How To Make Smart Business Decisions More Often.

Let me say from the outset that any business owner who has built a successful business is smart. Sure, there may have been some good luck or helping hands along the way, but on the whole, they have been smart to get where they are today. But do they make smart business decisions? The fact is – no they don’t! Drawn from my 20+ years’ experience as a coach and mentor, surprising as it is, business owners continue to make dumb decisions. So, I have put together the top 3 reasons drawn from a long list, of why:

1. Allowing emotion to override objectivity

humans we are emotional beings and hence emotional outcomes will always play a part in our decision- making. The challenge is to keep them in check and in perspective with the outcomes you are striving to achieve. Three questions to ask if you think emotion may be unfairly impacting on your decision making.

• ‘Do I know everything I need to know to feel the way I do right now; if not what’s missing?’
• ‘If someone other than me was making this decision, what information would they draw upon to ensure the decision meets all criteria in terms of outcomes, impact and fairness etc’
• ‘Being honest, am I falling in love with my own ideas before stress testing the perspective I have?’

2. Solving the right problem

This is essentially an issue of ‘clarity’ and posing the question ‘what’s the real problem we are trying to solve here today’? Solving the wrong problem wastes time, energy and money plus often leads to a false sense of security that the right decisions are being made. Three specific examples drawn from client case studies is probably the best way to illustrate this.

• Discussing the need for additional staff when clearly the problem was lack of productivity from existing staff which is where the focus needed to be.
• Discussing solutions to increase staff morale through incentives when clearly the problem was one of culture caused by the deteriorating relationship between two business owners. In this case I intervened and had some initially uncomfortable discussions with the business owners, but reality needed to surface.
• Looking at a new strategic direction for the firm when clearly the problems were more operational in nature. The strategy questions were simply more attractive to think about but were not going to solve the key problem of loss of profitability caused by a significant drop in customer service.

In each of the above cases clearly enunciating what the real problem was resulted in a different set of solutions to be implemented than were initially contemplated.

3. The impact of biases and other thinking limitations

In many cases we are not even aware that our decision-making is being impacted by certain biases and thinking limitations. Here are four of the more common examples.

• Exaggeration

As a general rule, business owners have a habit of being overly optimistic when it comes to projecting revenues and the time taken to implement various strategies & actions. Solutions like listing all the assumptions that underpin projections and detailing all the detailed steps involved in implementing strategies helps flesh out potential limitations.

• Simplicity

Sometimes the default strategy of ‘what did we do in the past?’ can still be valid. However, in rapidly changing times existing strategies may need to be road tested as to their current relevance.

• History

Sometimes the default strategy of ‘what did we do in the past?’ can still be valid. However, in rapidly changing times existing strategies may need to be road tested as to their current relevance.

• Confirmation

Confirmation bias occurs when information is sought that only supports your point of view. That often means ignoring rebuttal information or not seeking alternative views at all. It’s like police officers having a suspect in custody that they believe is guilty and ignoring any efforts to find alternative perpetrators.

In a business owner sense, we sometimes see them ‘falling in love with their own ideas’ and completely ignoring any evidence to the contrary. Finally, a quote by Henry Ford sums up my sentiments in relation to this subject.

‘Thinking is the hardest work there is, which is probably the reason, so few engage in it.’

Far too many people believe that thinking is an instinctive process that just naturally occurs and to an extent that’s true. However, it’s also a learned skill where the honing and perfection will help improve the quality of our personal and business lives.