How small business owners can improve their decision making

Before we start to go through the process of building better decision making, let's look at what goes wrong with decision making.

To do this let's introduce you to Nathan. Nathan is the founder and CEO of a scale-up materials science company. As with most scale-up companies, activities within the organisation move quickly, deadlines are tight, expectations are high and as such decisions have to be made quickly. It is this speed that provides us with the first and most common concern with decision making.

The second relates to Nathan's background. A materials scientist by background and someone who is a first-time founder and leader, Nathan finds himself making decisions in areas where he has little confidence or experience. This lack of experience and confidence means that he seeks information from a variety of sources before making his decisions, or he relies on gut instinct. This leads us to a third issue with the decision-making process - what information can we trust, and from whom?

Decision making is an essential leadership skill. For some it comes naturally, for others it's more difficult. We make decisions all the time: what to wear, what to eat, what programme to watch.  These are decisions that don't require much thought. Why? Because they have very little impact on us and our daily lives. However, as a leader we are responsible for making judgements and choosing between alternatives that may have a significant impact on the business and its staff. These decisions need more careful thought and consideration.

So which decisions require more thought and which decisions could be instinctive? We generally look at three specific factors:

1. Complexity: The greater the complexity, the more formal the process

2. Risk: Put simply, what could go wrong?  The more that could go wrong, the more formal the process

3. People: People do not always act rationally or consistently. This adds an extra layer of complexity, especially when seeking advice in a decision

We therefore accept that decisions will not always be put through a detailed decision-making process. However, as a first-time leader, a first-time founder, it's likely that you may use a more formal process more frequently and, as you gain experience - both in your role and with making decisions - the formal process will be used less.

A systematic approach helps you address the necessary components that result in a good decision.  By taking this approach, you are less likely to miss things or get caught up in political issues. You will make better quality decisions as a result.

There are five steps to making an effective decision:

1. Decide how to decide

How collaborative will you be?

How consultative will you be?

How autocratic will you be?

The answers to these really depend on what information you have, what information you need, the level of commitment you need from people, and whether there will be any likely conflict as a result of the decision.

2. Generate possible solutions

This is a critical step in decision making. The more options and possible solutions you generate, the more effective the decision will be. There are lots of different ways that you can do this either as an individual or as a group.  Investigate critical thinking and brainstorming.

3. Evaluate possible solutions

When you are satisfied that you have a good selection of alternatives, you need to assess the practicality, risks and implications of each option. To do this I favour two approaches. Firstly, the PMI tool - which details the positives, negatives and interesting elements of every alternative. Secondly, and especially in group environments, the use of De Bono's Thinking Hats can be very beneficial - taking each role in turn.

4. Make choices

Hopefully, if the evaluation step has worked effectively, a solution will be obvious. However, if it hasn't my advice would be to revisit steps two and three to see if any new solutions arise.

5. Implement and evaluate choices

Once a decision has been made, it's important that it is implemented quickly. Also, because not all decisions are good ones, the final step is one of evaluation and reflection. Was the process right?  How could the process be improved?

_Stuart is a trusted Enterprise Nation adviser who specialises in giving business and leadership advice to start-ups and growing businesses. Find out more about his services, and don't miss his Building better decision making webinar on 20 April.

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