Decision Making Process More Important Than Analyses

Your decision making process is more important to a successful result than your analyses to prove the validity of a decision. That’s what research shows consistently.

How do you decide? Do you follow a predictable process or do you let your emotions or situations lead you? My research suggests we let circumstances direct us, unwittingly. That’s why I believe we are poor decision makers, generally. Even so, I think we need to follow a proven process before we decide matters in our private lives and in business. Therefore, let’s see what we can learn from three large, bad decisions.

Decisions Influenced By Today

Poor Decision Making Process
Poor Decision Making Process

First, in January 1, 1962, four youths in a rock-and-roll band auditioned for a major British record label, Decca Records. Later they got a letter from Decca saying: “We don’t like your sound; groups are out; four-piece groups with guitars, particularly, are finished.” Decca missed out on signing the Beetles!

Why did Decca miss this chance to sign one of the best groups in history? They assumed the future would resemble the present. Therefore, they concluded that since four piece groups were not in vogue then, four piece groups would not be popular in the future. And so, they extended the present to the future.

Second, in 1975, Steve Sasson of Eastman Kodak, one of the biggest photo companies in the world, invented the digital camera. It changed the industry, and it changed Kodak forever—it started Kodak’s demise.

What happened? Print photography was very profitable and Kodak’s management assumed the future would be like the present.

Third, in 2007 Rio Tinto (one of the largest mining companies in the world) paid a 65% premium for Alcan Inc. at the top of the business cycle. Dick Evans, then CEO of Alcan, said later in the Wall Street Journal that the decision to buy was the “…worst decisions ever; it was the largest metals and mining transaction in the history of the world at the high point in the commodity cycle.”

Rio Tinto assumed the future would resemble the present. This bad deal took Rio Tinto’s attention away from building its business to coping with huge debts.

Decision Making Process Is More Important Than Analyses

Several studies show 70-90% of mergers fail. As well, many studies show the decision making process is more important than analyses. Yet, many firms have sloppy, or no decision making process.

I think one reason folks don’t follow a decision making process regularly is its lack of visibility on likely results. Contrast this with real numbers that analyses produce. People like to see figures. They want to see graphs showing revenues going up. They get excited to see possible returns on investments above the cost of capital, and so on. Sadly, they forget that often, assumptions driving numbers project the present and produce fancy graphs and charts that do not show reality.

Then again, egos, greed, myopia, naivety, affect our decisions. Often, CEOs and boards want their firms and ministries to grow and don’t want facts to confuse their decisions. They won’t accept the reason the business or ministry is declining is that it is unsound, and needs major overall.

My Decision Making Process

My decision making process is simple; some might say it’s naive. As a follower of Jesus, I believe I should do as He taught His disciples in Matthew 6:9-13. I should seek His will always. I strive to do, but don’t always do, everything I know God asks me to do in the Bible. However, when I do, I know I will see other specific tasks He prepares for me.

This simple approach applies in business and in our personal lives. We need to do everything under His direction. Set goals, prepare plans, act, compare what we do with the plan, and execute changes to get back on track. The key is to do what we know is right in our business or ministry. Besides, we should never let money, a bridge, a means to an end, lead any decision.

Seven-points to Aid the Decision Making Process

When challenges in our businesses and ministries arise, I suggest these seven points be central to our review. We must embed this review process in our culture. If we believe we are off in any one of these areas, we must redirect our efforts to correct it.

  1. Hire the right people and put them in the right slots based on their abilities. Let them redefine their jobs, as they see fit, to be better at doing the firm’s goal
  2. Treat employees, customers, suppliers, and everyone as we would like to be treated. Stress to everyone in the firm that people are most important
  3. Train, mentor, develop, empower, “catch employees doing right.” Hold them accountable for agreed, broad performance metrics
  4. Reward performance
  5. Employ the TAP principle: Be transparent, approachable, and predictable
  6. Ensure rules that exist are sensible, needed, and help to achieve the goal of treating people as we would like to be treated
  7. Love people equally, treat them uniquely. Embrace conflicts as crucial to strengthen relationships

This is not the process I see many followers of Jesus apply in ministry or in business. Usually, difficulties appear as financial problems and managers try to solve the so called financial challenge by trying to get more money.

More money is not the solution to structural problems

Sadly, people don’t realize there are no money problems, merely money symptoms.  Therefore, as a first act, faced with a money shortfall in a ministry, leaders should not go to donors for more. They should identify and start working to solve the basic problem to decide if they need extra funding. Maybe reduced waste and improved productivity will remove the shortfall. I have seen this.

Ministry leaders should seek wisdom and insight, not seek more money. Sometimes, more money merely affirms bad habits. Leaders should look at the ministry’s purpose, consult donors, and examine how employees are carrying out the mission. They should ensure employees are working according to Colossians 3:23-24. Most of all, ministry and business leaders should understand that more money will delay effects of real issues. It won’t fix them.

Questions To Answer During The Decision Making Process

Where there appears to be a financial challenge, businesses, and where it applies, ministries, should ask customers (clients, students, patrons) to help them answer these questions:

  1. Have we identified our customers and markets?
  2. Are we serving our customers’ needs?
  3. Do we have a coherent strategy that helps us reach customers conveniently, timely, and with the right quality?
  4. Have we identified core competencies, and are we using them to serve our customers?
  5. Do we have effective, simple, systems to help show our critical success factors regularly?
  6. Are our employees properly trained, engaged, happy, and working together for the mission of the business?
  7. Have we identified “silos,” created tasks that span them, and developed specific reward systems to encourage their elimination?

Conclusion

People make decisions constantly. We must be careful situations and money do not lead those decisions. That’s why we need to develop and follow a proven decision making process regularly. We should recall that an effective decision making process is more important than the analyses we do to help us decide.

© 2016, Michel A. Bell

Michel A. Bell

Michel A. Bell is a former senior business executive, author of seven books — including his first children's book published in 2022 — speaker, and adjunct professor of business administration at Briercrest College and Seminary. Michel is a Fellow of the Chartered Certified Accountants (UK), holds a Masters of Science in management degree from Massachusetts Institute of Technology and a Doctor of Business Administration honoris causa from Briercrest College and Seminary. He is founder and president of Managing God's Money™ and Stewarding God's Resources.

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