How To: Effective Decision-Making

In entrepreneurship, it’s survival of the fittest. In terms of evolution, humans and entrepreneurs have learned to build tools, language and social structures. We’ve innovated and adapted to the challenges that arise in our environment. As entrepreneurs, we are especially adept problem-solvers – often the reason we became entrepreneurs in the first place is because we recognized a problem and identified a solution. As we know, the choices entrepreneurs make have a powerful and immediate impact on their organizations, and the ability to make smart choices quickly is a core skill that every entrepreneur must possess if he or she wants to be successful.

Structures and strategies

When attempting to improve outcomes for an organization, leaders with a bias for action may default to entire structural reorgs, leveraging SWOT (strength, weakness, opportunity, threat) analysis. While this ability to make quick decisions is often a benefit to most entrepreneurs in the early stages of an organization, it can be extremely detrimental during the scaling stage. A Bain study of 57 reorgs between 2000 and 2006 found that fewer than one-third produced any meaningful improvement in performance.

When faced with organizational challenges, rather than overhauling structure, Bain and other thought leaders promote the idea of decision-driven changes, beginning with what they call a “decision audit.” It allows entrepreneurs to take a step back and assess what their ultimate goal is. The strategy for achieving team growth will be different than a strategy focused on increasing return on investment. From there it will be simpler to create a standard approach to large organizational decisions as well as small routine decisions.

Individual considerations

On an individual level, making important decisions is complicated by the biases and emotions we unconsciously bring to the table. Past experiences have inevitable impacts on the way we make decisions, but entrepreneurs that succeed are able to understand their natural biases, and work around them in order to see problems as objectively as possible. Self-awareness, when it comes to decision-making or otherwise, trumps ego every time.

To aid in eliminating bias, it’s also critical to hire a diverse team of experts that are aligned in achieving the ultimate business objectives. Using your decision-driven strategy, your team is armed with the organization’s north star and is free to make and execute decisions better and faster than your competitors.

Time and types of decisions

Beyond personal biases, the time constraints and types of decisions are both crucial considerations. Organizations that are able to make high-quality decisions efficiently are more agile than the competition. There are four essential dimensions to effective decision making: they must be high-quality, time-efficient, and easily actionable, requiring appropriate effort. Decisions that are missing any one dimension are not maximizing organizational effectiveness, and are likely draining resources.

There are two types of decisions that organizations need to be able to address within these dimensions. Big, one-time decisions that, standing alone, have huge impacts on an individual or organization are often what comes to mind when discussing organizational decision making. Entrepreneurs face make-or-break decisions more often than corporate employees, and finessing their technique for these situations is vital to success. It is equally important to polish decision-making techniques for small, routine decisions that cumulatively have a significant impact, whether that is establishing effective hiring practices early or maintaining high attention to detail in product prototyping, these choices will have amplified implications as the organization grows.

Leverage the community

The decisions entrepreneurs face carry immense weight on the future of their organization, but luckily have almost certainly been faced by those who precede them in one form or another. Many entrepreneurs in the ecosystem are willing to share their war stories and discuss how to better approach and solve the problem. Environments like the TechNexus Collaboration Center are especially helpful in providing a community of experienced entrepreneurs to refer to, as well as experts and corporate partners to seek advice from regarding different types of decision-making challenges. Networking at events like our Startup BBQ provide a great backdrop for initiating these conversations and building relationships that can provide help in the future.

Ultimately, an organization’s value is determined by the sum of decisions their leaders make and execute. Honing decision-making skills, and seeking guidance from those who have come before, are vitally important for entrepreneurs through all stages of organizational development.

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