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Lead Your Team Strategy

How to Make Effective Business Decisions

How to Make Effective Business Decisions
Credit: Rawpixel/Shutterstock

One of the greatest skills a leader can have is the ability to make effective business decisions. Business leaders make dozens of decisions every day that influence the success of the company while also having an impact on employees, customers or the marketplace. Developing such a skill requires a combination of education, experience and intuition.

There are many things that influence how an individual makes decisions. They include emotions, perceived personal and professional risks and rewards, preparation through experience or education, deadlines, stress and a host of others. It is important to mitigate the irrational and embrace the rational.

Whether decision-makers realize it or not, myriad factors must be taken into consideration before coming to a conclusion. Whether the decision-making skill is an innate gut feeling or one learned over the years, the bottom line is that being an effective decision-maker requires practice. Gayle Abbott, the president of Strategic Alignment Partners human resources consulting firm, recommends a four-point strategy to deploy whenever you must act:

  • Identify the problem.
  • Analyze the possible solutions.
  • Evaluate the possibilities that are likely to bring you closer to your goal.
  • Make the decision.

Abbott told Business News Daily that following this decision-making process does not always come naturally. Those who’ve mastered this approach usually have years of practice under their belts.

"When you see a successful person, you do not see what happened behind the scenes," Abbott said. "All of them have made mistakes on their way up, but they move on. They have struggled through failures — bad decisions — before finding a solution."

She also noted that it is important to listen to your intuition. The best leaders do this, and then gather all the facts and data to either support or reject that gut feeling, Abbott said. [What Is a Decision Matrix?]

As President Theodore Roosevelt said, "In any moment of decision, the best you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing." When it comes down to it, the answer may not always be clear, even when using a rational decision-making process. But the only way forward is take a deep breath, gather courage and make the decision.

"Sometimes you’ve got to say, 'I've now gathered all of this information and it is time to act,'" Abbott said. "The most successful people don't have to have all the information. They are willing to take risks. A big part of it is knowing when to be decisive."

Above all, Abbott said, keep your eyes on the prize.

"Be clear on the ultimate objective,” she said. "When faced with choices or options, you need to choose the one that will most quickly achieve it. Know your strengths and weaknesses to stay out of trouble."

An effective decision is different than a "good" or "bad" decision. There is a middle ground that allows for the choice to have impact, although it may not have as much an impact as anticipated. Leaders need to recognize the difference and not categorize every decision in two simple categories.

Sometimes it is very easy to recognize a good decision, such as when sales numbers increase or a new employee rises to the top. Other decisions may require more reflection to determine if it was the right decision or if another option was better. Did the decision solve the problem or move your business forward?

This evaluation process is critical to gaining experience in making decisions and to improve a leader’s ability to make effective decisions. By applying lessons learned, a leader can recognize similar situations and feel more confident with other choices made and courses of action pursued. The key is to be effective, not necessarily just right or wrong. 

This article was originally published in 2010 and updated Oct. 12, 2015. Additional reporting by Business News Daily contributor Michael Keller.

Marci Martin

With an Associate's Degree in Business Management and nearly twenty years in senior management positions, Marci brings a real life perspective to her articles about business and leadership. She began freelancing in 2012 and became a contributing writer for Business News Daily in 2015.