Business decision-making

Business decision-making: 4 common mistakes and how to overcome them

As a business leader, you’re responsible for making decisions that impact the long-term success of your company and the well-being of employees.

Examples:

  • Personnel decisions (hiring, firing, promoting and disciplining)
  • Selection of benefits programs
  • Annual goal setting
  • Budgeting and financial planning
  • Adjustment to new laws and regulations
  • Improvement of customer service

The decisions you make are especially critical during times of crisis or intense changes.

Examples include:

How you make these decisions shapes whether the outcome is positive and beneficial – or not.

Let’s explore some common business decision-making mistakes and what can be done to improve your decision-making process – should you fall into some of these traps.

The military perspective on making decisions – and what it can teach business leaders

There are few environments better suited to developing the leadership skill of making sound, confident decisions than the military.

I’m a 1st Lieutenant and reservist in the U.S. Marine Corps, with three years of active duty and training experience. Effective decision making is a core concept of our training and day-to-day expectations as a military officer. It’s this perspective as a military veteran that I bring to this discussion.

What I’ve learned is that, when comparing the military to a normal business environment, the process of how someone makes decisions isn’t all that different. The main difference lies in:

  • The amount of decisions military leaders make
  • The immediacy of consequences to these decisions

In the business world, leaders often make decisions for which outcomes may not be evident for some time.

It’s commonplace for military leaders to make many urgent decisions in a short period of time that generate reasonably immediate results. Thanks to sheer repetition, military leaders have the benefit of  compressing the decision-making cycle and quickly learning what will and won’t work in certain circumstances. Decision making that is commonplace in the military is most relevant to business leaders experiencing a crisis or period of change.

Naturally, there are pitfalls in decision making common to both military and business settings.

4 most common business decision-making mistakes

1. Being unaware of our own bias or rushing to conclusions

This occurs when you assume a current situation mirrors a previous experience, and you apply the same logic to the new situation without first obtaining all relevant facts and context. In other words: you immediately think you know what’s going on, adhere to your bias and skip to your assumed best course of action.

By making assumptions and rushing to conclusions, you introduce a high risk of:

  • Not viewing an issue holistically, which can lead to misdiagnosing problems
  • Focusing on the symptoms of a problem and not the root cause
  • Emphasizing your own perspective and experience at the expense of other viewpoints that could bring more value

The result can be that you implement irrelevant solutions, don’t address the root cause or make the situation worse.

Let’s say you notice one of your employees is less productive than other members of your team. You assume it’s a behavioral issue and initiate the disciplinary process. If you’re incorrect, you may demoralize the team member, fracture the relationship – and the real, underlying problem persists.

What you should have done is make time to examine the issue from multiple perspectives.

  • Are there any other factors that could impede your employee’s productivity?
  • Does the employee have the tools they need to get the job done in a timely and efficient manner?
  • Does the employee have the skills and knowledge to fulfill their job duties?
  • Is there a personal issue related to family or health that’s distracting the employee?

How to acknowledge bias and avoid rushing to conclusions:

  • Don’t accept information at face value. Ask probing questions.
  • Treat each situation as unique. Make time to learn about it.
  • Assess a situation from multiple perspectives. What are all the possible causes and solutions?
  • Acknowledge your own unconscious bias, and challenge your initial assumptions.

2. Dodging decisions

It’s human nature to:

  • Avoid discomfort and conflict
  • Seek to not overstep personal or professional boundaries
  • Protect yourself from consequences of a poorly executed decision

These tendencies may cause you to avoid business decision-making because decisions can expose you to discomfort, conflict or consequences. You may hope a problem or challenge will resolve itself or that a clearly correct choice materializes with time.

Problems don’t go away on their own. They often ferment and grow without intentional decision-making by a leader.

Decisions must be made deliberately. They don’t make themselves.

While you may think of dodging a decision as delaying action until a more opportune time, the reality is that dodging a decision is a decision in and of itself. You’re choosing to not act. Therefore, you indicate tolerance of the consequences associated with inaction. A more opportune time may never come.

Frankly, dodging a decision is ducking your responsibility as a leader.

A former Marine leader of mine once told me: Leaders are not what they preach. They’re what they tolerate.

Our actions demonstrate our values more than our words ever will. The message of inaction and avoidance to can be toxic to your team and a collaborative work environment.

Perhaps you have two feuding employees. You may avoid confronting the issue in the hope they will work out their conflict on their own. If you chose not to act, and they don’t resolve their differences, you accept the risk that animosity takes root and negatively impacts morale for the rest of the team.

Your team may perceive inaction as a lack of respect and caring for them or the workplace culture.

Remember this about dodging decisions:

Inaction is a decision on its own – and always the wrong one. Once you’ve gathered relevant information, face the issue directly.

3. Overanalyzing information

In an ideal world, there would be a neon sign blinking: This is the right decision. Proceed down this path.

We rarely ever enjoy such clarity.

Decisions can be hard. The information we must work with may be suboptimal. It’s normal to desire perfection and fear the consequences of making a wrong decision.

We can’t get stuck waiting on more information, endlessly evaluating the same options, waiting for a lightning bolt of clarity that won’t magically arrive. You must decide and act to prevent a situation worsening. Always maintain the flexibility to shift course as you receive more information.

The consequences for a business of “analysis paralysis” range from reducing business productivity and financial solvency to diminishing employee confidence in you as a leader. If you don’t demonstrate trust in yourself, why should others trust you?

Let’s say you learn that your current staff feel overwhelmed in their workload. Overanalyzing may look something like this:

  • You realize you need to hire additional employees.
  • You pull your financials to evaluate revenue, headcount and expenses.
  • You calculate again and again, without ever committing to hiring additional employees.
  • You continue questioning: At what financial metrics is it the right time to bring on new staff?

All the while, your employees continue working tirelessly to keep your company running smoothly. Too much time in an overworked state will cause employee frustration, burnout and possibly resentment. Your inaction may lead to individuals leaving. Attrition only exacerbates the issue, and your company might struggle to fulfill basic demands.

This may be an extreme example to illustrate the point: inaction, in the form of analysis paralysis, can cripple an organization.

How to avoid over analysis:

Step away from the immediate scenario and establish objective criteria for your decision. List the most likely scenarios and plan your course of action for each.

“If X happens, I will do Y.”

“If X doesn’t happen, I will do Z.”

4. Fear of delegation in business decision-making

The higher the stakes of a decision, the more you may seek to control it. You desire a positive outcome, and you trust ourselves to accomplish it.

However, excluding others in the process potentially limits your solution, inhibits innovation and fails to identify blind spots inherent in your own bias.

Teamwork, or shared decision-making, is critical. We all carry different biases, perspectives and experiences that may benefit the business decision-making process. Involving individuals with complementary strengths broadens our viewpoint to help avoid unforeseen challenges.

It becomes more and more difficult for an individual to manage all required decisions the larger and more complex a challenge becomes. There’s only so much time in a day that one individual can dedicate to a challenge. To operate nimbly and efficiently, learn to delegate effectively.

The military divides decision making into three distinct levels:

  1. Operational (the highest level)
  2. Strategic
  3. Tactical (lowest level)

Military leaders fail when they don’t respect the decision making level they should be operating within. Leaders can fail by making an operational level decision and then exerting too much influence down the chain of command to control subsequent strategic and tactical decisions. Instead, they should empower lower-level leaders to make independent decisions. This enables solutions to adapt more nimbly.

No one wants to feel as though they must justify every decision they make to a higher authority. Micromanaging people limits their creativity, engagement and ability to adapt. Effectively defeating one of the strongest benefits to working as a team.

How to overcome fear of delegation:

  • The biggest factor in delegating decision-making authority to others is trust. Build trust between yourself and the managers and employees below you.
  • Err on the side of trusting team members. Start by giving them small tasks and the bandwidth to complete them. Begin increasing their responsibility from there.
  • Engage in coaching as necessary. Over time, you’ll become familiar with each employee’s individual strengths and their level of investment in outcomes. You’ll learn which members of your team are best suited for which kinds of tasks.
  • Provide clear expectations when delegating assignments.
  • Offer support as necessary to personnel who are making and carrying out decisions on your behalf.

Bringing it all together: a business decision-making framework

The OODA loop is a widely used model of decision making in the military. It can be an excellent tool for business decision-making as well because it’s simple, relatable and repeatable.

The OODA loop model was developed by Colonel John Boyd, a former U.S. Air Force fighter pilot and Pentagon consultant. The premise is that all decisions occur within the same basic cycle. The goal is to progress through each step of the cycle to make informed, sound decisions.

Learning to progress through the decision-making cycle more quickly and effectively provides you an advantage over your competition. Consistently out-cycling your competition gives you an edge.

Image courtesy of OODAloop.com
Image courtesy of OODAloop.com

The steps of the OODA loop are:

1. Observe

Observe the environment and situational factors. Gather information. This is also where you may analyze the impact of previous actions to prepare for new or follow-up decisions.

To evaluate the impact of a previous decision, consider these factors:

  • Under what circumstances was the decision made?
  • What characteristics of the decision appear to have influenced the process?
  • Was the decision itself strong or poor, or can the results be attributed to the execution?
  • What other contributing factors can we better account for next time?
  • If a bad decision was made, consider how you can improve future decisions.

2. Orient

Put the information you gathered into context and adjust your perspective to align with the circumstances you face. Examine the more granular situation. Engage with all relevant parties.

  1. What catalyst created the need for a decision to be made?
  2. Who are the influencers of this decision?
  3. What is the intended outcome?
  4. Why is this outcome important – or not?
  5. How might the execution be carried out?

3. Decide

Select the best course of action given your goal(s) and the unique situation.

4. Act

Execute on the decision with the help of your team.

5. Repeat as necessary

Summing it all up

Mastering the art of good business decision-making is a valuable skill. Especially during times of change or volatility. You can develop this skill by seeking to understand common mistakes leaders make and develop strategies for avoiding them. Common pitfalls include:

  • Being unaware of bias or rushing to conclusions
  • Dodging decisions
  • Overanalyzing information
  • Fear of delegating decision-making and execution authority

Lean on frameworks like the OODA loop to guide you through the process and help ensure more timely and effective decisions.

To learn more about being a confident, decisive leader in dynamic circumstances, download our free magazine: the Insperity guide to managing change.

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2 responses to “Business decision-making: 4 common mistakes and how to overcome them

A
Amy Bogart

Chris, this is fantastic! Thanks for your insight.

Insperity Blog

Thank you for reading and sharing your feedback, Amy!

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