for a lot of people.

While there is no silver bullet to making the right decision every time, if you can change your thinking and train yourself to recognize how emotion and cognitive bias factor into how you and your team make decisions, the odds of making good, effective choices increase significantly.

And you can save that magic 8-ball for important decisions like whether you should order Korean or Thai for dinner.

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