Small business owners face decisions every day. They balance opportunity vs. risk, people effects vs. financial effects, and timing: do-it-now vs. later-is-better. Even deciding to do nothing can be a fateful decision (or non-decision). Some examples of small business decisions:
|How to do marketing?||Move to new location?||Grant customer request?|
|Buy new software?||What price to charge?||Modify employee schedule?|
|Make process changes?||Should I hire her or fire him?||Invest more capital?|
|Launch new product?||What components to make vs. buy?||Borrow money?|
Decision-making is worth special attention because it has great impact and it’s hard to do well consistently. Why is it hard?
- You never know all you need to know.
- Time is not your friend; often, you need to decide before you want to.
- If you get advice, it is divided, or based on poor understanding of your business.
- You expect resistance from key people: employees, customers, lenders.
- You don’t like the impact on others; there may be ethical issues with no good solution.
- Due to the impact, you are afraid to make a mistake, so you delay. When you delay, the situation changes, and often you are left with fewer and less attractive options.
Take heart! There are some techniques – some ways to go about decision-making – that can result in better decisions and less risk.
First, Let Your People Decide for Themselves – Delegate for “Dynamic Decision-Making”
Too often a small business owner makes all the decisions for the firm. You have competent people. Why not use their brains? Large organizations cannot escalate all decisions to the top, so they had to develop a technique to make sure only the most critical decisions come to top management. You can do this too!
Delegate some authority to your people. Let them decide what to do. Train them well, make the processes clear, and then turn them loose within limits. Larger organizations call these limits a “schedule of authority.” This is a company policy set up as table, specifying the decision-making limits of each position or level. For example, frontline people can approve a refund up to $x, or by supplies up to $y. Their supervisors have higher dollar limits. Maybe supervisors can also hire, or suspend but not fire, etc.
You will monitor the quality of their decisions, coaching them or changing the limits as needed. The result will be faster decisions with better consideration of the facts of the moment (“dynamic”), and a happier work force as well. See Delegate Responsibility to Improve Employee Performance.
Second, Get Some Other Viewpoints
Being the decision-maker still leaves room for getting advice! And getting advice does not mean you are stepping back and letting your advisors decide. Advisors can include a partner, another business owner, a lawyer or accountant, a consultant, a key employee, a key customer, a friend, etc. Two advisors are better than one!
Here is what’s good about getting advice:
- The advisor may know of examples where similar approaches were tried, and their results.
- The advisor may understand the implementation requirements of a particular choice better than you.
- The advisor will question things you take for granted.
- The advisor may have different biases than you, and less emotion, resulting in a more balanced approach.
- Explaining the situation to an advisor helps you explain it to yourself, organizing your thoughts and making your assumptions clear.
- The advisor may think of alternatives or impacts you missed.
- The advisor may know how to estimate or measure impacts better than you do, helping you to evaluate one alternative vs. another.
The next few articles will explain an overall approach for analyzing a situation, and then suggest techniques to use at each stage of the analysis.
Help our readers! What was your hardest decision in your small business? How did you decide?
Tom Gray helps owners save and grow their companies. He is a management consultant focused on small business and telecom, a Certified Turnaround Professional (CTP), a Certified Business Development Advisor, and a Certified SCORE Mentor. He can be reached at 630-512-0406 or email@example.com. See www.tom-gray.com. For Tom’s new book Business Techniques in Troubled Times: A Toolbox for Small Business Success, see http://www.businesstechniquesbook.com/