Making Good Business Decisions
By Blake DuBose and Mike DuBose
Making good decisions is a crucial skill at every level. – Peter Drucker
Decision-making is a vital part of our personal and professional lives from which no one is exempt. We all make hundreds of decisions every day, but how do some people make better decisions than others? And why do some leaders just seem to have it all together, while others make one bad decision after another?
Good decisions breed success, energize staff, and build outstanding companies. Bad decisions promote mistakes and failure. The more bad decisions you make, the less likely it is that you will build a great organization.
Many factors play into individuals’ decisions, such as:
genetics, greed, age, gender, personal history, intelligence, relationships, happiness, marriage, hormones, need for power, creativity, workload, sleep, fear, security, caffeine, trust, ego, spirituality, pride, stress, values, use of alcohol and other drugs, education, humility, skills, experience, finances, attitudes, successes, failures, mental health, physical condition, friends, and family.
Then, think about the variables within a company that impact decision making:
economy, trust, strategic plan, mission, purpose, outside experts, values, culture, threats, financial condition, quality of staff and leaders, budget, stress, age of the company, expansion, success, security, relationships, failure, crisis, company shareholders, rivalry, past history, planning, teamwork, communications, structure, and hierarchy.
The lists go on and on.Then, dump all those personal and company variables into a blender and mix them up with a variety of different personalities. Because of all the possibilities, a business decision made one day may have a radically different outcome another time.
To some degree, decision-making is an art that is learned over time. However, one can sometimes just be at the right place at the right time, resulting in a great decision. Consistently good decision-making is food for champions and the fuel that builds and drives great companies.
Strong, profitable, and great businesses with solid foundations are the result of many correct, courageous, and tough decisions. But effective leaders know they cannot make perfect decisions every time. It’s all about trial and error, and you should never believe that every decision you make will result in success. Every successful leader has looked into the mirror at some point in their past and asked, “Why did I make that dumb decision? What was I thinking?”I have apologized to my staff and family several times for poor decisions that seemed good at the time I made them. Many leaders beat themselves or others up over past company failures when they should actually learn from them and stay focused on the future.
My decision-making skills have improved over time with experience and age thanks to my close mentors: mistakes, Murphy’s Law, failure, and some great staff and family from whom I seek input. Keeping a good perspective has helped me turn extremely painful business and personal tragedies and bad decisions into precious, treasured gifts from God! I view decision-making as an adventure and a puzzle. It’s all about experimenting and knowing one will fail sometimes in order to succeed. As Winston Churchill once said, “Success is the ability to go from one failure to another with no loss of enthusiasm.”
There are two types of decision-makers: those who try, stumble, get up, and try again, and those who fear stumbling, agonize over decisions, and/or cease trying. Great leaders keep dreaming, challenging, testing, experimenting, and learning from their good and bad decisions. Consistently good decision-making requires the right attitude and an open company culture where people are free to find the right solutions. Employees, customers, and businesses suffer when conflict is ignored and poor decisions are made.
Decision-making has changed dramatically as technology advances, and new innovations will shape decision-making in the future. In the past, decisions took weeks to make via paper memos and snail mail. Now information can be transmitted instantly through the Internet to many people at all organizational levels. Text messaging, e-mails, and blogs allow staff, customers, and others to communicate, debate, and discuss issues rapidly. These innovations have made decision-making more immediate, complex, and challenging.
While technology, genetics, and environment play a role in helping us make good decisions, it is possible to learn effective decision-making. Let’s examine the how-to’s of making good decisions.
Knowing yourself and others: One of the best decisions I have ever made was to bring in leadership consultant Don Jenkins (www.leadersadvantage.us) to help me and my staff learn who we were. He guided us to truly analyze ourselves and understand others within and outside our organization, which is the first step in building a culture of good decision-making. Our mindsets radically changed. Once we were able to understand, accept, appreciate, and respect each other, we could have friendly, professional dialogues and debates when trying to reach good decisions. We learned that everyone does not think like we do and we should not expect them to do so.
Preventing: You can eliminate the need to make many unnecessary decisions in the future if you anticipate and prevent problems from happening. My grandmother, an entrepreneur, said, “Hope for the best, prepare for the worst!”Think about both what can go right and what can go wrong. At Columbia Conference Center, we try to prepare defenses beforehand for all possible problems: bad weather like tornados, health crises like customers having heart attacks, infrastructure failures like electrical outages, etc. By pinpointing potential crises before they happen and implementing strategies in preparation, potential for stressful, rushed decisions and failure diminishes.
Identifying: Aggressively look for problems in their early stages when they emit weak signals. Just think about the financial disasters and housing collapse that occurred in 2008. There were signals all over the place but no one paid attention, so our country and economy became a mess in 2009. People were blinded by greed!
Leaders and staff in great companies actively look and listen as a team for problems at all times and proactively make decisions before disasters happen. In fact, I spend a good bit of time testing ways decisions and new programs could fail. Unfortunately, many leaders put their heads in the sand and hope that problems disappear on their own. Rarely does that happen—in fact, they often magnify and grow. You want to make decisions in a proactive, calm environment, not in crisis mode with immediate threats staring you in the face. I don’t like surprises or having to make decisions in a “run-for-your-life” panic mode.
Analyzing: When problems surface and decisions are needed, use an open mind to trace symptoms to root causes. Effective leaders seek all the information and data they can in the decision-making process so they can see the big picture. Avoid focusing only on symptoms; instead, attack the root cause and reduce the chances of a problem reoccurring and practice Total Quality Management (TQM). As the Harvard Business School Press says,“Processing information effectively also means soliciting the right kind of input from the right people—so you generate the most comprehensive range of options and gain a clear picture of the potential risks and rewards of each.” Effective leaders assess situations carefully and accurately with open minds to secure a variety of options. Closely examine problems and list pros and cons for at least two possible solutions before making a decision. Look at roadmaps from different positions (from legal, financial, logical, and ethical standpoints and considering threats, your mission, and your strategic plans) and perspectives (those of your customers, community, shareholders, vendors, and staff).
In other words, study your problem thoroughly and don’t go for the quick fix! Determine your desired outcomes early on in the decision-making process and make choices that propel you toward those goals.
Understanding if and when a decision needs to be made: Few decisions have to be made immediately, so don’t rush! Time is needed to thoroughly understand problems and their causes and generate a variety of options for the most effective outcome. Thus, when a decision arises, I try to determine if and when it needs to be made. Some decisions may need to be made soon, others in the distant future, and some not at all. However, assign a date by which necessary decisions need to be made to avoid procrastination.
Creating the right, open decision-making culture: You want to build an environment where employees are encouraged to share differing perspectives in a friendly, professional, and respectful way. Creating an open culture sounds easy, but it takes time and trust for staff can feel secure about challenging the status quo. Openness needs to start at the top and radiate out to every level within the organization. Leaders need to be loud and clear that they value opinions and criticism, then must act the role. They cannot say one thing and do another.
Effective leaders promote hearty debate. When Barack Obama was elected President, he reached out to competitors to build his cabinet, following Abraham Lincoln’s tactic of surrounding himself with bright people who would openly challenge him. Obama told his choices that he would listen to them, particularly when they disagreed with him. Regardless of your political affiliation, you have to respect that attitude. Though Obama will face great challenges, because he has endeavored to obtain the most options, debate them in an open and unbiased setting, and select the best choice, his chances of success are very high.
There are different stakeholders in every decision, so you want to include different experts, key informants, and stakeholders in debates based on the topic. We believe at our companies that several heads working together always produce superior results. Too many business owners and leaders with big ole egos try to be the sole decision-maker without soliciting input from others, but it is important to share decision making with everyone. We seek “win-win” customer-driven decisions made and supported by the whole team. We desire our decisions to be owned by our leaders, employees, and customers. The role of the leader is to promote buy-in on all levels, which maximizes the success of the outcomes. Do not force decisions to travel through a sluggish, slow hierarchy. Inefficient bureaucracies stifle and often eliminate creativity, ideas, timely project completion, and good decision-making. The focus is often more on a controlling bureaucracy than making great decisions and executing. Our companies have followed the lead of others like Southwest Airlines to cut down on bureaucracy and thus expedite decision-making.
When weighing different paths, don’t let destructive motivators such as ego, greed, money, dishonesty, and bad ethics drive decisions. You may win battles, but lose the war. Remember Enron? Run any decisions you make through these filters:
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Will the result comply with our mission, vision, purpose, and values?(If not, don’t do it!) - How will my decision affect the budget and profitability? Do we have the resources to properly implement or support this decision? (If not, don’t do it!)
- How will the decision impact our staff and customers? To what extent do they need to be involved? How and when do I need to communicate with them?
- Does the decision mesh with our “Hedgehog Concept” as described by Jim Collins in Good to Great (what we do the best, are most knowledgeable about, and are passionate about)?
- Is the decision legal, ethical, and honest? Is it being driven by greed, the need for power, and the love of money? What will my minister, family, customers, staff, friends, and/or the media think about my choices? What about God and the IRS? (I bet the convicted Enron conspirators wish they had done this simple test!)
- Does this option seem to have a high success potential based on our past history? (We don’t want our past to rule us, but we can visit it briefly to guide our future with our past successes.)
- How will the decision build on our strengths in both the short and the long term? Improve our weaknesses? Create opportunity? Reduce or eliminate threats? (Conduct a SWOT analysis when planning.)
- Should I test the decision on a smaller, more experimental basis first before implementing it system-wide? (Why put all of our chips on the table? Better to gamble on a smaller scale initially.)
- Do my competitors have information that could help me make the right decision? (Look at competitors as great teachers and decision-making partners—though they may not know it! Examine their websites. Call similar businesses in areas outside your market to ask for advice. People love to share their successes, failures, and mistakes if you ask them in the right way.)
- What does my gut say? Am I worrying about this decision? Do I wake up at night bothered about it? Do I feel uneasy about it? (If so, your instincts are screaming, “Watch out!”)
- If the decision succeeds or fails, what could be the negative and positive outcomes? (Compare these pros and cons.)
Promoting reasonable, calculated risk-taking and decision-making: Great companies take risks after careful study and create an atmosphere where it is acceptable to try new things. Ideas and strategies from every level must be encouraged and heard. However, when things go wrong, individuals should not carry the blame. Otherwise, staff will stop taking risks when making decisions. Great companies focus primarily on their core activities that pay the bills and then explore opportunities in other promising areas. In our companies, we know what works and we stay the main course. We don’t want to threaten our company’s survival by putting all our eggs into one basket, no matter the potential rewards! Though you should focus on your core business, it is also important to look into the future, staying ahead of your competitors by reinventing your companies and testing new ideas and strategies. We spend about 20% of our time creating products, support, services, and alliances to take us down new, profitable roads in the future.
Making the right choices promptly: Many leaders stall or refuse to make decisions because they fear failure. Eleanor Roosevelt once remarked, “You gain strength, courage, and confidence when you look fear in the face.” Great leaders make timely, decisive, and often tough decisions.
External and internal forces can impact the quality of a decision. Avoid making decisions when you are rushed, threatened, tired, angry, emotional, hurt, desperate, hungry, frightened, depressed, using alcohol or other drugs, or sick. Make decisions for the right reasons when you are most capable of rational thought.
I go through various learning and decision-making modes on different days and at different times. I briefly delay decisions to search for new perspectives, debate my own thoughts, ask a lot of questions, and seek extensive input. I frequently then “sleep on it!” I also sometimes scare my family and staff by talking out loud about what could happen when my decision plays out.
Seek advice from in-house and outside experts, friends, and colleagues who view situations without bias. Surround yourself with outstanding people who are smart, talented, and experienced in different areas. Speaking to people of different genders, age groups, and backgrounds can provide you with a new, helpful perspective. I have made some major business blunders that would have turned out differently if I had listened to my wife, Deb, whose intuition is uncanny! We include one of our senior staff members in screening applicants for employment because she has a similar gift for reading people.
Avoid asking for input from staff who think like you. Engage employees’ minds and hearts in decision-making to promote ownership. I like for our staff to view my ideas as only the beginning in project design, problem-solving, debates, and decision-making. I want them to take my ideas, make them better, and then own them!
Before I make a decision, I write a list of the pros and cons on a sheet of paper and use them to weigh the odds of success, failure, and mistakes. I am a visual person who needs to see all the options simultaneously. Sometimes it may be helpful to dismantle large decisions or problems into smaller ones and work on each separately. Start out with smaller, simpler decisions that most stakeholders agree have a high success potential and work up to larger issues.
Avoid input bias by keeping your opinions from employees in the early stages of debate. Telling staff, “This is what I think. Don’t you agree?” kills creative dialogue. Tell yourself and others that you don’t have all the answers and encourage them to offer their help and guidance. “My way or the highway” mentalities create cultures where intimidated staff want to “please the boss.” It’s best to check egos when making decisions and, above all, LISTEN! In fact, “The more people you lead, the more you must listen,” notes Finzel in The Top Ten Mistakes Leaders Make. When things go right, I assign credit to others (even if it was my idea), and when things go wrong, I accept full responsibility—although I may privately coach the employee who made the problematic decision.
In Winning, Jack Welch writes, “Listen to your gut. It’s telling you something.”Malcolm Gladwell’s bestseller Blink also describes the power of intuition. Intuition is a valuable tool, but you want your decisions to also be driven by facts and input from different sources. Never make decisions based solely on instinct and gut feelings or logic and facts; rather, combine them with others’ opinions for the best chance at success. My greatest failures and faulty decisions were based on solid facts and logic!
Have a fallback plan in case the first decision doesn’t work. Once I have all the data in, I often pray for guidance to help me sort it all out and lead me in the right direction.
Pulling the trigger: Once you have solicited input and studied your choices thoroughly, make a timely decision. A leader cannot please everyone—there will sometimes be “no-win” situations when no choice feels good and you must pick between bad or worse routes. These difficult times build character! In many cases, pleasing everyone is not in the best interests of the company. Solicit input, but don’t get stuck overanalyzing too many possibilities. I used to look at too many options when trying to reach the “perfect” decision. I studied options to death and because I am creative, I would keep coming up with new choices. General Patton was right: “A good plan today is better than a perfect plan tomorrow.” At some point, you just have to say when “good is good enough,” shut down the debate, and make a decision.
Executing consistent decisions: Once the decision is made, there should be no turning back unless new information surfaces that warrants a change of mind—don’t waffle. Leaders need to be flexible but careful about changing their minds and reversing decisions. Second thoughts have slowed or aborted many wise choices! Weak, indecisive, or wishy-washy leaders can kill a company or any organization. They are like a sailboat in a lake with no rudder, drifting aimlessly and going wherever the wind blows. Employees recognize these weak leaders and will intentionally delay project initiatives because they anticipate the leader will change his or her mind. It is important to create an execution environment where decisions are thoroughly studied, debated, implemented promptly, and monitored on an ongoing basis for accountability.
Evaluating outcomes: Factually assess decisions to understand what worked and didn’t. If decisions are carefully studied and determined to be faulty, make alterations immediately but in a calm, orderly way. As Larry Bossidy told me, “Don’t hang on to or rationalize a bad decision too long. Cut your losses and move on!”
I once asked Jack Welch to describe the worst decision he ever made while running General Electric. He replied, “We decided to buy a company. We conducted a thorough study of the potential purchase, everyone debated vigorously, the numbers were right, everyone thought it was a sure fit and concluded that it was a good idea. We were unanimously convinced it would work. Then, the acquisition failed! Sometimes, good decisions will simply not work out! It just happens!” Don’t get hung up on good or bad decisions that end in failure, but use them as lessons for the future.
Communicate the decision promptly: When changes in course are made, alert everyone as soon as possible and tell them why. Set up meetings and encourage questions to address everyone’s curiosity and desire for information. The more information that is provided to them, the less likely they will be to complain behind the scenes. Credibility is lost if the news of a decision hits the gossip circuit first and is distorted and maligned. Staff also resent hearing the information from anyone other than their leaders.
When things go wrong, maintain the philosophy that mistakes and failures provide rich learning opportunities. Avoid pointing fingers or assigning blame. Be open, honest, and forthright. Bring mistakes into the open, no matter how embarrassing, for everyone to dissect and analyze the mistake. Use mishaps to build stronger future decisions and teach good decision-making skills. Accept responsibility for the mistake as CEO. Your employees will appreciate your leadership in acknowledging and rectifying the problem.
If you’re making good decisions most of the time, you’re on the road to building a great and successful company. When you stumble (and you will), stop, learn, share the wisdom with everyone, and move on to the next adventure. Great decision-makers turn mistakes into wisdom and never look back as they stay focused on the future.
Above all, when a decision pans out to be successful, celebrate! People like victories and feeling like a part of something bigger than themselves. Dish out praise, recognition, rewards, and kudos. This can be a lot of fun that motivates everyone. And lastly, be humble and thankful for success!
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© Copyright 2010 by Blake DuBose and Mike DuBose. All Rights Reserved. You have permission to forward this article to a friend or colleague and to distribute it as part of personal or professional use during the year 2010 in its full content with all credits to the author. However, no part of this article may be altered or published in any other manner without the written consent of the author. If you would like written approval to post this information on an appropriate web site or to publish this information, please contact Katie Beck at .(JavaScript must be enabled to view this email address) and explain how the article will be used. We appreciate you honoring our hard work and we try to accommodate any requests in a timely fashion. Shorter versions of some articles are available upon request.
Blake DuBose is a graduate of the Newberry College School of Business and is president of DuBose Web Group.
Mike DuBose has been in business since 1981 and is an instructor with the University of South Carolina graduate school. He is the servant leader and owner of three debt-free corporations, including Columbia Conference Center, Research Associates, and The Evaluation Group. Mike has completed his book The Art of Building a Great Business. For more helpful articles, visit his non-profit Website www.mikedubose.com.