11 Considerations to Help in Make Better Business Decisions
Recently I had the opportunity to present Making Better Business Decisions at a Project Management and Business Analysis World Conference in Winnipeg, Manitoba.
A topic close to my heart, since I focus on helping business leaders and professionals build business brainpower, make better business decisions and establish a common direction using strategic planning and business analysis best practices.
The interesting thing about this topic is that there are so many endless possibilities when talking and writing about making better business decisions since there is so much information available on the topic. Here are 11 points from that presentation.
Beliefs get in our way.
We tend to think we are better at making decisions than what we are and time and time again demonstrated as fact. We now know that decision making is more of a cognitive process resulting in the selection of a belief or a course of action among several alternative possibilities. Often our decision is influenced by a set of beliefs, values, and attitude. Research shows that we can be really bad decision makers.
That’s illogical Spock.
Sometimes when we look at all the facts and the right decision is an only common sense we tend to make poor decisions. For example, a cab driver will drive their cab less on poor weather days when they have more fares and more on warm weather days when they have fewer fares. The logical choice, drive more on bad weather days to make more money. The reason, a decision ceiling, and culture. We all have one. Know yours.
Factors affect decision-making.
Many factors that impact decision-making. They generally can be listed as workplace trends, technology, and culture. We have all seen the squeeze on in workplace trends; smaller business units, flexible work organizations, shared service and gig economy. Technology always changes; business intelligence, artificial intelligence, and expert systems are altering our approach to decision-making. Culture is always a factor yet sometimes left out of the equation. Depending on the part of the world you live in; decisions are based on speed, decisiveness, individualism or groupthink, organic and an all-for-one approach.
Thinking fast and slow.
I wish I came up with that phrase. But I didn’t. It is from a book by Daniel Kahneman, a 2012 Economic Nobel Prize Winner. It states that the decision brain has a system one and a system two. System one is intuitive, fast, automatic and instantaneous. This system has a lot of influence, guides and steers our lives. System two is slower, rational, logical and analytical. Deliberation and reasoning are its hallmarks. Traditional economists modeled saw people as rational, selfish, with tastes that don’t change much. Kahneman discovered is that we are neither fully rational nor completely selfish and that peoples tastes are anything but stable. System one and two are at odds with one another. Often taking a risk when we shouldn’t. It is worth reading his book, Thinking Fast and Slow to understand the brain in the decision-making process. Especially since in business analysis we often use decision-making models, approaches, and tools to help make decisions.
Models help in the process.
Anyone who knows me, know I use the setability model for planning, analysis, and decision-making across impact zones (see S.E.T. for Success, pp 17). I think models are an important factor in making decisions. Every organization or client I have ever worked with either have models they use in decision-making or they need them. As a professional, who uses business analysis, your job is to provide a model or find out what should be used in the business environment you are in and apply it. Having a standardized decision-making model is a positive benefit to the organization as it provides consistency. It is important to be able to adapt and change your model as things change in the business climate.
It’s all in the approach.
Related to models, your approach to providing solutions. In my presentation I mentioned that are many approaches to use (from 5, 7, 10, 12 step processes) that can be summarized in four steps; define, choose, implement and measure. Defining has to do with framing a problem or opportunity. Framing often has to be done well as it is the difference between seeing the glass as half full or half empty. To choose is to have a choice. With business analysis, the three option choice applies (do nothing, do something or do something else). Implementation comes down to your planning approach (predictive or adaptive). Finally, measure gets down to key performance indicator. It is about knowing whether you will or if you did achieve the result based on all the decisions made.
Critical thinking tools.
We all need tools in our toolbox and decision-making has a lot to do with having the best tool to apply in making key decisions. Most websites provide the same tools when you are seeking something to use to make decisions. They include; swot, pest, pros, and cons, and cost-benefit analysis.
If you do not know how to use these tools you should work on leaning them. They are the standards no different than having a hammer, a saw, measuring tape, level, and pencil; They are tools of the trade.
Confidence gets in our way.
Back to the brain and the way we think. It is thought people fail to take into account complexity and that their understanding of the world consists of a small and necessarily un-representative set of observations. Furthermore, the mind does not account for the role of chance and therefore falsely assumes that a future event will mirror a past event. For example, to use a phrase, my Dad would say, “they are just throwing good money after bad.” In other words, when we have sunk costs we tend to put more into a bad situation, we take higher risks, and we gamble more. When what you see is truly all there is, there is nothing more. We will hope for different results. We become overconfident. The only way to guard against this is by doing your due diligence.
It is an Illusion of control with a planning fallacy.
We all have optimism and loss aversion bias where we think we have greater control over our lives than we do. Something called the illusion of control. The examples cited include people believing that they are less at risk of being a crime victim yet live in a high crime area, smokers believing that they are less likely to contract lung cancer or disease than other smokers, and traders who think they are less exposed to losses in the markets. In this case, we overestimate the benefits and underestimate the costs. The key is to be more mindful of the decision-making process.
Overcoming positives and negatives.
Decision-making is tough because we have the deck stacked against us for making better decisions. There are some things we can do to solve the decision-making challenges. We can be more mindful of our choices. In our organizations, we can embrace the diversity of decision makers and create decision committees. We can have designated decision driver with someone who has no impaired judgment since the decision is irrelevant to them. Finally, we can create control limits on decision-making and obey the decision-making rules.
This article is just a summation of a presentation I did on making better business decisions and outlines the challenges I see in organizations and people in business today. Given some constraints we have today (time, money and resources) there are things we need to do so we are making better business decisions. We could design organizations for decision-making, create decision-making rules and guiding principles, establish flexible decision makes and a common decision-making language, seek to guard against over-confidence and optimism bias and maybe get a coach, a mentor or a decision group for those more difficult choices. Good luck.
Remember, do your best, invest in the success of others and make your journey count. Richard.