The professors at the business school Iese, Pablo Malla, and Miguel Ángel Ariño have made 10 fundamental principles for decision making. To decide is to choose, and to choose is to resign. It is always possible to make the wrong choice. Understanding these principles will help you make the right decisions. Do you want to know them?
Worry about deciding well rather than correct
It is usual to have an unjustified feeling of responsibility, which leads us to think that everything will go as planned if we do things right. But in a concrete decision, you may have made the best choice but still received bad results (and vice versa). The luck factor also intervenes.
Clearly identify your goals
How will you arrive if you do not know where you are going? It is fundamental to ask ourselves: what do I want/need to achieve? Knowing where we are going allows us to act according to our objectives instead of reacting to what happens.
The frame of reference conditions our course of action. It is essential that our approaches can be developed in reality.
Do not deceive yourself; it’s very easy to do
When we make a decision, we usually look for reasons that support our alternative, and we do not consider the reasons that question it. This problem increases when we surround ourselves with people who think like us. This is why the more heterogeneous the management team, the better the decision-making will be.
It is a mistake for managers to surround themselves with mediocre people who only endorse their decisions and do not criticize them. The value is subjective: losses affect us more than profits, which leads us to take very high risks for not accepting losses.
Address only relevant information
Irrelevant information can lead us to make bad decisions. For example, the biased information: The Titanic captain made a skewed use of the 17 icebergs warning messages he received before the crash because he was not interested in slowing down or modifying the route to prove to the world that It was a very fast boat.
Other information is historical, which at the time may have been relevant but currently is not useful. And finally, the mythical information, based on assumptions, does not distinguish between facts and value judgments. The paradigmatic example is the loss of leadership of the Swiss watch industry. With a market share of 90% before the 70s, the prestige of these watches was unquestionable.
However, when the Japanese copied their quartz mechanism with the same precision as the Swiss and cheaper, their quota collapsed to 20% in just ten years. The Swiss fell on the assumption that only they knew how to make the best watches.
Recognize uncertainty and management
Uncertainty can be frightening. For some people, change can be hard to process. Something that may help in coming up with several scenarios and make a contingency plan for each scenario.
Be creative and generate alternatives
We tend to think that the first alternative is the good one. Even though the alternative seems to be a good idea, you should still come up with multiple solutions. The more alternatives you think of, in principle, the higher quality of decisions.
Creativity is important to generate alternatives, but sometimes, it is underutilized, and we atrophy ourselves under pressure from a fictitious urgency. Only 10% of the company’s decisions are urgent, and 10% of those require immediate action. Another common error is to evaluate while we generate the alternatives. If we separate the production of alternatives from its evaluation, it will help us to be more creative.
Consequences of decisions
We often judge our decisions on how effective they are, but decisions have other consequences. A clear example is that of the executives of Enron, who, for winning more money, ended up in jail. What is final is that we can decide what we want, but once decided, the decision determines the consequences.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.