Tips for Wise Business Decision-Making

As you manage your business, you will be faced with important decisions that may impact the future of your company. This may seem stressful, but keep these tips in mind and you'll find yourself making wiser decisions in no time:

There no substitute for good financial reporting for decision making purposes.   At a minimum, monthly financial statements should be prepared.  A good record of one’s monthly profit or loss can provide an indication of how the company is doing and allow one to make decisions on spending and other matters.  Many small businesses use their monthly financial statements in lieu of a formal budgeting process for decision making.  For example, if you’re making money one can spend, if not cut back.  Further analysis of financial statements can provide other valuable metrics for decision making as well.

Statistical information can be useful for making business decisions.  As I covered in a previous post, there is a lot of valuable data in one’s computer systems that can be “mined” for decision making.  Data tools in Excel can be used to provide analytics from your data for decision making.  Advanced statistical tools are available in the Excel Analysis ToolPak, use them to go over your data thoroughly.  The Excel Solver function can be used to find the optimal mix of inputs for a calculation.

Don’t rely too much on expert information.  Oftentimes people have a tendency to place too much emphasis on what experts say.  Experts are only human and have their own set of biases and prejudices just like the rest of us.  Also don’t underestimate the value of information received from others.  People have a tendency to discount information received from low status groups.  These groups may use entirely different values and perspectives in their answers to your questions. The result is a larger perspective of what the issues really are.  Be objective and avoid only hearing what you want to hear or seeing what you what to see. 

Finally, why not sleep on it?  Research has shown that conscious decision making can be improved through unconscious thinking.   Generating new ideas and coming up with creative solutions and creative insights may be enhanced by allowing for some distraction and not just basing it on pure analytics.   These two modes of thought can work in harmony.  So next time someone is forcing a decision to be made right after the discussion, take some time to pause to allow your mind to sift through the information, sort it out and make sense of it.