In this video we discuss an important element of business and accounting… making decisions.
VIDEO SUMMARY
I find it very helpful to think about the decision making process. How do we make decisions? I talk a lot about finance and accounting in these videos. The purpose of finance and accounting is to help you make decisions. Now specifically I am talking about BIG decisions. I discussed one example in my video last week on choosing a market position. That is a big decision. And big decisions are difficult because they are so complex. There are so many possibilities, so many variables, and so many different outcomes. We are going to talk about how you decide.
A good place to start is to talk about the problem. A lot of people in business face the problem of “decision paralysis.” This occurs when there is so much uncertainty that no one makes a decision. This happens a lot. There is uncertainty for three main reasons:
- The world is complex. When you have an organization with 100 stakeholders, that creates an enormous complexity of relationships. It is really difficult to predict all the possible outcomes of a decision throughout your business.
- Most business decisions deal with the future. You are making decisions based on what you think your future customers will need. Of course, no one can predict the future, which creates uncertainty.
- You can never verify your solution. Once you make a decision, you cannot go back in time to see if another alternative has a better outcome. So it is impossible to really know if you ever choose an optimal solution.
You see from these three reasons why decisions are so difficult. It is really amazing we make successful decisions at all. This is how life works. In life, we are surrounded by uncertainty, and we make decisions every day. Our brains are really good at simplifying things. So our brains look at all this chaos around us and simplify our lives down to yes/no decisions. The problem is that so many business decisions are too complex to simplify down to a yes/no decision. What happens is your brain presents you with a yes/no decision when your business is more complex than that. The decision does not make any sense and you are left with uncertainty. And that is why you have decision paralysis.
Now I am not suggesting you cannot make educated guesses about the future. You can. Of course you can gather a lot of statistics to make data driven decisions. But I find it helpful to appreciate why there is uncertainty.
What I am going to do is give you a simple tip to use in your big decisions. Reframe your decision from yes/no to better/worse. “Should I release a new product or not?” changes to “Would releasing a new product make my business better or worse?” The difference is yes/no are absolute terms where better/worse allow for more flexibility. These decisions are so complex, you will never be able to know if you are 100% right or wrong. But it is easier to say a potential outcome is better/worse. You are leaving open the possibility that you do not know all the answers, and that is okay. I find that when people take the pressure off themselves of trying to make the right decision, it suddenly makes the decision a lot easier. So if you are struggling with a big decision, try and reframe it. What is something you can do to get a better outcome instead of a worse outcome. Because then you are at least heading in the right direction, and you can always course correct along the way. Just think about the impact this can have. If everyone started making decisions to make their situation just a little bit better, after a short while we would see some very large gains across the board.
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Neither Zach De Gregorio or Wolves and Finance Inc. shall be liable for any damages related to information in this video. It is recommended you contact a CPA in your area for business advice.