Why decision making is difficult
Decision making can be perceived as difficult because there are so many factors to consider, and because the consequences for making a bad one could prove disastrous, even fatal for a business. When there is so much to think about it often appears easier to do nothing – push those hard choices to one side and get on with the things that are easier to manage.
It costs too much…
Cost is typically a reason why decisions don’t get made. “It costs too much”, is a familiar chant for NOT doing something. But is this just a gut reaction? Is the cost too much or does it feel like it’s too much? Without properly evaluating the cost of something alongside its potential benefits, how do we know that it is “too much”.
It’s too hard
Some decisions are tough to make… so let’s just tuck them away and forget about them.
As an example, it may be increasingly obvious that staff numbers need to be reduced but you can’t face dealing with it. By procrastinating you could be putting the business at risk and consequently the jobs of everyone within the business.
The consequences of indecision
As alluded to in the example above, doing nothing can be disastrous. Not all situations surrounding indecision have dire consequences, but over time a repeated lack of decisiveness can gradually whittle away at the success of a business.
Direction
Any business needs direction. Without a clear path towards goals, it’s easy to go off on a tangent (or several tangents). Goal-setting decisions must be made to keep a business on a clear path to success and avoid wiggle room (or wiggly lines).
Watch your competitors zoom past
As you meander along your wiggly path without focus or direction, competitors (who are making decisions) fly past on their straight line to success. Indecision can lead to stagnation – getting back on track will become harder and harder the longer it goes on for.
How to make great decisions
Firstly, let’s just get this out there… not every decision is a good one. Things can go wrong, and mistakes are made. But that is no reason to put decisions off. Putting a decision-making strategy and process in place significantly reduces the risk of making bad decisions and increases your chances of success. Additionally, it’s worth remembering that when mistakes do occur, learn by them and adapt your process as necessary.
Baby steps
Making decisions sounds like a BIG THING! In reality, many decisions are small. However big or small, decisions need to be made – even small steps will help you get towards your goal if they are taken carefully and in the right direction.
Decision making strategy
So, you’re feeling scared about taking those vital decisions, but making decisions with positive outcomes for growth and gain can be exhilarating and exciting. Watch as business goes in that straight line towards greater success, you wave goodbye as you surge past competitors and external pressures become less of a burden. All you need is a strategy…
We’re not trying to oversimplify, and it’s important that decisions are made carefully, but they are not as hard as you’d imagine with the right strategy and processes in place.
Look at the figures
Just because something costs what you perceive as A LOT doesn’t mean it’s not worth considering. Rather than simply assuming it’s not worth doing, it should instead mean that it’s worth doing more research.
Evaluate cost. Assess what you will get and whether it will be a good investment. Yes, it may sound like A LOT OF MONEY, but what will the Return on Investment be and when will this be achieved?
Accountancy jargon
If you’re not familiar with certain accounting practices, it may be worth a little exploration. We do not expect you to become an Accountant, but don’t be put off by terminology and figures. Notable is that money has a time value – it depreciates because of inflation so you need to be aware of ‘discounted cashflow’ (how much something is worth now, and in the future). Plus, you should be aware of the ‘net present value’ (the current value of future payments). This is particularly useful for bigger projects. Don’t be intimidated – simple spreadsheets can help work out values useful in the decision-making process; if you would like one of these, get in touch.
Debt
You may find that it’s worth exploring financing options (so long as they don’t blow your credit rating). Calculate the net present value alongside borrowing costs – again, this may sound complicated but can be worked out on a basic spreadsheet.
It’s not all about the money…
Whilst we all appreciate that a business needs to stay solvent, decision making is not solely about the numbers. Will spending get you nearer to your goal, will you end up ahead of the competition, and is it worth going for in order to gain experience?
Take your time and make comparisons
Just because we’ve said that it’s vital to make decisions, doesn’t mean that you need to make them in a mad rush. Yes, there are occasions when speed is of the essence, but taking a moment to evaluate a project and make comparisons is always a useful exercise.
For example, you’ve been given a great sales pitch for a piece of kit. Take a step back before signing on the dotted line. Just because the pitch is good doesn’t mean the product is. Carry out competitor analysis to determine which piece of kit is best for your business by way of features, performance, and cost. Whilst it may not be practical to look at every alternative, you will have a much clearer idea of what is available even through some basic research.
Set a time
Put a deadline in place for taking your decision. Whilst you need to take time, you also need to appreciate that there is a point at which a decision should be made. You may reach your deadline and decide that more time is needed, but extensions should be treated with caution and made for good reason (not simply because it’s too hard and you keep burying your head in the sand).
Opportunity costs
For every decision you make there is an opportunity cost, in other words, the profit that you would have made from an alternative decision. Once again, it’s difficult to evaluate every single opportunity that you’ll be missing but think about the obvious options. How does Project A compare with Project B? Consider how much it will cost, how long it will take to implement, how much manpower is needed and when you will see a return.
Seek guidance
Ask the experts. If you’re not sure of something there’s no shame in seeking help. But beware – if you ask for an opinion, you will get one, and it may not be one you like.
Ultimately, you need to be comfortable making your decision, but be sure you are armed with the facts.
Communicate
Once you have made your decision, make sure that all stakeholders are informed in good time. What decision did you make, why did you make it and what was the process? Don’t just let information trickle out. Decisions that aren’t communicated clearly can be misinterpreted, even when the potential outcomes are positive.
When you have had to make tough decisions, such as reducing staff numbers, it’s especially vital that communication is clear, concise, timely and legal. Decisions that have a seemingly negative impact on a business need to be handled with care and consideration – hiding from them will worsen the impact.
Monitor
You’ve made the decision and the natural reaction is to sit back and relax, relieved that the issue is dealt with. In reality this is just the beginning. Most business decisions will have an ongoing impact and this should be monitored. How well has the decision been received, is it having the desired impact and do any other decisions need to be made in order to make it work better. Are you heading in your desired trajectory, or heading off on a tangent?
Do you need to adapt your decision-making strategy?
How well do you think the decision making went? Would you do it differently next time? And what did you learn? Decision making is addictive – the more you do it the more you’ll feel comfortable with it.
Keep calm and carry on
We are in tough times, and you need to take as much control as possible. Business is uncertain. You may not thrive on uncertainty, but you need to be comfortable with it, and feel that risks are minimised.
You need to be able to make difficult decisions and follow them through. Making decisions is the essence of business – get bolder and more competent. You will make mistakes, but decisions do need to be made or business will stagnate.
Above are simple processes to help make decision making easier. Don’t hide from decisions – address them head-on with a process and rationale. Remember – if you don’t do something, someone else will, and you will lose out. Make sure you’re on the winning side!