“Whenever you see a successful business, someone once made a courageous decision.”
Decision making is a key business skill that drives team performance and is an inevitable part of successful companies’ business strategies. The typical decision-making process we wrote about in one of the previous texts involves the following segments: defining the problem, gathering information about it, identifying opportunities, selecting the best options, and tracking the results.
When it comes to long-term decision making, as a business owner or a manager you have to be acquainted with popular techniques and methods that can help you find the best solution to your company’s problems.
A survey conducted by Bain consulting agency that included more than 750 companies, found that there was a 95% correlation between decision-making efficiency and financial results. The data also showed that the company whose top management was the best in making an efficient decision saw a 6% rise in revenue compared to its competitors.
If you want your business to be in the leading category when it comes to profit, use the following techniques when making decisions to improve your management skills and make a significant contribution to the success of organizations.
This technique helps business owners and managers estimate all future costs and benefits. As a result of this analysis, entrepreneurs opt for one of the alternatives that will benefit them the most, in terms of total net profit for the organization. The main goal of every company is to make profit, moreover, every decision should be made towards achieving that particular financial goal.
This popular technique helps managers objectively go through the current situation and serves as a basic guide for strategic planning. When you plan to make a big change in the way you do business, a SWOT analysis can help you break down the situation into four different quarters.
Strengths – What does your company do better than the competition? Identify the strengths of your business that include business strategies, adopted procedures, or innovative initiatives. Use this information to steer the development in the desired direction.
Weaknesses – How can your business improve? Try to take a neutral approach and consider what factors do not benefit or even harm your business and its growth.
Opportunities – Use your strengths and consider how you can use them to create new opportunities for growth.
Threats – Identify the challenges that stand in the way of achieving your goals and recognize the primary threats to your organization. When it comes to external threats that are beyond your control, it is necessary to recognize them on time, carefully examine them and create backup plans to adequately respond if the situation starts taking a turn for the worse.
Once you have this information, work on turning weaknesses into strengths, and threats from the environment into market opportunities that you will take advantage of.
This technique is used in the process of establishing financial effects to determine which solution makes the most sense and has the least negative impact from an economic perspective.
Feasibility analysis is used in strategic business planning while making estimates about a new project. This is one of the techniques used at the very beginning of the launch of a new product or service because it helps the management decide whether a certain strategic agreement is feasible for the company.
This is one of the crucial tools for most organizations because it can unmistakably reveal what is the best business strategy to follow. Using this decision-making technique, it is possible to analyze all available options and determine how different factors enhance the finalization of the process. It is possible to use and compare the analysis to find the best option.
When you have multiple choices and variables in front of you, this is a great way to make the decision-making process easier because it shows exactly why and how each factor is contributing to the project. You can easily make a decision matrix by creating a table with all the factors that the decision contains or elements it consists of. The columns list all the factors and rate each of them according to importance and priority. Analyzing the final grades at the end makes the final result more tangible and reveals which option should be taken into consideration.
Pareto analysis, a decision-making method, is known as the 80/20 rule, which means that 20% of your activities will yield 80% of the results. This technique is used to identify possible changes, identify challenges, and remove obstacles from your path.
A perfect example of this principle applied in business or management is that 80% of sales come from 20% of your customers. Companies can take advantage of the Pareto principle by identifying the main characteristics of the first 20% of their audience and finding more customers similar to this group. Once you are able to determine which changes will have the greatest impact, you will be able to prioritize the decisions to increase the benefits. This allows managers to revitalize their energy and focus on the factors that will actually drive growth of their business.
There are many other techniques that organizations can use to facilitate effective decision making. As practice shows, it is often necessary to combine a number of strategies and techniques to achieve the best results for your organization. It is important to review each decision by analyzing the results, in order to ensure that the company achieves the set goals.
Since this is a “practice makes it perfect” skill, based on the experience of world-famous leaders, we have prepared for you 5 secrets of smart decision making.