10 Tips for Making Great Business Decisions

Chris Owen - Ross School of Business and School for Sustainability and Environment

Making great business decisions can be difficult. Incomplete information, confounding variables, conflicting interests, and tight timelines—these are just a few of the challenges that entrepreneurs face as decision-makers. Fortunately, sound decision-making is a skill that can, in part, be taught. Below is an abbreviated list of strategies—a decision-making toolkit—based on the research of both Nobel Prize winner Richard Thaler and Joe Arvai of the Erb Institute that we at Poornatha are teaching our entrepreneurs in the Journey ‘n Joy Entrepreneurship Ecosystem.

1. Begin with vision and values. Your decisions should align with and support both your overarching vision and your core values. What are the purpose and goals of your business? Does this decision support that purpose and goals? What are your business’ values? How does this decision affect both shareholders and stakeholders in your business ecosystem?
2. Identify important information. You will always have either too much information or not enough. Your responsibility is to identify important information while ignoring that which is irrelevant. This is both an art and a science. Lean on your own experience as well as the guidance of mentors. Lastly, stay focused on your end goal as you research your options and their respective outcomes.
3. Learn from the past. History is a great teacher. Often, a simple look backward can help you take a step forward. Ask yourself: Have I or someone I know faced similar circumstances before? What was the decision that was made and what was the outcome? How is my situation similar or different?
4. Be aware of brain tricks. Our brains are inherently lazy. In order to process large amounts of information quickly, we use mental heuristics—that is, mental shortcuts—to make decisions. We take into greater consideration experiences that have happened more recently (recency effect) or more often (frequency effect). We tend not to stray far from past decisions (anchoring effect) and depend largely on our feelings (affect heuristic). Are any of these brain tricks influencing you decision in a disproportionate way? How and why?
5. Acknowledge choice architecture. The options with which we are presented often dictate the decisions we make. Our environment shapes us. So ask yourself: “What are the options with which I am being presented? Can I restructure this problem or my environment to provide myself different options?”
6. Avoid decision fatigue. Making a multitude of daily decisions makes us mentally tired. This is called “decision fatigue” and it weakens our creativity, analytical ability, and self-control. Therefore, never make important decisions after you have already made several other decisions or when you feel fatigued.
7. Quantify it to clarify it. Numbers matter - a lot. They often make clear on paper that which may be fuzzy in our minds. Identify important data points, quantify them, and highlight trends. When possibly, equalize your choices by measuring them and comparing their outcomes quantitatively.
8. Taste-test your top choice. Apply the concept of a “prototype” or MVP (minimum viable product) to your decision-making process. Is there a way you can test the various outcomes of this decision at a negligible cost? The goal of this strategy is to gain as much feedback as you can before having to fully commit.
9. Hedge your bet with a diversified decision portfolio. Ask Yourself: “Do I have to go all-in with this decision or are there ways I can maximize my probability of success by distributing risk over several selected options?” This is the equivalent of a diversified portfolio of investments—a “decision risk portfolio.” Don’t risk everything on one choice if you don’t need to, especially when you have several great options available to you.
10. Trust your gut. Most business owners begin by trusting their gut. While this is valid to a degree, why not also inform your decision with the aforementioned decision-making tools? Your personal experience and collective wisdom are important, but it shouldn’t be the only factor that determines your final decision. Therefore, trust an “informed gut instinct.”

BONUS: Document your decision outcomes. Many business owners make a decision then neglect to reflect on the process which produced the outcome. Begin documenting your decision-making process. Over time, you will accumulate a library of decision-making maps which can inform future choices.

References and Recommended Resources:

Triple-Bottom-Line Decision-Making, Joe Arvai, Professor at the University of Michigan

Nudge, Richard Thaler, University of Chicago

Ruth Chang, Hard Choices, TEDx

Planning the future of Plan International Brazil

Rebecca G-K  -  University of Michigan Ross School of Business and Medical School

Last week, I had the wonderful opportunity to join the Plan International Brazil leadership team on a strategy planning retreat. The retreat took place in a city 75km from São Paulo at a former orphanage that was run by one of Plan's partner organizations. The organization has now turned the campus into lodging and meeting space for retreats and conferences. It provided the perfect, peaceful setting to focus on long days of planning the future of Plan Brazil.

Retreat grounds with city of Poá in the background

The goal of the retreat was to determine how to align the on-the-ground activities with the new strategy of Plan’s programs. The organization recently decided to focus its work on promoting girls’ rights and equality for girls. Plan has over 20 years of experience advocating for children’s rights in Brazil, but started programs specific to gender equality just in 2012. With leaders from every program unit in various states and managers from the national office, we discussed the details of how to achieve Plan Brazil’s new vision of “a fair and just Brazil for all girls.”

"Girls and boys have the same rights" - from a collection of Plan stickers

Walking through the new strategy piece by piece

One of the challenges we discussed in attaining Brazil’s vision is resistance or push back from community members and community organizations regarding the focus on gender. Plan works in rural cities where gender roles tend to be rigid and many girls stop studying in middle or high school to help with housework at home. One of the core goals of Plan is to change social norms around gender roles, increasing the number of young women who obtain secondary and higher education. Plan includes fathers and mothers in activities to help girls challenge gender roles at home, in addition to reaching out to community leaders and policymakers. It was encouraging to see a report come out during the retreat from the World Bank titled “The High Cost of Not Educating Girls.” The data show that girls who complete secondary education can expect to earn twice as much as those with no education; studies like this can help get community leaders on board with Plan’s mission.

Working hard on setting realistic goals for the next 5 years

Selfie break

Work groups finalizing KPIs for the next strategic cycle

The CEO arranged for a morning of team-building activities with an outside consultant. One of the highlights was an exercise in which the group was divided into three groups and tasked with putting together an “evening news program” to present. Each group presented the perspective of either Plan staff, Plan leadership, or Plan clients in a 5-minute skit. During the debrief, the facilitator explained that parody and humor is a powerful tool in helping an organization reflect on its strengths and weaknesses. He noted that important issues surfaced in our hyberbolic skits that likely would not have been brought up in a more serious discussion. I thought this was an entertaining and useful activity to bring to future teams and organizations. It was also my debut acting in Portuguese; I was awarded “Best Actress"--  I think to compensate for the entire staff laughing at my Portuguese!

One delightful thing about Brazil: there is cake and coffee at most meetings!

Plotting our evening news broadcast

After 3 long days that were both exhausting and energizing, we came back to São Paulo with new ideas, friendships, and a clear vision for working towards a fair and just Brazil for all girls.

Beautiful sunset lighting up Poá in the distance