So, you’ve made a bad decision.
Perhaps you’ve delegated a task to the wrong person, hired a less optimal job applicant, or moved forward with a project that wasn’t carefully planned. And as soon as you realise your error, the damage has been done.
It’s easy to wallow in despair, but as leaders, you also have the opportunity to find solutions and overcome challenges. The question is, how do you get started?
Insight: All decisions entail risks. To make smart ones, teams need a sound decision-making process in place.
Data: Poor financial and operational decisions by managers cost businesses more than 3% of their profits. (Gartner)
Key Action Point: Adopt the Smart Decision System to make the most out of your dollars, time, team, and focus, and make better-informed decisions moving forward.
Some decisions can seem smart or harmless in the beginning. But be careful — the consequences of making the wrong ones are very real. Here’s how they can impact your business:
All of this could lead to more problems than the ones you started with. This makes strategic planning, data analysis, risk assessment, and decision-making processes the key game changers for mitigating the negative impacts of poor decisions.
Let’s say the damage has been done. There’s only one choice for you to make now — get back on track. So, how do you recover from a bad decision? Here are four ways to get started:
It’s easy to buy into the sunk cost fallacy. When a certain endeavour fails, we tend to hold on to it because of the time, energy, and money invested in it.
That’s why it’s hard to let go of losing stocks. That’s why when individuals mistakenly order too much food, they overeat “just to get their money’s worth”.
However, that’s a reactive approach to loss. Once you realise that you’ve made a bad decision, the best action is to recognise the blow now rather than expending more resources on a lost cause and dealing with an even bigger problem later.
Are you willing to look at things from another perspective?
Whether you’re forging an entirely new path or picking up where you left off, smart decision-making means asking four key questions:
When you’re willing to look at things from different perspectives, you open up possibilities and opportunities for your business to leverage. This is how you unlock new solutions and prevent old, recurring problems.
After acknowledging the fact that you made a bad decision, take time to extract the lesson from the experience.
Where did you go wrong? Was there a blind spot? Did you trust the wrong people? Were you too confident that it would go according to plan? Did you disregard the red flags? Did you let the opportunity slip up?
Identify what your decision-making biases are, and decide to overcome them. Once you do, you’ll be conscious not to allow these biases to blind you and you’ll be making smarter decisions next time.
In the words of decision-making expert Olivier Sibony, "Process trumps analysis by a factor of 6."
To support your team and gain more accountability for the outcome (whichever way it turns out) — you’ll need to adopt the Smart Decision System. In a nutshell, the system aims to identify the smart risks worth taking before investing in a choice.
Smart risks are defined as what’s left of the total risk (all possible risks that come with any decision) when you remove the avoidable decision risk (factors you can control) from the picture. This is known as the Smart Risk Formula. |
If you remember the key questions to ask when finding the remedy, you’ll notice that having open conversations around the following questions can help you define which risks are worth taking.
We get it. The consequences of poor business decisions can be tough. But believe it or not, it’s not the end of the world.
The important part is you’re doing your best to ensure they don’t happen again.
Whether you’re making decisions for your business or are at a personal crossroads, the principles for smart decision-making remain constant. When humans fail, it’s a reliable system that creates a safety net around decision-making and will set your business up for success.