Cost of poor quality business decisions | Sunday Observer

Cost of poor quality business decisions

4 December, 2022

No business will ever be free from decision-making, so it is absolutely crucial to really think through each decision as it arises, and really evaluate what there is to gain from it and what there is to lose. Business performance is as good as or as bad as the decisions you make. Making a decision without all the information is a sign that you are operating from a place of fear or anxiety or to satisfy your ego as a leader.

Whether you are a new leader in a key decision making role or an experienced top executive, making decisions impacting the business you cannot afford to make bad quality decisions, particularly during times of crisis.

A top executive’s ability to make a quality decision is a skill that comes with sharp assessment, deliberation and evaluation of alternatives available. It is true that bad business decisions often have ripple effects that can cripple the overall organisation - but that can be avoided. With so many decisions to make, it’s important to make sure you give the proper thought and time to each one to avoid making rash or bad choices.

Cost or gain first

Naturally, one of the first things you should consider is how much money your decision could cost your company or how much gain you can expect. I mention this first because, even with all else equal, this will likely be the deciding factor that sways your choice in one particular direction. If the financial cost associated with your decision has the potential to ruin your entire business, don’t make that decision.

If you think, ‘We might be able to do that,” without risking your company’s stability, mentally explore that route further. The need for a cost-assessment analysis is always a must. That is what is key in avoiding bad business decisions - it is gaining a thorough overview of what its cost will be for each aspect of your business and what you can get out of that expenditure.

When situations do arise where financial costs must be assessed, ensure that you are keeping your finance team in the loop. Check if your cash-flow can support it. Having a third-party opinion is vital, more so when complex financial costs must be understood when interest rates are at its highest ever.

Work with your finance team to truly understand what the financial cost will be - monetary and in terms of resources. Is this a truly viable idea, and can the numbers back it up? Or rather, can your business revenue withstand a potentially bad idea? Work with your next level leaders to understand if it is a worthwhile endeavour.

It might be worth getting feedback - formally from the teams that might be impacted to truly understand its cost. They might be able to provide another perspective that you might not have considered, or can offer additional insight to reinforce your decision.

This also goes for trying to understand productivity, and working with different teams to get their feedback will also help inform that aspect of the decision. Usually, it is hard to measure the future impact of productivity, but departments might be able to give you a better understanding of what the system currently is, and what is needed to make that more efficient.

Juggling a business and its myriad needs is definitely stressful, especially the decision-making portion. However, the best way to avoid bad business decisions is to truly think about its cost, both qualitatively and quantitatively and how this will affect your business. Using these three analyses as a blueprint, it will become easier to gauge whether the business decision you are making is right, or is it better to avoid it and move on to a different opportunity.

Impact on productivity

A forward-thinking business person should consider how his or her current decision will impact future productivity within the company. Maybe the decision will cause some temporary slump but streamline productivity a year down the road. Maybe it’ll boost productivity initially but fade off over time.

Both outcomes should be considered before you make the final call. To continue with the example of changing offices, I anticipated a minor slump in productivity during the first few weeks of our move. Our teams had to get used to the new set up, we had to account for potential technical glitches, and there was the hype surrounding our new location that would be a minor distraction. All in all, we experienced very little loss to our productivity and part of that is because anticipating such issues can help your teams prepare for them in advance.

Take the time to check with stakeholders and gather any additional relevant information before making a fast decision just to get it done. The idea here is to make sure you’re getting all the information and truly understand the decision – and its implications – before making the decision. This will also make sure the decision is based on fact versus assumptions, something that can happen when you move too swiftly.

If you recognise any of these signs in your decision-making history, now is the time to make the fix. The next time an issue arises, do a quick pulse check and confirm you are actually ready to make a good decision.

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