The average person makes thousands of decisions each day, and most of them have little lasting impact.
However, decisions made by business leaders can determine whether an organization ultimately succeeds or fails. A glance at recent news articles will show plenty of examples of poor decisions that sent companies into a downward spiral. In fact, there’s a 95 percent correlation between companies that excel at effective decision-making and those with strong financial performance, according to research by Bain & Co., a global management consultancy in Boston.
In today’s fast-paced and complex business world, leaders must continuously refine their decision-making processes and practices to ensure they stay on the right path.
“A good leader is open-minded and takes into consideration other ideas and points of view,” says Jennifer Lee Magas, vice president of Magas Media Consultants in Monroe, Conn., who has a background in HR and employment law. “Having a narrow-minded approach to decision-making can limit your growth as a leader, and you may be missing out on a decision that could actually benefit you and the company.”
Because each decision is different, leaders would be wise to choose the appropriate decision-making style for the situation at hand, says Marie Hansen, SHRM-SCP, dean of the College of Business at Husson University in Maine.
“Determining which style to use and when requires an understanding of your authority and role as leader, the expectations of your team, and the types of decisions to be made,” Hansen says. “Leaders who remain transparent in the manner in which they make decisions and why they choose different styles, dependent on the type of decision, are able to build trust and respect.”
Four commonly recognized decision-making styles are:
Directive. The leader uses his or her knowledge and past experience to reach a decision without seeking information from others. The advantage is that decisions can be reached quickly; the disadvantage is that the leader might not consider the long-term ramifications.
Conceptual. The leader seeks ideas from team members, which encourages creativity and innovation. This style is suited for long-term projects and planning.
Analytical. The leader relies on direct observation, facts and data.
Behavioral. The leader collaborates with others on options and is highly influenced by their feelings and opinions. The downside: If a consensus can’t be reached, the leader must choose a different approach.
Key Steps
Incorporating a process or checklist can help strengthen the decision-making skills of C-suite executives.
Financial guru Dave Ramsey, author of EntreLeadership (Howard Books, 2011) who trains leaders on better decision-making, says the key steps include:
Set a deadline. “Procrastination can be avoided by setting a self-imposed deadline,” Ramsey says.
Gather many options. “Quality decisions come from having the most options—find them,” he says. “Options have the power to remove fear.”
Determine the worst-case scenario. “When you emotionally digest the absolute worst-case, you can make the call with a degree of confidence,” he says.
Follow your guiding values. “When you have a clear sense of ethics, you can make decisions more easily and quickly,” he says.
Understand that inaction is an option. At times, doing nothing is the best choice. “That’s different from being paralyzed,” Ramsey says. “Deciding not to decide is a decision.”
Another important step that leaders sometimes overlook is to review the legal ramifications of their decisions before they render them.
“A lot of the litigation I see, at least in the area of employment law, arises from executives making snap and uninformed decisions,” says Nannina Angioni, a labor and employment attorney with Kaedian LLP in Los Angeles.
Seeking legal advice before announcing layoffs, for example, can help reduce the risk of legal troubles, she says.
The Roadblocks
Fear of making the wrong choice, worrying that the decision won’t be popular, or being unable to decide altogether are a few of the challenges that executives encounter when they need to make important decisions.
“Fear is the ultimate cause of paralysis, and, just like the squirrel that runs in front of your car and can’t decide what he wants to do, fear will get you killed,” Ramsey says. “Of course, there will be times when you’re afraid. Just don’t allow indecisiveness due to fear.”
‘Leaders who remain transparent in the manner in which they make decisions and why they choose different styles, dependent on the type of decision, are able to build trust and respect.’
Marie Hansen, SHRM-SCP
Such delays can cost an organization “first to market” position and have lasting consequences, says Larry Mietus, founder of Speaking of Strategy, a consultancy in Buffalo, N.Y.
“When your heart, brain and gut tell you that you’ve got about 80 percent of the data collected … make a decision,” he advises.
On the other hand, leaders who are overconfident and don’t seek other opinions can create problems as well. When a business leader offers his opinion before soliciting input from others, other team members are likely to be reluctant to offer different ideas. As a result, innovation and creativity could be stifled, Mietus says.
Heather Ishikawa, senior vice president of Caliper, a human capital analytics company in Princeton, N.J., warns that confirmation bias can occur when leaders seek only information that confirms their beliefs and dismiss information that does not.
While input from the group is a worthy goal, holding out for consensus is often a bad idea, says Jim Hauden, author of What Are Your Blind Spots? Conquering the 5 Misconceptions that Hold Leaders Back (McGraw-Hill, 2018).
“We shouldn’t need a vote,” Hauden says. “We want the wisdom of the group to lead us to the right path. While the decision-making process does culminate in a decision, it’s the art of co-thinking and synthesizing together that yields the most powerful results.”
Of course, having a process alone doesn’t ensure that leaders will make the right decisions, ones that will benefit their organizations over the long run.
“Empathy plays a pretty significant role in good decision-making because leaders need to actually care if their decisions have a positive impact,” says Helen McPherson, founder of McPherson Consulting Group Inc. in Fort Worth, Texas.
Trust Your Intuition
In the end, the best decisions involve a mix of knowledge, intuition and a willingness to take a bit of risk—some of which has to be developed over time through experience.
For this reason, Greg Githens, author of How to Think Strategically (Maven House, 2019), likens decision-making to an art form rather than a process. Leaders need to develop insight.
“It is the insight that allows them to effectively cut through all the data-noise,” Githens says, “so that they can recognize the ‘crux of the matter’ and make good strategic and tactical decisions.”
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