How to Make Effective Decisions in Business

Business.com / Managing / Last Modified: February 22, 2017

Many businesses have been overrun by people who've heard the story of the tortoise and the hare too many times. These people go to...

Many businesses have been overrun by people who've heard the story of the tortoise and the hare too many times.

These people go to one of two extremes when analyzing data to make their decisions: they rush through it, barely giving the numbers a second glance (the hares), or they plod through the material so slowly that they seem paralyzed to take anything away from it (the tortoises). While it's great that companies have realized the need to collect data, what they do with that information is just as important as the information itself.

Don't Focus on the Wrong Numbers

Running a business is a lot like running a race. The end result is most often what propels the participants to keep moving forward -- it's the carrot dangling over all the competitors' heads. Sometimes, that glittery outcome distracts people from the real point of the race.

In the 4x400 relay, four athletes run separate, but equal, legs of the race. The relay team that finishes first might reasonably assume that on that day, they completed the relay the best. They'll stand on the podium, receive their recognition, and return to the practice track, confident that they know what it takes to win. The teams that finished lower might question their performance: why did they lose? Where did their process fail?

And here's where measurement and assessment become so critical. The relay race is actually a complex task with no fewer than 8 critical elements:

  1. The start
  2. Leg #1
  3. First exchange of the baton
  4. Leg #2
  5. Second exchange of the baton
  6. Leg #3
  7. Third exchange of the baton
  8. Leg #4

Because of this complexity, the team with the fastest four athletes is not always the team that wins. Though success is commonly judged by who crosses the finish line first, this simple assessment isn't going to enhance the team's performance, and it may actually undermine their overall process improvement.

Good teams, and good companies, will focus their energies on fine-tuning the finite elements of complex tasks. Hours are spent perfecting the start, team members practice endless exchanges, and teammates work for years on their acceleration and top-end speed. If they ignore any single element, failure is almost guaranteed. If you spend all your time focused on who comes in first, you can be assured it won't be you.

Bad Data is Worse than No Data

Having a clear picture of what, and how, to assess performance is among the most critical competencies any business can evolve.

Every valid process improvement model begins with a thorough exploration of what can, and should, be measured. For this reason, the science of assessment is one of the greatest missing pieces in business -- it must be rational, objective, critical, and timely. It must have context. Bad data is worse than no data because it gives you a skewed perspective on what's before you.

But time after time, it seems that companies are content on accepting sales figures and customer satisfaction reports as the "be all and end all" of their business analytics. While these analytics are important to consider, companies that stop here are only learning what they have achieved -- not what they could achieve.

The pieces that combined to create the success -- or lack of it -- displayed in these sales figures and customer satisfaction reports are the elements that businesses can truly work on. Attention needs to be focused on the details, from how long sales associates interacted with customers to what stock stores had on hand in each size, color, and style. Each piece impacts the final result.

How to Make Informed Decisions

In order to shift companies' focus from the basic end game to breaking down the parts of each process, businesses need to establish effective assessment cultures. Encourage team members to see that deconstructing business processes is the only path to process improvement. Then, companies can build consensus around 3-4 critical elements of each business process that determine its success.

Use the relay analogy to help teammates see that processes are as dependent on each of them, and their responsibilities, as races are upon athletes' exchanges. We must measure and assess each, not to punish our co-workers, but to pinpoint weaknesses in our processes that we can strengthen together. This will help drive home the idea that sustainable success is a journey, not a destination.

At the end of every relay, the top-performing teams stand on the awards podium.

Sure, the moment is special for the team that crossed the finish line first -- on that day, they performed the fastest, and there's little doubt that winning feels great.

But the moment is also special for the teams that didn't win that day, because they hopefully learned something from the defeat that will help them prepare for the next race -- that is, if they know where and how to look.

Photo credit: bethenny.com

BrianS. McGowan, PhD, is a research scientist who has worked as a medical educator, mentor, accredited provider, and commercial supporter. McGowan is author of the forthcoming fall 2012 release of#SOCIALQI: SimpleSolutionsforImprovingYourHealthcare.

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