Strategic Thinking and Decision-making

If you run your own business, you already know that seemingly small decisions can have big consequences later on. A critical aspect of decision-making is thinking ahead and learning how to play out those decisions in your mind. Whenever possible, do your best to think long-term rather than short-term. That approach will help minimize crisis situations where you feel compelled to make a quick decision to solve one problem, while creating a new problem in the process.

Good decision-making is an integral part of strategic planning. It allows you to make decisions before they have to be made, relieving the stress of making snap decisions under pressure. While this isn’t always possible because of changing conditions and unforeseen emergencies, the idea is to control the fire drills to a manageable level.



Independent Goals

The goal is to make decisions that are not influenced by the noise and uncertainty of current events. That doesn’t mean that decisions should be made in a vacuum. The idea is to separate your decision-making process as much as possible from external forces that might unknowingly steer you down the wrong path.

You want your choices to be made based on facts that you consciously evaluate in a proactive manner, rather than reacting to what you see happening around you. Take control of the process instead of responding to it.

Planning

A plan is essentially a series of interlocking decisions made in advance. The best plans can be easily modified, and it’s a good idea to identify “off-ramps” when key decisions must be finalized before proceeding to the next one.

The plan should have a milestone schedule that allows measurement and comparison of actual performance. If a milestone is missed, you can take corrective action before it severely impacts future milestones.

Small businesses shouldn’t be intimidated by the term “strategic plan.” It doesn’t need to be complicated and polished. Something as simple as a spreadsheet with a series of intended actions and accompanying schedule can serve as an operating plan. An informal plan is far better than no plan.

Converting plans to action

No business plan will cover every decision you make or every contingency. Any plan that’s too detailed will prove cumbersome and difficult to implement. There’s no point in spending a lot of time on something that you won’t use on a regular basis.

When faced with an important decision, consult the plan to see if you’ve already addressed it. If not, study the plan to see how possible decisions might affect the overall plan. This will help you to avoid making a decision that jeopardizes your long-range thinking. Develop workarounds and consider alternatives that fit the best and still accomplish your objectives.

Don’t let an emergency shake you from your plan. It may help you find a solution that solves the immediate crisis, while still allowing you to recover downstream. Decisions made randomly will often conflict with each other and will make recovery that much harder.

Maximizing Resources

Your time is your most valuable resource, and time is money. Wasting either will hurt your bottom line, or could kill your business. Good decisions made in an orderly and thoughtful way will help to maximize all your resources and profits along with it.

This is especially important when evaluating decisions like expanding your business, changing locations, borrowing money, hiring employees, adding products, and finding new suppliers. All of these actions are interrelated, and how you decide on one will affect the others. You will make the best of limited resources by laying out a plan that addresses all of the relevant issues and factors. From this will come the decisions that need to be made to set the plan in motion.

Types of Decisions
  • Strategic – These decisions are overarching and are focused on the long-term. For example, determining the future direction of your business and the types of products would be strategic decisions. They inherently involve risk-taking, minimal structure, and a higher level of creativity than other decisions. They should always address your critical objectives, business philosophies, and company values.
  • Tactical – These are mid-level decisions with a medium-range timeline. For example, if you made a strategic decision to produce a new product, tactical decisions would include how to produce it and what suppliers are needed. Tactical decisions support the implementation of strategic plans.
  • Operational – These are day-to-day decisions that are focused on the short-term and usually have immediate impact. Larger companies deal with many of these decisions by issuing policy manuals for various aspects of their business. Small business owners normally make these decisions on the fly, but should be careful not to make higher-level decisions the same way. While mistakes in operational decisions can usually be corrected, it’s much harder to turn around strategic decisions that have long-term costs and consequences.
Process & Techniques

Here are some steps to consider for the more important decisions you make:
  1. Define the specific issue and its importance
  2. Determine the date by which a decision must be made
  3. Collect all relevant facts and data, and rationale behind them
  4. Seek the advice of people you trust and brainstorm multiple alternatives
  5. Evaluate the pros and cons of possible solutions
  6. List and challenge all assumptions
  7. Think top-down and then bottom-up
  8. Analyze options, but don’t over-analyze to the point of decision paralysis
  9. Avoid compromise and select the best option
  10. Sleep on it, then do a sanity check on your decision
  11. Explain the results to those who have a need to know
  12. Manage implementation and perform follow-up
Summary

There’s no blueprint for decision-making that works for everyone. In many cases, you won’t have the data you think you need to make an informed decision. That’s where experience becomes an invaluable asset in the decision-making process. The longer you’ve been in business, the more likely it is that you’ll face decisions and obstacles that are similar to what you’ve seen before.

Don’t make it more complicated than it needs to be. Trust your instincts and intuition, and don’t be afraid to go with your gut when making a close call. Sometimes the worst thing you can do is delay an important decision or hesitate in a crisis. Be proactive, take your best shot, and review the results as events progress. If you later find you made a mistake, admit it and take corrective action.


Michael Sanibel is a freelance writer specializing in business, marketing, personal finance, law, science, aviation, sports, entertainment, travel, and political analysis. He graduated from the United States Air Force Academy and is also licensed to practice law in California and New Hampshire. Michael wrote this feature article exclusively for Debbie May.com (www.DebbieMay.com), an organization dedicated to helping small businesses succeed.