Falling revenues and future uncertainty driving by the coronavirus outbreak means that many leaders are facing tough business decisions.
While there is lots of government support available for businesses during the outbreak, companies will still be faced with many difficult decisions. Whether to take on debt, even if it’s backed by government, or whether to ‘furlough’ workers as part of the Coronavirus Job Retention Scheme are just two of the many tough calls ahead.
Running a business inevitably involves taking difficult decisions. However during a crisis, the number of difficult decisions increases and the level of uncertainty and risk makes it harder to take those decisions.
Decision-making in business and leadership is a frequently studied area, with many books, papers and modules covering it. We have put together a checklist on how best to approach it.
Got 2 minutes? Use our tough business decisions checklist to get you quickly heading in the right direction
Got 10 minutes? Take advantage of our checklist and structured how-to guide below
The checklist: Steps to help you take tough business decisions
What are the tough decisions? Every business will face difficult decisions and they can range from whether to hire another member of staff to changing the focus of what the business does.
However the most difficult are to do with employees and money. Whether it’s deciding if you need to make people redundant, furlough them or whether to take on more debt through a loan in order to meet your liabilities and pay bills. Every decision is different and the circumstances specific to your business, but there are general principles and steps to help you make the best decision for you and your business.
Everyone is different, and will have their own ways of working, but the following guide walks through good practice, gives a number of tips for approaching tough or difficult decisions and links to a number of sites, papers and blogs that have relevant advice.
Step 1: Organising and understanding the decision
It might be that the decision is black or white with only two possible choices. However, in many cases there will be a need or problem that needs resolving with a number of different options or ways forward.
Taking the time to organise and understand the decision is important to make sure that the choice you make is between all the available options and is the best one long-term for your business.
Think about potential solutions to the problem or ways of addressing it to give yourself more options. It might make the decision harder but it means you’ll be choosing between the right options, not just the first ones you came to. SMEWeb has a useful guide that talks about the different business decision options.
One specific technique to try after you think you have identified the available options is to see what the opposite would look like. This approach, named the Constanza principle is designed to jolt you out of your usual way of thinking and force you to think differently.
Step 2: Preparing to make the decision
Gathering the information you need to make your decision is important.
Too little information and the risk of making a decision that’s harmful or you need to reverse out of becomes more significant. Look at the options you have and work out what do you need to know about those options to be able to choose between them. Don’t just think about the immediate implications but also the longer term. What would each of those options most likely mean for the business in a year’s time?
Too much information though can lead to analysis paralysis. The former US Secretary of State and retired four-star General Colin Powell has written about the 40/70 rule for decision making:
- He says that making a decision with less than 40 per cent of the available information is too risky and likely to lead to making poor decisions
- However, he thinks that you shouldn’t wait to get more than 70 per cent of the potentially available information
- This is because he believes that this makes you too slow, and that it is always possible to get more information
- But that with 70n per cent of the information you should trust your expertise and instinct to make a good decision
Finally, before you make the decision it’s important to think about your bias. As human beings we all have biases – they are part of our brain. They also, often help us make decisions faster than if we started from scratch. This is useful, but sometimes it leads us to choose without truly considering everything. The Harvard Business Review has a short article that covers high stakes decisions and a few other key tips.
Step 3: Making the decision
When it comes to making the decision, set aside some quality time to get it done.
In a busy working day, particularly when you are coping with the coronavirus outbreak, it is tempting to leave it until the end of the day. In fact, research shows most people make better decisions in the morning before fatigue sets in. Thinking through difficult decisions is hard work and our brains do genuinely get tired. So, make time at the start of the day to make your decision.
Think through the pros and cons of each option and how important each one is. You can do this in your head, in writing, or using decision software. This exercise is not just thinking through advantages and disadvantages of each option. You need to consider how important they are in the short and long-term as well.
Finally, try to create some distance from the decision by imagining how you would advise someone else who was faced with the same choice.
This is called self-distancing and works to give you some emotional distance and separate out the emotional from the factual. Decisions are of course emotional, and as a business leader you know your business and your instincts and emotions are what have helped you build it.
Don’t ignore them but be aware of them when you make the decision.
Step 4: Communicating the decision
Making the decision is not the end; you will need to communicate it to others. Particularly if it involves employees’ jobs, pay or conditions, the communication of a decision is a vital part of making the decision happen.
Think through who needs to be told about your tough decision, when you will tell them and how you will tell them and explain it. After you have worked through that, rehearse how you will tell them and think about the questions and responses you may get.
Every business faces tough decisions, particularly during a crisis. Taking the time to think through those decisions, creating more options and understanding the implications of those options will help make your ultimate choice better for you and your business.
Don’t forget about our useful checklist, designed to help you make tough business decisions.