Leadership

How to Avoid a Bad Decision – Small Business Owners Can Help Themselves

Bad decisions happen. In our hurried 90 mph business pace it is, perhaps, inevitable. Sometimes, it’s not so much the essence of the decision, however, but rather the process by which it was made and put into action that determines good versus bad. Too many times we spend months talking about a problem and a decision that must be made; meanwhile, time ticks by and money “runs out” until the moment comes when action is required and, for better or worse, a decision is made. Unfortunately, this scenario often creates an environment where “second guessing” the decision is likely. And, whether the decision was innately good or bad, the outcome may go sideways as challenges arise, uncertainty develops and commitment fades.

How do executives best help themselves, and their executive teams, make better decisions that beget better results? The answer lies in a leader’s ability to create a decision making system within the corporate culture and then to teach people the disciplines and skills involved in making the system successful. Where to start? With a framework that your people can easily adapt to each and every decision making opportunity.

Jeff Foran, a founder of DEF (Decision Education Foundation – an organization targeted at teaching young children the skills of better decision making), specializes in corporate strategy, corporate restructurings, and asset valuation. With an MBA from Wharton, he serves as a guest lecturer at Stanford University and teaches courses in corporate decision making in the Department of Management Science and Engineering. He is also a member of Stanford’s Decision and Ethics Center.

Foran believes that, “…there are six requirements of a good decision (and they) are like links in a chain; the decision is only as strong as the strength of each link. A good decision, thus, requires an appropriate level of attention to each requirement.”  According to Foran, if you teach your employees the requirements and the necessary supporting skills for each, you raise the quality of everyone’s decisions.

These six requirements include:

1. framing the problem by defining the issue or situation we are going to solve.

2. creating alternatives in solving the problem or situation; alternatives are the possible courses of action available to us. Without sound and compelling alternatives, there is no choice, no decision.

3. developing useful information which combines what we know and what we would like to know in order to make our decision.

4. establishing clear values; what we want the decision to accomplish; that is, what we really care about; the wants, needs, even dislikes by which we prefer one consequence of a decision over another.

5. utilizing sound reasoning to combine our alternatives, information and values to reach a decision. Sound reasoning enables us to explain why we prefer this alternative to another alternative.

6. committing to follow-through by pulling the internal switch and shifting from thinking to action. A successful follow-through may require time, money, effort, help from others and an acknowledgement that obstacles will appear and we are committed to overcoming them.

If you do nothing else, start with framing, for what is framed as the problem or issue at hand, is what’s acted upon. Framing is crucial to good decision making as it states the situation at hand and makes certain that all decision makers are aligned. Every good decision begins with establishing a clear understanding of what we want to accomplish, and is worth the time it takes to get it right. Good decision makers create a specific, measureable frame that is designed precisely for the situation at hand.  Turn the frame into an open-ended question and let the dialogue and debate begin!

Instead of falling into the systematic traps of winging it, or rushing it, or simply not thinking it through, you can create a new system of habits.  These new habits reduce uncertainty, increase confidence and will lead to more profitable outcomes.

Category : Leadership

About the Author: AmyK Hutchens

Speaker. Author. Trainer. Business Strategist.


A former executive of a billion dollar global consumer products company and awarded the Vistage UK, International Speaker of the

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  1. Hi AmyK,
    I enjoyed this post. Your points 2-5 sound familiar to me. Given your brain-based approach, I wonder if they have been influenced by the Myers-Briggs approach to decision-making:
    1. Identify facts
    2. Brainstorm options
    3. Evaluate all options logically
    4. Screen best option against values

    I look forward to learning more about your brain-based tools.
    Best,
    Don

  2. Hi AmyK,
    I enjoyed this post. Your points 2-5 sound familiar to me. Given your brain-based approach, I wonder if they have been influenced by the Myers-Briggs approach to decision-making:
    1. Identify facts
    2. Brainstorm options
    3. Evaluate all options logically
    4. Screen best option against values

    I look forward to learning more about your brain-based tools.
    Best,
    Don

  3. This is a great tip. I think most of the problems in decision making comes from forgetting these basics. Its not that people dont know them but most of the time they get overlooked when there is pressure and stress and decision be made based on gut feeling and additional outside irrelevant influences which ultimately result in disaster. I’m one proof for this. I have been trying to work on my business decision making skill but I dont think I have made much progress so far.

  4. This is a great tip. I think most of the problems in decision making comes from forgetting these basics. Its not that people dont know them but most of the time they get overlooked when there is pressure and stress and decision be made based on gut feeling and additional outside irrelevant influences which ultimately result in disaster. I’m one proof for this. I have been trying to work on my business decision making skill but I dont think I have made much progress so far.

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