A Tool To Dramatically Increase Your Success Odds

Here’s what you’ll find:
● The correlation between business success and effective decision-making.

● The four kinds of business decisions and how to manage each.
● The Seven Step Decision Making Process.
● The Decision Tree Tool for High Stakes Decisions.
● This section will be found in the Management Principles and Concepts folder.

Making good decisions.

This is an essential business management skill. It’s the one thing all small business leaders do that directly and continually affects everything a business was, is and will be. Ironically, most owners don’t think too much about how they do it.

Let’s be clear. Businesses are an accurate reflection of the cumulative decisions made by their owners and leaders. It’s easy to see which companies have developed excellent decision-making skills and which haven’t.

Let’s also make sure that we’re using a common language:

Decision = the act of making up one’s mind about something. It involves reaching a conclusion on an issue under consideration and choosing from a set of options.

Decision-making = an organized process for selecting a course of action from several options, which produces a choice and result: either in actions or opinions.

Not All Decisions Are Created Equal

Small business leaders make four kinds of decisions in managing their enterprises:

  1. Maintenance decisions – frequent, every day “keep the lights on” decisions
  2. Tactical decisions – occasional decisions about actions to implement strategies
  3. Strategic decisions – infrequent, major direction-setting decisions that have significant impact on and consequences for the enterprise
  4. Existential decisions – relatively uncommon decisions whose potential impact directly affects and influences the very existence and future of the business

Note the vast difference between the two ends of the continuum.

Maintenance decisions are mostly about smaller stakes and consequences. Little formality is needed, and the costs of a negative outcome are comparatively small.

As we move up the decision hierarchy, the stakes become exponentially greater. Strategic or existential decisions can have a potentially profound effect on the company’s well-being and future. They require considerably higher levels of formality and organization.

Here’s the moral of the story. Small business leaders should match the approach and method of a decision with the complexity of and relative impact it will have on the business. Decisions are different and must be managed accordingly.

Seven Steps to a Sound Decision

Here’s a great graphic from The Happy Manager. It displays the seven steps for making an informed and thoughtful decision:

This is a useful visual checklist. The seven-step process can be highly formalized for strategic and existential decisions. It also can be eased up slightly for some tactical and even occasional maintenance-level decisions.

Each management team should determine for themselves the levels of formality they invest in their various decision-making processes.

Know the sequential steps in the decision process. Don’t skip any of them: no matter the level of the decision.

(If you’d like to have a free, full-sized and downloadable version of this graphic to use and share with others in your organization, here’s a link to it on The Happy Manager site.

The Decision Tree: a Tool for Higher Stakes Decisions

This is how The Free Dictionary describes a decision tree:

“A treelike diagram that illustrates the choices available to decision-makers, each possible decision and its estimated outcome being shown as a separate branch of the tree.”

This is a powerful tool for situations at the higher end of the decision hierarchy.

Here’s what makes decision trees especially valuable – they produce a visual representation of the decision factors and ask for relative valuations of the available options. Perhaps most importantly, they instantly shine a spotlight on any aspect of the decision that’s incomplete or hasn’t yet been considered.

Using decision trees for high stakes and complex decisions makes it virtually impossible to omit, gloss over or ignore important decision points.

There’s a lot of information available on decision tree tools and software applications. The latter come in a wide range of levels, from beginner to advanced versions.

If you have little or no experience with decision trees, I recommend that you walk before you run when using them.

Here’s a link to wikiHow’s website for manually creating a decision tree. It’s simple, easy to understand, yet surprisingly effective for getting started: http://www.wikihow.com/Create-a-Decision-Tree

If you prefer a video example of a decision tree, here’s one from Syncopation Software showing how a simple decision tree is created about analyzing a decision to either take or leave behind an umbrella with a forecast of rain;

If you prefer software tools, here are links to three good options (although the SBOM does not endorse or recommend any of them):

http://www.smartdraw.com
https://www.syncopation.com
http://www.brighthubpm.com

Aligning each kind of decision and management with its probable impact level does not—by itself—guarantee success. But without it, the odds of getting it right are much longer.

Key Points
• There’s a direct correlation between effective decision-making and the overall success of the business.
• All decisions are not the same. Each should be treated and managed differently.
• Use the Seven Step Decision Making Process as a visual guideline.
• Strongly consider using Decision Trees for high-stakes and high-impact decisions.
• If you are new to decision trees, start modestly by creating manual ones. Then progress to other more advanced, software-based versions.