Management’s most memorable moments are its colossal failures. Spectacularly bad decisions are trumpeted in the news media, memorialized in books and movies, and etched in our memories. Clearly, the way to achieve anonymity is to make consistently good decisions.
Fortunately for those of us craving fame, making good decisions isn’t easy. Making good decisions is very, very difficult, and something to be respected and rewarded.
Over the years, the decision-making process has been analyzed, dissected, disassembled and reassembled by all kinds of people, from academic professors to football coaches. The idea behind all their work was to learn more about the process so it can be used to train people to make better decisions.
The success of a football team, for example, is highly dependent on the decision-making ability of its quarterback. In many games, the outcome is determined by a decision to throw a pass or not.
Teams with quarterbacks who make mostly good decisions end up winning. The others end up as the supporting teams that make the others winning records possible.
It’s much the same case in business. While there are other factors that sometimes play an important role, the destiny of a business is created by the decisions management makes.
We don’t know half as much about how human beings make decisions as we should. Nonetheless, some useful guidelines have been developed to help us with the process.
Years ago, the U.S. Navy used to give out wallet-sized cards with these simple rules for making a decision. The rules were laid out in the form of questions:
1. What is the problem?
2. What is the cause of the problem?
3. What are the possible solutions to the problem?
4. What is the best solution to the problem?
Time and human nature have combined to inflate the list, of course, and the latest management texts have replaced the original four questions with seven or sometimes even eight rules. Whether a longer list improves things or not, though, is a matter of opinion. There is a strong likelihood that someone who has to be told to implement the decision probably shouldn’t be allowed to make decisions certainly none that would affect other people.
The first step, defining the problem, is not always easy but it is always worthwhile for a manager to investigate and apply some thought to. This is particularly true when the problem involves some individual’s behavior or performance. The initially reported problem often turns out to be something quite different when you shine a light on it.
Even when a problem appears obvious and emerges from the cold and neutral financial reports low profits in second quarter, for example it is worthwhile to give some thought to how the problem is defined. Are profits too low, or are they too volatile? These are two very different problems, each with its own set of causes and solutions. And the last thing you want to do is come up with the perfect solution to the wrong problem.
Establishing the cause of a problem will shape and define the options available for a solution. In many businesses, for example, it is not always obvious whether a given problem is caused by internal or external forces. A decline in gross revenue, for example, could reflect external factors such as changing demographics, price changes for gasoline or reductions in disposable income as a result of new taxes or an economic downturn. On the other hand, it might be caused by internal forces such as noncompetitive prices or poor customer service.
Compiling a list of solutions can sometimes seem like an unnecessary part of the process, but in most cases it helps a lot to spell out the options.
The process of writing the possible solutions out not only sharpens our own thinking but also makes it a lot easier for anyone else to read in to the decision process. That anyone else could be a technical person, a mentor, a consultant, or someone whose views and opinion you value such as your husband or wife.
Having the options in writing allows the person to look at them as they are instead of our unavoidably selling them the one we like best.
Selecting the best option is always easier if you have gone through this organized process. What is best can vary a lot from business to business and even from one time period to another. A solution isn’t best, for example, if it requires money you already spent last quarter on something else.
There is no procedure or checklist that can guarantee good decisions. Using this simple, four-point check list, though, can move the odds in your favor, and that’s a good thing.
James McCusker is a Bothell economist, educator and small-business consultant. He can be reached by e-mail at otisrep@aol.com.
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