Decision-making is arguably the most important skill a business leader needs to master. Every day business owners and leaders face difficult decisions that have implications for them, their business, and their staff. Some decisions are small, others are huge. The hardest probably include letting people go, reversing a previous decision, or doing something that might damage your reputation.
It can be overwhelming. It can be a challenge.
Therefore, in the interest of looking after business owners and leaders, we’ve put together this guide to help you make the best decisions you can for everyone involved in your business. So, without further ado, let’s dive into four approaches to avoid poor decision-making in business.
Some great frameworks for decision-making in business
The most important thing when it comes to decision-making in business is to ensure that your decisions are well-informed, logical and support the overall objectives of the business and you, as the business owner. To improve your decision-making skills, it may help to follow a set structure or framework for each decision. These approaches help to achieve that goal.
1. Start with Purpose
A key approach to good decision-making is start with your purpose. Simon Sinek’s Start with Why provides a framework upon which ‘organisations can be build, movements can be led, and people can be inspired. And it all starts with WHY.’ He emphasises that great leaders realise that people won’t simply buy into a product, but they buy into the ‘why’ – the purpose behind it.
What are your company vision and values? What is your personal vision? Do you even have one? Why did you start your business in the first place?
These questions are crucial when it comes to your decision-making. To drive forward your business through the decisions you make as a leader, never lose sight of your purpose. You might think that this is irrelevant for some decisions. However, in the day-to-day firefighting and distractions of running a business, it’s easy to make knee-jerk decisions based on a narrow view you may have.
Take the time to step back and check.
Ask yourself – does this decision reflect and fit with your company purpose and vision? Or will it derail what you’re trying to achieve?
Once you’ve determined that a decision serves your purpose, then work your way down a simple flow chart like this one.
If you can say ‘yes’ to all these questions, whatever decision you’re weighing up will most likely be a good one.
2. Weigh up the options with a SWOT Analysis
You must find the right decision-making framework for you, but what happens if you need to weigh-up two options against each other? This is where you could use an effective SWOT analysis approach. A SWOT analysis is the aspect of your business strategic plan where you look at your business’ strengths, weaknesses, opportunities, and threats. You can apply this logic to each of your potential decisions.
TAB Facilitator in Aberdeen, Helen Mill, has provided her ‘Options Appraisal’ template to help us walk you through this.
A crucial element to this approach is to have a ‘status quo’ option – what will be the result if things were to stay as they are?
Then, list two or three other options along the top row with a description of each. You can then select the outcomes that are most important to you – these might be subjective or objective.
With these outcomes in mind, you can then evaluate how each of those decisions will affect that particular outcome. For example, if you decide to stick to the status quo instead of expanding your distributors, you will see no change in your outcome of improving your margins.
Finally, you can then capture key elements of your SWOT analysis for each of these options to get a clearer picture of what each decision would mean for you and your business.
3. Confront the brutal facts and adopt a good mindset
When making an important business decision, it is imperative you have all the information. This reminds us of the Stockdale Paradox and how it helps leaders to adopt a good mindset in the face of the hardest decisions they must make.
It goes like this:
Stockdale had said that he needed ‘on the one hand unwavering faith that you can and will prevail in the end, and at the same time, you need the discipline to confront the brutal facts as they actually are.’
Collins and his team noticed that the “leaders of the good to great companies embodied the same duality.”
So, when it comes to tough decisions that can be hard to stomach, adopt this mindset; confront the brutal facts of your situation, resisting any emotion, knowing it is the right decision for you and your business to grow. You will prevail in the end!
4. Have a support network
“A problem shared is a problem halved,” as the old saying goes.
Making effective decisions in business can be significantly simplified by sharing them with a support network. One of the best recommendations we can give is to get the right people around you, for you, who can not only advise you but challenge you on your critical thinking and decision making.
This might be your own board of directors, or a select group of trusted friends, a business coach or consultant, or even a peer advisory board. By allowing others to give an external perspective on the decisions you need to make, you are allowing yourself to think differently. These opinions can help to weigh up your options as mentioned earlier or give you alternatives you’d never even considered.
For example, Lee Johnson, owner of Advanced Electrical Services in Leeds said: “The Alternative Board has been a vital resource to challenge my ideas and enable me to make better decisions. Working on a Business Advisory Board with other like-minded business owners from various sectors has enabled me to access support, experience and knowledge to help me to run my company.”
This is just one person’s take on the value that a support network can contribute to a leader’s ability to make effective decisions for their business, which allows themselves, the business, and staff to thrive.
How to Avoid Poor Decision Making
We also want to highlight some key things to avoid when decision-making. This will stop you making poor decisions for your business.
Avoid using your emotion
When your business is your baby, it is inevitable that you can be making decisions based on emotions. However, the problem can come when you don’t take a step back. We should view these decisions from an outsider’s perspective rather than instantly making decisions in anger or any other emotion. This can be incredibly hard but is crucial to the long-term success of businesses.
If you’re interested in learning more about this, download our e-chapter on ‘Reasons why Emotional Decision Making is Killing your Business and How to Stop It.”
There’s nothing worse for a team than a leader being indecisive. Don’t go back and forth on a decision, not only does it compromise your leadership and trust, but it can also significantly delay progress. If you find yourself struggling with a decision, follow one of the decision-making approaches we’ve laid out in this guide or ask others for guidance.
You can also correct a wrong decision. You can put it right and move on. Indecision? You haven’t a hope.
Use Your Team
There is no reason why, with certain decisions, your team can’t be involved in the process. You could even think about creating a planning team for decision-making. Having your team involved in key decision in business not only takes some pressure off you, even though the responsibility is ultimately yours, but it also means they feel more involved in the direction the company is going. This will improve employee motivation and retention rates. Everyone’s a winner!
Some final top tips on decision-making from our expert TAB Facilitators…
“Leadership involves a lot of decision making and you won’t always get it right. But making a decision, explaining why, and communicating it clearly is far better for the teams you are leading, than someone who prevaricates, changes their mind or is indecisive.” Paul Winterbottom, TAB Manchester West
“Do the right thing for the right reason, then deal with the consequences.” Helen Mill, TAB Aberdeen
“Know your cognitive biases.” Jonathan O’Shea, TAB Bristol North
“Decision making is about making changes to reach your business and personal visions – so start there.” Guy Tweedale, TAB Norwich
By adopting some of these tips, you’re making significant strides towards improving your decision-making skills and your leadership capabilities. But, if you’re hungry for more, check out a webinar on Effective Decision Making, provided by our friends from over the pond.