Three Steps to Improve Your Business Decision-making

In a world that keeps moving faster and constantly changes, making the right decisions is becoming more important than ever. Without understanding where to invest time, how to allocate resources, or when to support key team members, businesses simply can’t build momentum to keep ahead of the myriad challenges in their operating environment.

According to Tracy Bolton, chief operating officer at SAP Africa, making good decisions is like a muscle that should be exercised regularly. “Some studies suggest people make up to 35 000 decisions every single day. In our personal lives, those decisions could be about what to eat for lunch, or whether to keep reading a newspaper article. But in a business context, those decisions could be mission-critical, and getting it wrong could lead to lost opportunities, reduced revenue and lower levels of competitiveness.”

Avoiding decision fatigue

Researchers have found evidence of so-called decision fatigue, a concept that suggests there are a finite number of good decisions a person can make in a day before the quality of their decision-making deteriorates.

Former US president Barack Obama, for example, chose to wear the same colour suits every day during his two terms to eliminate one of the many decisions he’d have to make during the day, freeing up his mental capacity to focus on more important decisions.

“The more decisions you make during the day, the higher the likelihood that some of those decisions start showing poor outcomes,” adds Bolton. “In a business context, however, putting the correct systems and processes in place to automate some of the decision-making process can reduce the strain on executives and other decision-makers, leading to better business outcomes.”

Technology as a tool to improve decision-making

As the uncertainty caused by the pandemic combines with other disruptive global events, business leaders are finding it challenging to make the right decisions to steer their companies through the turbulence.

“Companies are increasingly turning to technology to support decision-making processes through the improved collection and processing of data,” says Bolton. “New data-driven solutions help bring greater transparency and predictability to critical aspects such as human capital management, procurement, supply chain management, risk and compliance, and financial planning.”

She cites growing innovation in how African enterprises are utilising SAP’s technology solutions as a positive sign for improved decision-making. “Across the continent, companies of all sizes are using technology to track the impact of their decisions, mine historic data for trends insights, and improve forecasting with predictive capabilities. When integrated across each area of the business from the shop floor to the top floor, and using the following steps, companies can consistently make better decisions to improve the outcomes for the business.”

To get decision-making right in our current business environment, Bolton recommends companies follow three key steps to improved business decision-making:

Step 1: Put the right systems in place

“In business, most of the decisions that are made should be underwritten by a set of policies and processes to speed up, automate and guide decision-making,” explains Bolton. “Technology solutions can be a powerful ally here, as they could be configured to have all of the processes and policies embedded, allowing for a seamless decision-making process.”

The entire human capital management function, for example, can be digitised, with best practices for hiring, leave policies, and more built into the system.

“Procurement systems can be configured to ensure you get the best pricing from only authorised suppliers, with aspects such as RFP management guided by industry standards. This reduces the pressure on individuals to make the correct decision as most of this is automated within the various systems.”

Step 2: Accommodate different types of decision-makers

Bolton says companies need to allow for different types of decisions to be made at different levels of the organisation.

“Different personalities make decisions in different ways. Some need to have all the data at hand and consider all angles before making a decision. Others only need some data and then rely on their instincts to move forward, while others still choose to make decisions based on their potential impact on people.”

She advises that companies use the policies and processes they’ve put in place to help create an environment where people feel empowered to make decisions and can learn from mistakes.

“Empowering your employees with accurate data can also bring direct improvements in the quality of the decisions they make, limiting mistakes and creating an environment where every employee can safely take action without putting the organisation at undue risk.”

Step 3: Exercise your – and your team’s – decision-making abilities

As with any skill, practice makes perfect. Bolton recommends that companies encourage practicing making decisions faster and with the correct data at hand.

“To exercise your decision-making abilities, start with smaller decisions and practice different techniques for coming to the correct decision,” advises Bolton. “For example, Nobel Prize-winning psychologist Daniel Kahneman recommends getting rid of overconfidence to improve the quality of your decisions.”

Another useful tool to practice better decision-making is the art of probability. “Research suggests even basic training in probability makes for better decision-makers and helps avoid cognitive biases that lead to poor decisions. However you approach it, taking opportunities to regularly practice making good decisions will invariably lead to better outcomes, for you, your team and the business.”