Life has a nasty way of springing surprises on you. The only certainty, it would appear, is that you will encounter a lot of uncertainty. Being an entrepreneur is no different. If you are like me, you might have thought you made your hardest decision when you chose to become an entrepreneur. Wrong! Before you know it, the business, customers, employees and the world at large are bringing problems that require you to make decisions. There also seem to be few easy decisions. Why didn’t anyone tell you about this? Well, you heard it here first — much of your productive time as an entrepreneur will go to making, hopefully, good decisions.
“Effective executives do not make a great many decisions. They concentrate on the important ones,” says Peter Drucker in his book The Effective Executive. Simple as Drucker’s assertion sounds, it is hard in the fog of entrepreneurial battle to focus on the important few. So how do you identify the important from the merely urgent or routine problems? Having identified these, how can you make good or effective decisions?
Is this your decision?
The best way to make good decisions is to first determine if it is even your decision to make. Entrepreneurs — and here I speak with some experience — love to be in the thick of things. “The equipment is stuck in Customs. We won’t be able to ship our product on time. What do we do?” “He won’t accept our offer without a joining bonus. Should we offer him one?” “The customer will not issue a purchase order without a penalty clause. Do we agree to one?”
Issues like these will keep popping up all the time. While you may love playing Captain Crunch, the one everyone goes to for decisions, you would be mistaken to offer one for every question posed. If you want your business to grow and, importantly, if you want to have a personal life, it is critical that most decisions be made by other people. That is the first decision you have to make every time, answering the question: Is this a decision someone else should be making?
So how do you determine which decisions are yours to make? I’d recommend that you use the following simple guideline — if a year from now it would still matter what decision you make now, then it is probably something you want to be involved in. For instance, agreeing to a penalty clause in a multi-year contract with the Government will matter. Similarly, anything that involves the culture of your organisation or shareholding or capitalisation would make the cut. Most other decisions can probably be made by someone else. Which of course brings up the question: How do you ensure that the decisions others make do not drown your business?
Having a well thought out and tested process for decision making will not only help you but your entire team make the right decisions. Here again, I refer to the work of Peter Drucker who spells out a five-step decision-making process. They are:
- Comprehending the nature of the problem or decision — is it generic or an exception?
- Understanding the boundary conditions of the problem.
- Figuring out the right solution without considering real world compromises that might be needed.
- The action required to execute the decision.
- Validating the appropriateness of the decision once taken.
At first glance, it may seem tough to figure out what to do if your product won’t ship on time. Most operational issues do not require executive decision making. As in the example of agreeing to a penalty clause in your Government order or deciding to do business with the Government or setting up an overseas distributor — issues that will have a long-term impact on your business — a well thought out process helps. Further, it allows your senior staff or other partners to use the same methods and yardsticks to make their decisions. This way your direct presence or involvement is not needed in each time.
Drucker makes the point that one rarely encounters truly exceptional cases. Most situations you encounter, even if new to your business, are generic and would require a rule to be fashioned. “We don’t sign penalty clauses in our contracts or any penalty or liability clause cannot exceed the value of the contract itself,” is a rule you can formulate. “We may offer discounts or walk away but no penalty clauses,” is another. It is critical to define the problem before you attempt to make a decision. This requires the first three steps to be followed rigorously. Subsequently, dealing in the real world rather than in some ideal scenario, it is important to ensure that the solution is effective. And this should not merely be faith-based but data-driven; such validation after a decision is made will ensure you continue to make good decisions or learn from bad ones.
The five steps could take a few minutes in some instances and a few weeks in others. Either way, it will help you make measured decisions. Needless to say no process is infallible and good leaders trust their instincts. Of course, great leaders know when not to rely on their instincts but to get the data first.
Not making a decision is a decision
The former Indian Prime Minister P. V. Narasimha Rao epitomised the art of non-decision making or so it seemed. Legend has it that he’d avoid making difficult decisions and in time, the problem would disappear or resolve itself. As an entrepreneur you will rarely have the luxury of ignoring decision making. That is not to say you will not do it. I have avoided the hard decision to let go of some difficult employees, as my staff keep reminding me frequently. Such avoidance of decision making is the classical ostrich-sticking-its-head-in-the-sand syndrome.
It is critical to recognise that it is a legitimate decision when you decide to not make a decision. It’s worth reading the previous sentence more than once — it is not intended as a play on words. Choosing to not make a decision is completely different from avoiding a decision. The difference is that you have made an explicit choice, one with consequences that you understand and are prepared to live with. Such a choice is particularly appropriate when it is evident that the situation will take care of itself. More importantly, it is of little importance, even if annoying, and is unlikely to have any material impact. In such circumstances, it is worth keeping in mind the Roman edict, “De minimis non curat praetor”or “the magistrate does not consider trifles!”
This article first appeared in print in the Hindu BusinessLine in Nov 2008.