The Secret of Small Business Owner’s Decision-Making!

Decision-making skills have always been my go-to in all aspects of my life. From deciding what time I’ll wake up every morning to making choices about which activities and plans to prioritize for the day, my ability to make the best choices will directly affect how productive I’ll be each day. In business, a leader’s decision-making skills are just as crucial in ensuring the business is always on the right track.

The most useful element for small business owners is their personal decision-making skills. These include innovation, analytical thinking, persistence, and collaboration. Top-tier skills will set you apart from the rest and establish you as a reliable, trustworthy, and competent leader. 

Let’s take a closer look at why your decision-making skills as a leader are crucial to ensuring that your business thrives, grows, and achieves its goals. We’ll discuss why making good decisions is pivotal to your success and how bad decisions can bring your organization down. I’ll also give valuable tips on how you can enhance your decision-making process,  including pointers on some of the best tools and techniques to utilize. 

Why Good Decision-Making Skills Are Crucial To Your Success 

Top-tier decision-making skills are crucial for small-business owners because these are what the entire organization lean on for virtually every aspect of business operations. Effectively managing a team takes a lot of adroitness, experience, and know-how. To top it all off, you need to learn how to masterfully juggle various tasks and responsibilities so you can ensure that operations are seamless and your team is always functional and efficient. 

Some people think leaders mainly have to focus on the executive aspect of the business. This includes consequential, critical tasks, such as:

• Ensuring that corporate policies are observed
• Overseeing financial activities, budgets, and reports
• Setting and reviewing company goals
• Drafting and approving plans of action
• Reviewing progress reports
• Delegating responsibilities throughout the team

However, highly functional leaders do more than just these. They also make sure they maintain control of all facets of the business even though they’re all for task delegation, responsibility sharing, and transparent leadership. Effective leaders know that if they focus solely on executive tasks, their influence and authority in the team might be compromised, and they might start losing control over how the team journeys toward the set goals. 

Leaders must have a hand in the various day-to-day activities of the team so they know exactly where the business is, how it got there, where they’re headed, and what their plan is to get to the goals. Superior decision-making skills are some of the best tools for leaders to ensure their business continually thrives. 

Consequences of Bad Decisions

Bad decisions can have disastrous consequences for the business. One wrong move can spell the difference between success and failure. Poor decision-making can result in:

• Inefficient allocation of company resources. This can eventually lead to financial losses for the business. 
• Low employee morale. Your employees may start feeling unhappy with their jobs if they perceive your decisions to be biased, insensitive, and non-inclusive.
• Low productivity. Low morale leads to poor engagement, reduced work efficiency,  and low productivity. 
• Increased employee turnover. Your employees will start looking for greener pastures if they’re unhappy about your leadership style and if they feel undervalued. 
• Lost opportunities. You will miss out on many growth opportunities if you have poor decision-making skills. 
• Damaged business reputation. You can hurt your company’s image and damage your prospects for expansion if you keep making bad decisions. The impact can reverberate beyond the walls of the workplace and paint a bad picture for your organization. 

Impact of Good Decision-Making Skills in Leadership

Excellent decision-making skills set good leaders apart from the rest. It’s what gives quality to their leadership career and can push them to reach even greater heights. 

I remember a story shared by a friend about an ex-colleague, Paul, who was a “favorite” leader in their company. Most of the workforce wanted to be part of his team because he was known to be easy-going, fun to work with, considerate, and gregarious. Paul’s team always seemed so happy and in high spirits.

Unfortunately, a crisis struck the company, and leaders were expected, naturally, to take the helm and lead their teams through the difficulties and challenges. Sales were down, even the most loyal of clients were nowhere to be found, and the company was looking at downsizing.  This was when inferior leaders were weeded out from the pack.

Paul’s jovial spirits and pep talks did little to salvage his team. What they needed was a determined, strategic leader who could implement drastic yet well-calculated decisions. Paul wasn’t capable of that — his brand of leadership was all about fostering camaraderie, trust, and teamwork. 

Regrettably for him and his team, optimism and cheerfulness weren’t enough to save them — most of them were let go by the company, including Paul who was extremely taken aback since he thought his popularity in the organization was a big advantage. 

Benefits of Good Decision-Making

Good decision-making can mean the difference between an organization’s success or failure. When leaders are equipped with excellent decision-making skills, they can help facilitate positive changes, stability, and growth.

Here are some other benefits you can expect from good decision-making:

• Saves time. Good decisions keep you from redoing, revising, and revisiting the decision-making process. Good decisions generate positive results and typically provide lasting solutions to problems. 
• Better use of resources. Resources and funds will be put to good use and maximized for the benefit of the business through superior decision-making skills. Additionally, wastage will be avoided, as well as unnecessary spending and misuse of resources and funds. 
• Higher productivity. Good decisions address the company’s issues and concerns in efficient and effective ways. You can expect improvement in productivity and company performance when good decisions are accurately implemented. 
• Better brand of leadership. Leaders who are reliable in making sound, strategic decisions earn the reputation of being responsible, efficient, and trustworthy. 
• Stronger engagement and commitment. You will earn a higher level of commitment from your employees when they know you can be counted on to make well-informed, inclusive, and rational decisions, more so if you include them in the decision-making process. Transparency in decision-making will make your employees feel that you’re invested in them and you see them as allies in business. 
• Helps prevent conflict. Including your team members in the decision-making process should be done mindfully. You mustn’t go all on transparency but be keen on exerting your authority as a leader. This is a great way to promote teamwork while preventing and managing conflicts within your team. 

Useful Decision-Making Techniques for Small Business Owners

Making rational, inclusive, and effective decisions for your team is the cornerstone of competent leadership. As a leader, you make decisions practically every day for your business — from mundane, daily chores to pivotal, executive resolutions. Each choice you make reflects on your organization and contributes significantly to its advancement or decline. 

Decision-making involves these basic steps:

1. Identify the problem or goal. Clearly define the decision you need to make. Identify the parameters and ensure your team understands each of them. 
2. Gather relevant information. Collect internal and external data pertinent to the situation at hand and the goals you want to achieve. Do extensive research because the information you gather can uncover details you missed and help you make the best possible choices for the business. 
3. Identify promising alternatives. Draft several plans of action that can potentially get you to your goals. Be specific about the steps involved in each alternative solution so you can get a clear picture of what it entails. 
4. Evaluate your alternatives. Weigh the pros and cons of each alternative solution. Imagine what would happen if you implement each of the alternatives and then rank them according to viability.
5. Make your choice. Select the best solution for your business. You can also combine the alternatives available, so you reap more benefits. Your choice here will most likely be the alternative solutions that ranked high in Step 4. 
6. Take action. Start implementing the plans of action related to your solution of choice. Delegate tasks and closely monitor the progress so you can make adjustments when necessary. 
7. Review your decision. Evaluate the short-term and long-term consequences of your decision. Determine whether or not it’s truly capable of resolving the issues you identified in Step 1. Don’t hesitate to abort the decision you made if it turns out to be not as efficient as you had hoped. Repeat any of the previous steps to arrive at a new and better decision.

Below are some great techniques you’ll find most useful when making decisions for your business:

1. Decision Matrix

A decision matrix is a grid composed of figures and information that can help you analyze the options available to you. It can also help you easily compare your options and determine their viability by weighing the variables involved. 

This quantitative approach to decision-making takes weighing pros and cons to the next level by allowing you to weigh and rank variables (typically through 0-5 rankings) related to a situation through a visual representation that gives you a comprehensive view of the entire scenario. 

The decision matrix is typically applied in situations with binary options that have several variables attached to them. For instance:

• Should you hire new employees or not?
• Is it time to go with another supplier, or should you hold out?
• Will moving the office to a new location be more advantageous for your growing team, or will staying put be more practical?

In all these scenarios, you are faced with 2 options, but each option carries with it distinct factors that contribute to how viable each of the options would be. For example, if you’re on the fence about hiring new employees, you’re probably considering factors such as hiring costs, additional payroll expenses, employee workload distribution, and employee efficiency. 

Here is an example of a decision matrix where we used a 0-5 ranking for the variables (with 0 being the most detrimental to the business and 5 being the most advantageous):

In the table above, it is evident that maintaining the status quo (not hiring new employees) may be the best option for the business since it earned 28 more points versus the other option (hiring new employees). Although new hires will help improve efficiency and workload distribution, the heavy weight of hiring and onboarding costs plus additional payroll expenses tells you that maintaining the status quo would be your best bet for now. 

2. Decision Tree

A decision tree is a framework or flowchart that explores potential solutions to a given problem and all their possible outcomes. You can also incorporate costs, risks, and potential issues to be encountered. It is a great tool to utilize if you want to ensure your decisions are logical, well-thought-out, and comprehensive. 

Decision trees provide you with a bird’s-eye view of all the options available to you so you can get a clearer picture of what you’ll be getting yourself into if you go for any of the alternative solutions you came up with. 

With the advent of artificial intelligence in the field of business, we’re seeing more and more software platforms capable of aiding leaders in the decision-making process. Consider any of these decision tree tools:

• Cloverpop
• Lucidchart
• Creately
• MindMeister
• GitMind

3. Pareto Analysis

Also referred to as the “80/20 rule,” this decision-making technique allows leaders to determine which alternative solution will have the most significant impact on the business. It was first conceptualized in 1906 by Italian economist Vilfredo Pareto (he noted that 80% of the land in his country was owned by just 20% of the people there) and later developed by Romanian-American business theorist Joseph Juran. 

The Pareto Analysis essentially describes unequal distribution. For instance, in the workplace setting, you might find that 80% of the decisions made during a team meeting were executed within just 20% of the actual duration of the meeting; or 80% of your success as a team can be attributed to just 20% of all your efforts. 

When making decisions, you can use the 80/20 rule by adopting the mindset that about 80% of the problems you encounter in business can be traced back to 20% of the causes. Here are a few simple steps:

1. Clearly identify the problem.
2. Determine the causes of the problem.
3. Rank the causes according to the level of adverse effects they have on the company.
4. Organize the causes into groups based on their intrinsic similarities.
5. Develop plans of action for your team, focusing first on those that ranked highest to boost your chances of quickly solving the problem.  

4. SWOT Analysis

SWOT is an acronym that stands for:

• Strengths
• Weaknesses
• Opportunities
• Threats

It is a simple, straightforward decision-making technique that allows you to clearly see the characteristics, potential, and consequences of proposed solutions. Strengths and weaknesses are typically internal organizational factors, while opportunities and threats are external, thus providing you with a holistic approach toward making the best decision for your business. 

A SWOT analysis will become more effective if you involve your team in the process because this exposes you to different perspectives relating to the 4 factors (SWOT) involved in the proposed solutions.

5. Visualization 

Visualization is the process of presenting information in a graphical, more visual representation to help make concepts easier to understand. Through proper visualization, patterns can be quickly identified, conclusions can be swiftly drawn, and actionable solutions may be directly formulated. Essentially, visualization helps tell the entire story as concisely and precisely as possible.

Here are some tools you can use for effective visualization:

• Cartograms
• Gannt charts (project schedules)
• Histograms
• Pie charts
• Tree diagrams
• Network graphs

Final Thoughts

Your own decision-making skills can help take the business to greater heights or cause it to plummet toward stagnancy and failure. As a leader, you must invest in your abilities, know-how, and experiences to ensure you’re always fully equipped to face whatever challenges may lie ahead. 

We, at Sancus Leadership can help you optimize your decision-making skills and train you to always come up with and identify the most opportune solutions to address your business’ needs. Schedule a demo with us today and take the first step toward sharpening those critical leadership skills!