“Nothing is more difficult, and therefore more precious, than to be able to decide.” ~Napoleon Bonaparte
There is no question that the ability to make good decisions is at the heart of a successful business. For entrepreneurs, especially those with small businesses, the cost of making mistakes is extremely high.
In one case, a firm selected the wrong vendor to supply a critical part and nearly went out of business when the supplier could not deliver. A second firm paid a high price when their software vendor delivered the software over a year late.
In a third example, a firm’s board of directors was considering what benefits to provide the CEO. The board made a tragic error by selecting the wrong provider and watched the CEO’s morale nosedive as his benefits shrank.
In each of these cases and many more, the entrepreneurs did not take the time to develop criteria to guide their decisions.
When making decisions, it is easy to go with a gut feeling. However, gut feelings do not require analytical ability or consideration of any objective criteria. As such, they can quickly lead you astray.
A firm was considering hiring a bookkeeper, which is such a critical function for every business. As they sorted through the resumes that had been submitted, they also looked at the applicant’s picture. This is not bad if one of your criteria is that the candidate be good-looking. However, if it is not one of your job requirements, including that as part of the initial screening could end up leading you down the path toward a wrong decision at a very high cost.
In order to make great decisions, you must determine the criteria ahead of time and apply these requirements to your decision-making process. For example, if you are going to hire a bookkeeper, your criteria might be that applicants have five years of experience, availability to work overtime, and knowledge of your specific bookkeeping software.
However, just identifying your criteria is not enough. You must also weight them according to their importance. For example, experience could be weighted at 60 percent, availability to work overtime could be 10 percent and knowledge of the bookkeeping software could be 30 percent. Weighting the criteria can be really helpful when ranking the candidates or alternatives.
An entrepreneur was evaluating possible locations for his new restaurant. His initial criteria were the traffic count, parking area and neighborhood demographics. On the initial pass, prior to applying weights, the entrepreneur selected one location based on these criteria. Once the entrepreneur applied weights to the criteria, however, the first location was tossed in favor of a second location that better met the owner’s requirements.
I guarantee that if you take this approach, you will make much better decisions. Now go out and fine tune your decision-making process by identifying criteria and weighting them according to importance.
You can do this!