Decision-making can make or break the health and eventual success of a business. Psychology Today discusses the psychological influence on decision-making. Memories, emotions, reason, and bias affect forming opinions and ultimately forming a decision. Free will is what allows us to make simple decisions and rationalize what is the best decision to make. Decision-making is about being strategic, prioritizing, and focusing on your business’s beliefs of what will be the most ideal, and helpful outcome for your company in the long-term.
We will discuss the following topics:
- Steps of decision-making
- Examples of business decision-making
- Factors that affect good decision-making and how to turn it into a business advantage
- Why is having a decision-making strategy important?
Steps of decision-making
As discussed by Business News Daily, countless decisions are either executed by employees under company guidelines, a company handbook, or an employee rulebook. Nonetheless, it is essential for business growth to not be restrained by the limitations and rules of company handbooks and guidelines. By not limiting forming decisions based on rules and guided restrictions, a company can prosper from creative thinking and not adhering to any misbeliefs or bias. Now, here are the following steps:
Step 1: Establish a goal
With strategic planning, define and set obtainable business goals. Be as specific as needed and create challenging goals; the more challenging a goal is, the more rewarding the outcome will be for your business. Form a support team around the goal, making sure everyone is informed each step of the way. Envision achieving your business goals; this will help buoy motivation towards completing the goal and create a positive impact on work progress towards the goal.
Step 2: Collect related information
Before you make a decision, it is highly useful to do some research and gather pertinent information that will help identify the roadmap and consequently the course of actions needed to make an informed decision.
Step 3: Measure your options
As you collect the information you will start identifying alternatives and likely solutions for the decisions you need to make. Take a step back to evaluate the possible outcomes of each of the alternatives. Ask yourself what course of action will take you closer to reaching the goals from Step 1? What has the higher potential? List the alternatives in priority order, this way you will have more clarity on what to do next.
Step 4: Make your choice
Carefully make a choice based on all the goal planning research and evidence. Most importantly, make a choice that would be the most rational for your business moving forward.
Step 5: Assess your decision
Evaluate the short-term and long-term outcomes of this decision, and how it will positively impact your business. Most importantly, assess if the decision you chose will accomplish the goal setting from Step 1 and figure out if this decision will fill a valuable need for your company.
Examples of business decision-making
According to Growth Business UK, here are some insightful examples of business decision-making for steering your business to success:
Forming a partnership
Partnerships, including with powerful companies in your industry, can maximize the long-term benefits in sales.
Launching a new product
Creating and launching a new product for a different marketing segment. For example, creating a quality product but for lower budget businesses.
Widening market expansion
Moving into a niche market similar to your business’s current market.
Invest in top sales talent
Depending on the state of the economy, this could be risky for some businesses, but extremely rewarding because of pursuing new business within your company’s core markets.
Focus on business strengths
This is where Strength, Weakness, Opportunity, and Threat (SWOT) analysis is highly useful. Instead of focusing on your business’s weaknesses, which can prevent business potential, focus the attention on your business’s strengths to further scale your business to new levels of success.
Appoint a COO
By appointing a Chief Operating Officer, your company can streamline upper management processes and raise the beneficial value of a company.
Factors that affect good decision-making and how to turn it into a business advantage
It is best to be aware of any major factors that could cost good decision-making in any business. By being mindful of the following factors, your business will be able to avoid encountering difficult, poor decision-making and vastly improve the results of decisions, reducing any concerns in the decision-making process. We’ll go through a run-through list of crucial factors to avoid and instead, learn to spin it into a business advantage for decision-making.
1. Urgent deadlines
The more deadlines you have can affect rationalizing and taking time for a series of small decisions. Each decision you make for your business is significant and should never be rushed. Instead, turn urgent deadlines into a motivating opportunity for your employees and leadership team to set deadlines that work conveniently into the goal-setting roadmap schedule. The "urgency" then is more a planned set of steps that ultimately will match the overall goals your business wants to achieve.
2. Choice overload
Having too many choices to pick from can cause an unorganized and slowed-down decision-making process. Instead, make a top 5 choice list of potential decisions your company would greatly benefit from the most. You want to have condensed, good-quality pick of choices. Less is always more.
3. Missing or inadequate information
Not knowing the full picture, scope of the decision, or level of importance can impact how or when a decision is made by acknowledging this factor.
4. Risk assessment
Some people may be hesitant to take alternatives that may seem riskier, especially in a business setting. Knowing certain boundaries (for example: when making a purchasing decision or knowing how high one can bet) could potentially help assess decisions that may seem risky.
When you don’t know the possible outcome, making a decision will be more challenging. Gathering the necessary information and establishing a framework, will help you in making some assumptions transparent and thus overcome some of these uncertainty feelings.
Why is having a decision-making strategy important?
For both managers and employees, leadership and a proactive work ethic in decision-making is integral to a business’s longevity. Having a decision-making strategy is significant for businesses, so we’ll discuss a few benefits here.
Making better choices
When you’re a decision-maker for a business, you always need to keep your business’s well-being in mind. You must separate your own personal needs from the needs of your business. Try not to take the easiest path in making a decision because of an existing camaraderie at work for example. Aim to avoid picking a solution that may seem like the best option for your business, however, isn’t because all the facts and research about it have not been thoroughly examined. Business is business purely, and each decision-making plan needs to reflect it.
Helps with big decisions in the present or future
Usually as a leader within a business, some big decisions that potentially may affect the health of the company have to be made. These tough decisions can impact company's employees' job security. First, focus on the facts and from there find the ideal solution to making a difficult decision. Second, always seek out co-workers' advice and opinions. Strong decision-making for the present and future is contingent on pulling from everyone's point of view.
Saving time and money
When a business practices good decision-making, they could save their company a huge amount of money and time. For example, when it takes a long time for a management team to inform their team about choices that have been made in the decision-making of the company, this results in a lengthier process in the team executing the goals as the result of the decisions made. Fast decision-making made by business leaders will lead to more efficient work processes from the team. The more organized a business shapes itself, the more money and time is saved overall.
Decision-making is about strategy, priorities, and what you believe will provide the best or most useful outcome for your business. To encourage positive change and drive long-term business growth, use a decision-making strategy that involves everyone in the company. Components including steps, examples, and factors affecting decision-making can create a space where all are open to sharing ideas and thus make the best decisions for your company. The more emphasis is placed on decision-making, the better organized and strategic a business’s decision-making process will be as a result.