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How To Make Good Decisions

The primary role of managers is to make decisions. Good business managers are separated from the average ones by their ability to consistently make wise decisions.

Decisions have different scopes, perspectives, or degrees of urgency. The scope of a decision being made can apply to one particular department in a company, such as whether to add or reduce personnel, or it can have company-wide complications, such as deciding to change the compensation plan.

The perspective of a decision being made could have a short-term or long-term impact. Routine expense decisions have a short-term impact, whereas capital equipment purchases have long-term ramifications.

Decisions can also have different urgencies. Decisions that could affect whether or not you obtain new business from a large customer will likely have a different sense of urgency from the decision to have the CEO visit a small customer as a gesture of goodwill.

They can be technically based. They can have human relations components, like deciding to hire from outside or promote from within the company or should overtime work be voluntary or mandatory?

Decisions can have an operational perspective as well:

Should a job be run on machine A, B, or C, considering that machine C runs the fastest but needs a lot of maintenance?

Should management meet with a new customer at the customer’s or at management’s location, where they can give them the grand tour of the facility?

Should the organization switch from vendor A, a long-time supplier, to vendor B, who has better pricing?

Decisions can also have a long-term strategic aspect, like deciding to focus on tweaking a currently profitable product line or focusing energies on developing new technology. Should the firm try to penetrate two new international markets or focus its energies on increasing its market share domestically?

Harold Geneen coined the term unshakable facts (Economist, pg.1). Every decision he or his managers may be asked to make should be based on concrete, objective data or unshakeable facts rather than emotional, subjective feelings. This means that assumptions upon which decisions are based should be tested and researched first to confirm their validity.

This is particularly true in human relations decisions. For example, an employee is to have committed some serious offense, such as hitting another employee, practicing sexual harassment, or stealing, which are clearly dischargeable offenses based on the firm’s employee handbook.

A supervisor or manager called to the scene of one of these incidents is faced with several choices. Untrained managers may view the superficial evidence, listen to some initial witness accounts, and simply terminate the employee on the spot.

Because these are sensitive human relations issues that the entire workforce is likely to become aware of very quickly, it is crucial to diffuse the situation immediately. At the same time, it is important to consider the legalities of the human relations issues.

The best way to approach situations like this is to do the following:

Quickly diffuse the situation by suspending the employee pending a full investigation. This removes the employee from the situation, restoring calm to the workplace.

Over the next several days, conduct a calm, rational investigation.

Make the appropriate decision based on concrete, objective facts.

Another parameter of good decision-making is to make every decision from a range of options, including the option to do nothing. Every option that is being considered should be evaluated for its pros and cons., for example, before the sales department decides to open a new store in the Pacific Northwest, it should consider whether the effort and expenditures may be better spent by focusing on an existing region. Instead, should these costs be devoted to a national TV campaign that may increase sales in all regions?