When Apple’s board of directors rehired Steve Jobs after he was fired more than a decade earlier, the decision shifted the company’s future in a seismic way. Jobs ascended quickly to iCEO and went on to make major decisions of his own: He laid off scores of employees and reorganized top management. After streamlining the company’s product line, Jobs instituted a strict no-speaking-with-the-press policy, which still lends mystery and amps up excitement whenever a new Apple product is about to be launched.
From setting short- and long-term business goals and developing strategies to meet them to managing teams and individuals, managers and executives make about 3 billion decisions a year, says Forbes. Research by Bain & Co. involving 1,000 companies conducted during a 10-year period found that the effectiveness of those decisions is 95 percent correlated with financial performance.
Sometimes, though, organizations don’t realize just how important decision-making processes are to their bottom line—and to employee contentment and customer satisfaction. Below are eight key decision-making strategies for business leaders followed by nine ways decision-making processes are often sabotaged. Both lists can help organizations small and large work more efficiently and successfully.
8 Decision-Making Strategies for Business Leaders
Crunching data can help businesses improve their decision-making strategies and, in turn, their outcomes.
What companies learn through data collection isn’t always about what works, though. It’s also about revealing failures, said Staats, who has spent 15 years teaching technology and health care organizations how to make good use of the data they’re gathering. In one instance, he helped a technology company analyze data collected on employee handwashing, which is linked to hospital infection rates.
“In theory, failure is good,” he said. “If we try something and it doesn’t work, we can learn from it and keep trying.”
While some may say big data is forcing companies to shift from intuitive-based decision-making to relying solely on analytics, Staats doesn’t think so.
Ethical decision-making in companies is driven by what an organization—and society—thinks are good values, such as honesty, integrity, fairness, equality, diversity and dignity. It’s what influences a company to pay men and women equally when they are evenly matched in skills and experience and discourages employees from insider trading.
With the support of a company’s board, what The New York Times referred to as “chief ethics officers” can help build a strong ethical culture within an organization and help make business ethics an integral part of their corporate strategy. Internal ethical challenges may include diversity and addressing employee sexual harassment. External ethical concerns could include compliance with environmental laws, federal and state safety and privacy regulations, and fiscal reporting statutes.
The day-to-day choices that keep a company running smoothly—simple, routine decision-making such as ordering supplies and choosing the best distribution channels—are operational decisions. They’re not big-picture strategy-oriented choices made by the CEOs and board but generally the job of middle and junior management. Companies can make hundreds of them in a week, or even in a day.
Process entails everything an organization does in its ongoing operations, including deciding how the company prices products, what products to launch, and how they go about marketing.
While it’s traditional for decision makers to focus on outcomes, experts say that can get in the way of process. Staats points to the NBA’s Philadelphia 76ers, whose fans chant “Trust the Process” during games, as a reference to a management strategy designed to acquire top-level players.
“We think if we got a good outcome from our decisions that we followed a good process, but that’s not always the case,” said Staats. “Sometimes you make good decisions and have bad outcomes. So understanding the process that got you to the decision is important [for] understanding the why behind what you’re doing.”
Non-programmed (or unprogrammed) decisions revolve around new scenarios faced by an organization—unlike programmed decisions, which are based on previously established processes or rules made by an organization. Manufacturers that follow recommendations by the New York City Department of Health and Mental Hygiene to reduce sugar by 20 to 40 percent in their packaged foods and drinks will likely be traversing new territory and making non-programmed decisions.
Tactical decisions involve the nuts and bolts of executing a larger strategic plan. They’re actionable and have a purpose and a measurable result. It means developing workflow structures and distribution channels. For managers, Forbes suggests that making tactical decisions might involve analyzing their department’s capabilities and strengths, as well as its weaknesses and gaps, and drawing up a plan to act on those findings. Or, it might mean assessing a customer’s needs and what drives them, including how to address those needs to increase big-picture company goals such as growing sales. Tactical decision-making leads to measureable results.
When it comes to decision-making in business, said Staats, no matter what type you’re focused on, “understand what the baseline looks like; [understand] the sandbox you’re playing in.”
9 Ways We Sabotage Our Decision-Making Processes
Change happens, and you can’t always use the same business models from 10 or 20 years ago to make business decisions today. Push past fear. Don’t let it get in the way of process-focused decisions. Try new ideas.
Sometimes a past success may cause a person to freeze up when new decision-making challenges arise—they fear they’ll never have a great success again. But a failure is not a fault. Some CEOs look to hire people who’ve had business failures, as they bring experience and resilience to the job. Try again, even if you fail again. It helps you grow.
We have an overwhelming tendency to look for what confirms our beliefs and ignore what contradicts them. Counteract these tendencies. Try to prove yourself wrong. Ask if there’s a better idea. Use unbiased surveys to confirm issues. Plant a devil’s advocate in meetings to push back.
Some leaders may judge success based on outcomes, but a poor outcome doesn’t mean the decision-making process that led to it was poor. Remember that a product’s popularity with the public isn’t always a reflection of its value or true quality, or of the process that went into it.
Avoiding heuristic processes
The word heuristic is from the Greek heuriskein, meaning “to discover.” Sometimes businesses stick with tried-and-true decision-making processes instead of heuristic or trial-and-error ones. Try thoughtful exploration and creativity, which can lead to growth and fresh, surprising results.
Being too focused on the end result can lead to an unwillingness to take the risks required for longer-term success. Leaders can encourage their organizations to be thoughtful and unafraid to take step into the unknown.
We want to be seen doing something. Often, waiting or reflecting has a higher value than being out in front.
Perfectionism (sitting-in bias)
We’re afraid to stand out and be a so-called deviant in business. Don’t let the drive to be perfect stall growth or sabotage your career. Take decisive actions, even when they’re not flawless.
It’s the old ostrich-burying-its-head-in-the-sand method of avoiding conflict by looking away or denying it exists. Be aware: It is always better in business to acknowledge conflict than to live in denial.