John Strom: Making decisions in business
November 13, 2016
The title of this article seems simple enough. Yet, making decisions — good decisions — is really a complicated process. As a leader/manager, it's important to make decisions the right way as the cost of wrong decisions can be expensive. And the benefits of the right decisions are equally impactful in a positive way!
How decisions are typically made
Decisions in most business are made quickly without a lot of thought. Managers can see what needs to be done and are quick to just do it. This works most of the time. Unfortunately, too often these quick decisions yield some results that aren't really the best. This is often seen as the decision plays out over time. There's a better way.
Making better decisions
The decision-making process is just that — a process. By that I mean there are some steps to take that will result in better decisions. These steps include fully understanding all the elements involved in the decision, gathering relevant information, considering all the ramifications of the decision once it's made and then effectively implementing the decision. Let's consider each of these steps:
Understanding all the elements involved
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To make the best decision, it's necessary to fully understand all the elements involved in the decision. For example, decisions in one department often have impact on others, yet too often these impacts aren't fully considered. For example, the decision to outsource work for less cost to one department that can be profitably done in-house may save money in that department but doesn't consider the whole picture. The company is passing up profits in another area. And often there's little consideration of the impact of decisions on the customer experience as well as team member effectiveness, efficiency and morale. Then there's the long-term impact of the decision on repeat and referral business. Making/saving money today can cost a lot of money later on.
Gathering relevant information
The second step in making good decisions is to gather relevant information about to the situation. There are three good sources for this information:
Your people. Those who work the job everyday know it best. What's happening now? What elements need to be considered? What do they think should be done? Take a few minutes before deciding and talk to them.
Customers. How would the various decision options affect them? Most companies have some knowledgeable, loyal customers they can ask for insight on what's the best road to take.
Observations. Take a few minutes to observe what's currently happening relative to your decision. This will often lead to some adjustments to the decision that can be important in the long run.
This last one is important if you haven't done the job yourself in a while.
Considering all the ramifications of the decision
This third step is as important as the first two, because without taking time to do this, you can easily make decisions that have positive impacts in one area of the business while negatively impacting others in most undesirable ways.
Run the potential decision by knowledgeable others in the company to get their thoughts on its impact. They will often see ramifications that you don't see. Ask for both the upsides of the decision and potential downsides. Ask how they see the decision impacting both in the short run and the long run. And if there are others outside your organization whose input you value, ask them the same questions. Of course, if you know of others who have made the same or a similar decision as you're making, ask they how it's working out. (Be sure to consider the differences between their situation and yours.)
A decision to get a handle on policy expense resulted in many decisions by staff that may have saved money in the short run but cost customer loyalty and the resulting repeat and referral business in the long run. It proved very costly indeed — over time!
Does the decision meet the three criteria for good decisions?
All good decisions must meet three important criteria: 1) Is it good for the customer — does it make their experience better? Will they like it? Will your action(s) encourage them to repeat and refer others? 2) Is it good for the company — will it make things easier, more efficient, more effective? Will your people like it? 3) Is it a good business decision — consider both the short- and long-term implications? Will it save money? Will it make you money? The answer to all three must be "yes!"
Don't be afraid to change your decision
Lastly, don't be afraid to change your mind later. Things change, often quickly, and you need to be ready to change quickly, too. As the decision is implemented, monitor how things are going following the process above to be sure the benefits are there and there aren't unexpected downsides. Make adjustments, even make radical changes if necessary. In the face of things not working as they should …
It's not a weakness to change your mind; it's a good management decision!
When it's clear the decision wasn't (completely) the right one, if you don't change things up, you aren't doing your job as a manager. I've seen far too many retail managers stick to their decision when it's clearly a bad decision to do so!
When you follow a good decision-making process, you end up with good decisions. When you don't, it will cost you. And in today's real-world of tighter profit margins, you really can't afford that, can you?
John Strom is a SCORE mentor who continues to help managers improve their knowledge and skills to grow their businesses. He has over 30 years experience in coaching, training and consulting in both small and large organizations. His life mission statement is "to help people learn then using that learning to benefit themselves and others." Contact him through northernnevadascore.org or directly at email@example.com.