Leadership always requires you to make decisions. But many times the decisions are not easy to make. There are many grey areas, pros, and cons, and factors to consider when making decisions. It’s not easy, especially if you consider the outside pressure executives face from clients, constituents, higher ups in the organization, and even at times the board. An executive’s ability to make good decisions, i.e. decisions that contribute to the company’s growth may determine their ability to climb that corporate ladder.
Instead of leaving decisions to chance, previous experience, or gut feeling, executives can improve their success rate by adopting other decision-making tools.
Diagnosing Your Decision-Making Style
Many executives only rely on basic decision support tools, such as cash flow or simple quantitative testing. Such tools are enough for making simple decisions with only a few factors involved but it’s not enough for making complex decisions. Don’t get me wrong, there’s nothing wrong with using basic decision-making tools, but these conventional tools tend to work best in stable environments where things are predictable or controllable.
Start-ups and organizations that do business in fast-changing industries need executives with leadership skills and the ability to make decisions in tight situations. Think about it, basic tools are only helpful when leaders have complete and reliable information, which is almost impossible most of the time.
The Problems Executives Face when Making Decisions
The problem is not with the tools, but with an overwhelming number of decision-making tools available. There are many decision-making tools that can be used even with incomplete information, such as information markets, case-based decision analysis, and qualitative scenario analysis. However, without the proper guidance, leaders tend to forget about other tools that they are unfamiliar with and stick to what they know best. Adding to this are the host of factors that don’t fit into the decision-making tool and require an executive to rely on instinct, intuition, and input from others.
Creating a Decision-Making Profile
Developing decision-making skills do not happen overnight. It’s a never-ending learning process, and experience is the only way to learn. Theory isn’t enough.
To help you make better choices, ask these two questions before setting on a tool and a path to how to make the decision.
What does it take to succeed?
Formulate the right if-then statements about the decision. This will be a test as to whether you have a strong understanding of the crucial factors affecting the decision, such as the economy, the current market’s status, past results, personnel you have, and more.
For example:
If the new process lowers production costs by 30%, then we can increase our market share by passing on those savings to our customers.
If the discounted price increases product sales, then we can implement it to reduce overstock.
Are the possible outcomes predictable?
The decision-making process isn’t completed when a decision is made. The ramifications or possible outcomes of the decision are also scrutinized.
If an executive decides to do something similar to what has already been done, there’s a high probability that he can predict the possible outcomes accurately. That’s assuming no significant changes in any factors being used to make the decision and/or the situations are similar. Unfortunately, not all outcomes could be predicted that easily because factors change. Listing the range of possible outcomes from every decision is a crucial exercise in developing good decision-making skills, as this process acts as a filter for bad or risky decisions that might otherwise harm the company if it’s put into effect. Once you have explored the possible outcomes, it provides you with information to make the decision.
There will never be a way to guarantee that all decisions you make turn out positive. Even after a decision is made factors may come into play you couldn’t have predicted or foreseen. However, if you take the time to ask what success looks like, and how predictable is this success you are more often going to make decisions having considered the facts. Good decision-making comes from having information, and the right information. Take the time to get both.
Curious about what type of decision-maker you are? Take our quiz on decision-making and find out.
