How to Make Quick Business Decisions
Making a decision based on gut feel alone is not only lazy but also likely to be a dud. However, recent books like the best seller “Blink” give the impression that you just have to rely on your instincts. For most business decisions, this approach will get you fired or drive your company into bankruptcy.
However, there are many times when you have to make a business decision quickly and when there is no more time to do a thorough study, you must be ready with an abridged but reliable process that you can depend on to come up with a sound decision. I have come up with a short list of steps to improve the chances of getting it right even if there is little time:
1. Think first how you will approach the problem. This involves several things starting with problem definition, the time frame and budget within it must be solved. Consider too what will happen if you take no action. There are some problems that are best left ignored – they may be trivial or resolve themselves in time.
2. Research the problem. Most problems have already been encountered in the past. It would be more economical to first learn what was tried in similar situations. Even if you find out that a particular approach did not work then you have one less alternative to consider.
3. Get the opinion of key people from affected departments. In your haste to make the decision you may forget the consequences on other aspects of your company’s operations. More minds on the matter may bring better alternatives. Another good consequence of getting more opinions is that you will get stronger support. You will also bear less blame if things did not work out well!
4. Consider out-of-the-box ideas. In a crisis or if we are in a hurry, we usually fall back on just the old solutions. This may be a prudent decision since it is already tried and tested. However, this should not prevent you from exploring unconventional ideas that may be far better. In fact, if it is a crisis situation, it is usually easier to institute radical changes since it will be clear to everyone that there is no other choice to survive.
5. List down the viable options. Some people just go through the motions of listing the alternatives but neglect the effort to provide truly feasible alternatives. Usually there is only one serious option provided. This is a waste of time and will not enhance your efforts to obtain the best solution. Genuine alternatives must be brought to the table.
6. Evaluate both the pros and the cons. Very often we are so excited by an idea that we forget to examine its negative aspects. If all the people around you are “yes men”, this is very dangerous for it blinds you to the potential dangers. If it all seems one-sided, get one capable person to play devil’s advocate to balance the discussion.
7. Counteract the tendency to be loss-averse. Studies have shown that people will strongly prefer the safety and comfort of not losing 1000 pesos rather than gaining 2000 pesos. In actual practice people usually chose not losing rather than gaining double! People prefer avoiding losses than making gains; this puts the timid at a great disadvantage. Be bold enough to be objective in computing the most advantageous option.
8. Do not consider sunk costs. Sunk costs are expenses that have already been incurred and can no longer be recovered. Unfortunately, while most managers know that this is the rational thing to do, there are two major factors that hinder this logical course. The first is the emotional barrier of admitting to oneself that the previous investment which he approved was a blunder and the second, if the decision maker is an employee, is the career damage caused by having wasted company resources. Nevertheless, the best policy is to cut your losses.
9. Quantify the peso value of your alternatives. When there is little time there is a tendency to be swayed more by the number of arguments rather than its peso value. There may be only be one argument in favor and ten arguments against but if the one argument is bigger in value than all the ten combined, then it should prevail.
10. Select a decision that will be good for the long term. There are many decisions that are profitable for now but may bring on irrevocable harm later on. Examples of these are reducing the quality of products to save on costs, cutting the marketing budget, neglecting safety procedures, etc. Such acts risks destroying the company’s brands and reputation.
The steps mentioned above are just a guide to stimulate you to design your own system that is appropriate for your business and position. You should develop your own professional approach. Making a quick business decision must not mean guessing the answer.
*Originally published by the Manila Bulletin. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.
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