Entrepreneurs are known for their ability to take risks and determine the decision they have to take for their business. Decision-making is a comprehensive process of making your firm’s best choice, considering all the available alternatives and resources. It is not an easy task because one has to be analytical and methodical in the process and make the decision that sustainably utilizes the scarce capital.
It is essential to analyze the possible pitfalls of management decisions. Though not every decision is worth the time and energy. Sometimes prompt actions are necessary, and a delay could result in the ultimate loss of opportunity – these are called programmed decisions. Unlike non-programmed ones, they don’t need a lot of thought and do not carry many consequences. There could be three types of decisions; strategic – taken by top management, tactical – taken by managers, and operational – taken by employees. Let’s look at some tips for successful strategic decision making in business, which need to be taken by the CEO or the board of directors:
1. ANALYTICAL THINKING
As established, some decisions require an in-depth understanding of political, social, and environmental factors and consideration of facts and historical figures concerning the decision dynamics. We call it analytical thinking.
The decision-maker is liable to reflect upon risks and costs associated with a specific choice. They check out detailed and systematic facts to prove their decision to maintain effectiveness and efficiency. Intense analysis constitutes several sets of data, personal understanding of the market, and the industry’s probable condition.
The research and reasoning penetrate deep into the knowledge of consumer behavior, risk management, accounting, and finance, alongside supply-chain. Due to the requirement of such thorough understanding, companies are encouraging their managers to pursue analytics degrees online to learn new modes of operation. Analysts can use different tools to benefit, such as predictive analysis, which includes realistic forecasts, or prescription analysis, which uses the machinery to churn out relevant facts and figures.
2. BUILD A SMART OBJECTIVE
Setting an objective is the primary task of the decision-making process, but the aim must be well-thought.
In simpler words, the decision-maker needs to develop a SMART objective, SMART being an acronym for specific, measurable, achievable, realistic, and timely. Specific goals mean that it should be paying attention to one direction, and delegation of work becomes easy.
Secondly, the objective should be measurable because there should be a method and an order of action that helps reach the final aim of the decision. Thirdly, it should be achievable, which refers to the attainability of available resources of labor and capital. Fourthly, the objective has to be realistic to make sense to everyone and is beneficial to the business in the end. And lastly, the object should be time, which means there should be a specific time span fixed to accomplish certain activities. All these conditions make the objective analytical and in alignment with other strategies of the business.
3. COMPARE COST-BENEFIT
Cost-Benefit Analysis (CBA) is an integral part of decision-making. First and foremost, the analyst creates a set of different strategies and alternates. To choose the best of them, the analyst compares each one of the pros and cons. Then they match the cost against the revenues, the strength against the weaknesses, and the opportunities against the cost. To execute the CBA, you need to determine the costs and allow them to each alternative. Then they have to calculate benefits in terms of statistics and revenues. After that, they compare options and prepare a report. The report shows the next plan of action, depending upon the most practical choice. This way, the decision that you take is made risk-proved and packed with in-depth study.
4. UNAMBIGUOUS COMMUNICATION
Communication is the key to the success of any plan’s execution. It is the same for the decision-making process. Even though you shouldn’t come under anyone’s pressure or bias, discussing the choices and available alternatives with your group is essential before making a decision. Communicate with your people about the objective you have in mind and the strategies required to reach there so that they can tell you if it’s achievable. If you have enough time, consult your competitors and see how they took a particular decision; many experts are also available to help you with this.
Thorough and clear communication can help you eliminate your personal biases and help you see through several perspectives. Not only this, but communication also enables you to realize the capabilities and determination of your employees before making a decision. Once you know what your team can do, it becomes easier to set an objective and implement a decision. It also minimizes misunderstandings.
5. GENERATE CONTINGENT PLAN
Decision-making is not an easy process, and it requires a lot of risk management. A lot could go wrong because of a particular decision. For instance, if the business is seeking to expand or go into a partnership – they could run short on the capital, or the partner could deceive them. In such a case, you should always be ready with a contingent plan. It should be fixable to the actual procedure at any point and should be in alignment with the real goal. As a manager, you should communicate the plan to the team, and everyone should agree upon it. It is essential because if, due to unfortunate reasons, you have to reroute the map, everyone is ready to go on board with the other one.
The contingent plan should also have detailed risk analysis and measurement because quick and prompt decisions are requisite at the time of contingency. Lastly, the contingent plan should also have the corrective measures for the actual one. After evaluation, your team can promptly activate them.
In the business industry’s competitive race, you need to have an edge, which no one else does. And this requires making a risky decision more often than not. The ever-evolving environment forces entrepreneurs to think outside the box, be creative and innovate effectively.
In such a situation, successful decision-making is not the easiest part of the plan. You must adequately follow the order and the process of the decision-making after doing complete research. Do not let yourself overthink because you are to question it at several points but try to counter it with existing reasoning. If you stay sure of yourself, your team stays assured the execution becomes achievable.