Entrepreneurship Series: How to Make Good Decisions?

Management is all about making decisions. Here are few definitions of management:

F W. Taylor- “Management is an art of knowing what is to be done and seeing that it is done in the best possible manner.”

Henri Fayol stated: "to manage is to forecast and to plan, to organise, to command, to co-ordinate and to control.

Fredmund Malik defines management as "the transformation of resources into utility".

A careful study of the definitions of management gives a feeling that every function of management requires a sound decision. Every entrepreneur has the responsibility to decide in the best possible way to get the desired results. How should an entrepreneur make intelligent decisions?

Decision making is at the heart of everything we do in our life span. It is a choice either deliberate or forced. One cannot escape it. At every turn in life or business, there are alternatives and we have to choose the one that suits us best in terms of achieving our objectives. With so many choices available, what is the best for us? When we are confronted with a situation that requires a decision, first of all our mind searches for any past experience of a similar situation and we are heavily biased towards that decision. If not, then we try to approach it with gut feeling and lastly with thorough analysis and evaluating all possible alternatives. At an early stage of an enterprise, we rely mostly on past experience and gut feeling. 

As a budding entrepreneur, you may not have enough experience and relying on gut feeling is not the best answer. To avoid pitfalls, you need to write down the decisions you need to make, their importance and the frequency of such decisions. Many decisions would be of day to day nature like daily cash flow decisions - payment to suppliers and collection from customers, production planning etc. Some would be of  long term nature like introducing a new product line, purchasing new machinery, hiring a key employee etc. When you write your decisions and prioritize them according to their importance and frequency, it makes you more clear about what you have to do and unconsciously you start thinking and evaluating alternatives. Because as the saying goes “writing is half work done.” Routine nature of decisions require no special expertise or analysis, just the necessary information about your business process but long term or strategic nature decisions need careful thinking. 

Strategic thinking is like playing chess. The chess board is the environment and the opponent is all the forces that are beyond your control e.g. competitor’s reaction to your moves, change in legal framework or availability of external resources like raw material, additional funding to name a few. You move a piece without considering the opponent’s move, then you are playing according to his plan and doomed to failure. As chess requires planning, so does business. “Even a poor plan is better than no plan at all.” You can do careful thinking without having any experience. All you have to do is to think like a chess player, before moving a piece on the board, a chess player thinks of all possible moves of his opponent and also his possible moves against the future moves of his opponent. It is a “what if” analysis. It's more like thinking through. Sometimes you might fail, but don’t be afraid of it, it won’t be the end of the world, it would be okay, as long as you carefully analyse what caused failure and learn some important lessons. Another quote from chess goes: “You may learn much more from a game you lose than from a game you win. You will have to lose hundreds of games before becoming a good player.” 

One sure way to make better decisions is to rethink them. Once you make a decision don’t rush to take action just give it some time to digest and revisit that decision with another perspective. It is much better to go to your mentor, your friends, consultant and even employees and discuss your problem without revealing your decision. You will have many perspectives and also other alternatives that you might have missed. Revisiting is also necessary in situations where you have some past experience. The business environment is dynamic, it is changing all the time. You have to adapt to the new realities.