How to Make Better Business Decisions

I was recently working with a senior leadership team in a company of estimable size and stature on an organizational diagnostic.

The initial goal cited by the leadership team was to fortify needed business skills in a population of emerging leaders from across the company.  As we reviewed some of our findings, we noted that many people, regardless of function, struggled with prioritizing work and making good decisions.

As several issues were examined more deeply, it became apparent that people in various business functions have many approaches to decision-making.  Leaders in different departments seem to group problems and decisions to be made into one bucket instead of thinking about decisions that need to be made to support their functional goals versus decisions that involve organizational performance or have a cross-functional impact.  Also, people who were in a position of decision-making authority didn’t always consider problems from different perspectives; most notable were views associated with impact on customers and competitive stature.

 In digging more deeply, I learned that there were some causes associated with suboptimal decisions. These included:

  1. Options were not clearly spelled out because the problem wasn’t clear
  2. Internal “tribal knowledge” was a substitute for accurate, timely data
  3. Impacts on other parts of the organization were not considered

Plus, there were some other items that I noted. Specifically, I learned that several decisions were made:

  • Without a context around agreed-upon strategic business goals
  • Because of a knee-jerk reaction to a customer complaint, an operational challenge, or a seemingly urgent request from sales

Why should this be so?  And why does it happen more than it should?   I’d ask you to consider your own environment and examine the business decisions made in your group.

With this context, I started to scan the business literature and research by consulting firms.  While some of these points seem academic, they seem to make sense to me, and I wanted to summarize them here.  I learned for example that some people ignore good data when it doesn’t mesh with their way of thinking.  This is called confirmation bias.  Another term I learned about was anchoring where people apply weight to data or other indicators that are not germane to the problem at hand.

So, what can we do to improve the probability of success in our own decision-making?

Here are some ideas that might work.

  1. Try to step back from any situation that seems critical and requires more reflection and consider what happened and why.  Involve others so that you can test your own theories and assumptions and assess their context.
  2. Check your data and data sources.  I find that the better the data, the deeper you can go into a discovery of the root cause.  If you can separate a symptom from a cause, you might be in a better position to consider options.
  3. Take a more structured approach to possible options.  A decision matrix can help you by listing out the options down the left side of a spreadsheet, and decision criteria can be applied in column headings. The intersection between an individual criterion and an option can be parameterized and scored. For example, if an option has a high degree of strategic relevance, it would be scored as a 10 versus something that has no strategic relevance; that would score a 0 or 1.

While this is not a full-blown prescription for improved decision-making, it might open some ideas for you to fine-tune your approach to problem-solving.

As I sometimes ask in my business acumen and strategic planning workshops: “what’s the cost of a poor decision?”  I can ask you the same thing.  I hope you’ll consider this as you fine-tune your approach to your effectiveness as a manager or leader.

By the way, if you’d like to listen in on my podcast called “Masters of Business,” go to:

NOTE: Steven Haines is the founder of Business Acumen Institute, a global training and advisory company focusing on building business acumen for emerging leaders and managers.

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