Decide or Perish: How To Make The Right Call

October 30, 2012 /Forbes/ – This past summer at Stanford, I worked with a gathering of some of the world’s most successful business leaders. Each leader knew how to make great decisions at critical moments, and had a long track record of doing so.

As a group, we consolidated their wisdom into 10 rules for great decision-making:

1. Start with adding up costs and benefits.

This obvious cost-benefit appraisal can be elusive. Why? Because most of us tend to underestimate costs and overestimate benefits – and to be generally optimistic about our ability to make things happen. This skews our analysis in favor of outcomes we’re hoping for.

Good decision-makers are wary of wishful thinking; if you need a second or third opinion, ask trusted skeptics. Keep close to you those who will push back and make you defend your assessments.

2. Don’t go for percentage wins only.

You’re not going to be noticed by by turning $100 into $1,000, even with a tenfold return. However, if you make $1B into $2B, someone may well take notice. So keep in mind what’s at stake: in many business decisions, it’s the absolute, long-term financial return that matters, and the highest dollar benefit wins over the highest percentage benefit.

3. Don’t get sunk by sunk costs

Every business school student learns to ignore sunk costs when deciding whether to stay with an investment. But in the real world, you’d be surprised at how long politics, bad judgment or inertia can keep ill-fated “hobbies” alive. Don’t fall in love: when it’s clear a pet project is ailing, hurry up and get out the rifle – so to speak.

4. Cut down your options and rank what’s left

Separate “the elephants from the ants” – ditch the little ideas and save the big ones. When you’re deciding what to pursue, cross off everything but the top few priorities. A few, clear, simple objectives are more likely to deliver results than complex “perfect decisions” that will only bog down an organization.

5. Don’t procrastinate

Time is rarely on your side. I’ve yet to hear an executive say he made a tough call too soon. The same goes for making personnel decisions: if you’re not looking for ways to promote or keep current team members, it may be time to think about replacing them.

6. Recognize that “facts are stubborn things”

Don’t let your feelings warp your perception of the situation at hand. Look the circumstances squarely in the face. Fear can make you freeze up; but in almost every case, it’s better to make a call and deal with consequences than to leave things in limbo. As Winston Churchill said of courage: it’s “the first of human qualities because it is the quality which guarantees all others.”

7. Remember Kant

It should go without saying that you want your decision to be an ethical one. So if your ethical compass needs a bit more calibrating, think of Emmanuel Kant. His “categorical imperative” is a useful thought experiment to help you decide if you’re doing the right thing.

Here’s how it works: imagine that your decision, once you make it, becomes a universal law that forces everyone in your situation to act just as you did. For example, let’s say someone parks in your reserved space. You must decide between leaving a firm note and slashing the guy’s tires. If you leave a note, from then on, everyone who parks in the wrong space will get a note on his windshield. On the other hand, if you opt to slash, all parking space usurpers – including those who did so by accident or because of an emergency — will return to a car with slashed tires. In which world would you rather park?

8. Test decisions against ease of execution

Merely good decisions can become great ones if you execute them well. So for every one of your options, think about whether it’ll be easy to explain to your team and your organization, or if it’s likely to be lost in translation. Will people be enthusiastic about making it happen? If not, maybe the idea is not as good as it looked on paper.

By Joel Peterson