Entrepreneurs and business leaders have to make decisions every day—both major and minor—some of which have the potential to grow or wreck a business enterprise. Great leaders learn how to become great decision-makers, not because they’re equipped with some innate skill but because they’ve mastered a few key principles to move the process along. Here are some hopefully helpful guidelines to improve your decision-making process.
Take time—but not too much time. Some of the stress involved in making a big decision comes from a sense that it must be made right away. It’s also not in our nature to live comfortably with uncertainty. But when you force a decision, the result is typically unfavorable. On the other hand, you can’t take forever to decide. A good approach is determining the deadline for making that decision (if it’s not already obvious) and use that as the time-frame in which to deliberate.
Break the process down into smaller options. Not every issue requires a straight “yes” or “no” decision. When possible, try reframing your decision as more than two alternatives. Look for situations where you can take analogous actions, “test-driving” your decision on a smaller scale, prior to taking permanent action.
When you make a decision, stick with it. You’ve assessed the options, considered the likely outcomes and consequences, and now you must decide. Waiver too long in “analysis paralysis” and a great opportunity may disappear. Once the decision’s been made, don’t second-guess yourself. Learn from the situation and move on.
Recently I came across an article on Forbes.com with an interesting take on the process. Contributor Mike Myatt describes how keeping in mind a “hierarchy of knowledge” can help with the decision-making process. This hierarchy includes:
- Gut instincts. This is a “feeling” that may have nothing to do with facts on the ground. Nonetheless, Myatt says, “your instincts can often provide a very valuable gut check against the reasonability or bias of other inputs.”
- Data. Drawing decisions based on raw data is risky at best and generally leads to a flawed decision.
- Information. This is drawn from “a collection of processed data” where meaning and context have been layered upon raw data, paving the way for a more comprehensive analysis.
- Knowledge. From information that “has been assimilated, tested and/or validated” comes knowledge. This is the point at which an informed decision can be made.
Myatt also offers a helpful 7-step process to tip the odds in favor of a smart decision:
1. Perform a situation analysis. What’s motivating the need to make a decision? Who will the decision impact? What happens if no decision gets made?
2. Expose the decision to public scrutiny. How would you feel if your decision appeared as a headline in tomorrow’s newspaper? What would your stakeholders think?
3. Do a cost/benefit analysis. Do the likely benefits of your decision outweigh the costs?
4. Evaluate the risk/reward ratio. Are the potential rewards greater than the possible risks?
5. Ask yourself if it’s the right thing to do. “Standing behind decisions that everyone supports doesn’t particularly require a lot of chutzpah,” Myatt notes. “On the other hand, standing behind what one believes is the right decision in the face of tremendous controversy is the stuff great leaders are made of.”
6. Make the decision! Great leaders develop “a bias toward action”—making decisions even when they lack all the necessary information.
7. Have a back-up plan. “The real test of a leader is what happens in the moments following the realization they’ve made the wrong decision.” That’s why it’s so important to have a Plan B.
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