Business management requires decisions to be made on a more or less constant basis. Even a bad decision can be profitable for a company, but not as profitable as a good decision would have been in the same circumstances.
It’s important to make decisions the right way so that they provide optimal results instead of just getting acceptable solutions all the time. The worst thing to do is to not make any decisions at all and just live in hope that things will work out alright in the end.
Decision making is more of a science than an art. There is a process we can follow to make”good” decisions — those that produce the best outcomes, most if not all of the time. It’s a process that can be applied to almost any business decision and should be learned by everyone with management responsibilities.
First let’s examine how bad decisions come to be made. There are many reasons things don’t go as they should due to shoddy decision making, but these are four of the main causes:
Too Narrow a Focus
A crisis situation arises and calls for urgent decisions to be made about how to extricate the business from possible disaster. So what happens next? Management focuses only on the way out of the mire and not on what caused it in the first place. With a bit of luck the crisis passes and soon it’s back to business as usual. The causes of the original problem aren’t explored and the situation can easily happen again.
No Search for Improvement
Decisions tend to be made in the context of their existing surroundings. They are made to handle a given situation and not with the purpose of creating improvements. If every decision were made with the intention of improving conditions rather than just responding to circumstances it would lead to better decisions being made.
Failure to Understand Positive Outcomes
When things go well we often give credit to external factors or simply ignore the reasons why a positive outcome occurred. There’s always an inquest into failures but little examination of the in-depth reasons when things work out well.
Too Few Options Considered
Making decisions first requires considering the available options. Identifying these options is an essential task that’s often given too little attention. The process of making good decisions begins with a search for the options involved so that the best of all possible decisions can be made.
Because we’ve been making decisions all our lives we think we’re reasonably good at decision making. What’s really true is that we’re making too many decisions haphazardly, without a structure or process to guide us.
This carries over into organizational management where decisions are usually made in too short a time because of a desire to be doing something about a situation. We often rely on the past as a reference source without fully understanding the consequences of previous decisions we’ve made.
However, there is a set of questions to answer when making any decision that will help to ensure the best possible results. These aren’t hard and fast rules to follow but rather a structure to be used as required.
1. Why do we need to make a decision?
2. Who should make the decision?
3. What resources will be needed to make the decision?
4. What are the options we have to choose from?
5. What are the consequences of each of these options?
6. What is the value (positive or negative) of each consequence?
7. Which decision will give us the best value?
This seven-question process removes much of the hierarchical pressure from decision making. There�s less chance that someone at the top is going to impose a bad decision on the rest of the organization because the process is essentially transparent.
Forget the classic “gut feel” and”intuition” methods of decision making and instead look for answers to these seven questions every time a decision needs to be made. By applying these questions to making decisions a sequence is initiated that forces adequate consideration to be given to each key step of the process.
Copyright 2005, RAN ONE Inc. All rights reserved. Reprinted with permission from www.ranone.com.