We all have to make a lot of decisions every day. How often are they the right decisions? What is the impact of a wrong decision? How can we make better decisions?
Some decisions are easy; what to have from the lunch truck menu today? Others are more difficult; how much do can we afford to invest in going after a new market? And there are many in between.
The real concern for all of us is the tough decisions; the difficult ones with a major impact to the organization. Particularly if we are wrong.
So how do we make better decisions? Among the wide array of decision-making tools available to everyone, there are three that stand out. Why? Because they:
• Put the decision into perspective.
• Are easy to use
• Can be understood by everyone
• Are quantifiable
There is no particular order for these, so let’s look at one that is commonly quoted: the Risk/Reward matrix. This is a simple 3×3 grid with the relative risk factors on one axis and the relative rewards along the other. Once you identify the risks involved with the decision, rank them from Low to High. Then identify the results or rewards the same way. Now you have an objective decision-making tool.
An alternative to this approach is to look at the Effort/Impact model. This matrix compares the relative effort required to achieve the desired result vs. the relative impact of the results. How many of our resources (time, money, people) do we need to expend to achieve the desired result and is that result high enough to justify this investment?
Then there is the classic Cost/Benefit analysis, frequently preferred by financial types. What are all of the costs (investments, expenditures, resources) required vs. the calculated benefits (returns, cashflows, profits)? The correct calculation for this is actually the Benefits divided by the Costs, yielding a percentage result, although commonly it is referred to the other way.
(Let me know if you want a copy of any of these).
The output of these tools will guide you to the most logical, reasonable conclusion. Add just a dash of judgement & the quality of your decisions will be dramatically improved.
A critical element of better decision-making is being as objective as possible when using these tools. Subjectivity, political correctness or emotional inputs reduces the tools effectiveness to no better than a flip of a coin.
Contact Build It Backwards(SM) today and let our consulting services give your organization the foundation to succeed well into the future.