Effective business decisions are made in a logical, reasoned and informed way. Or so you'd think. In fact, my research for the Zurich Big Decisions report shows that while many business executives believe this is how their decision-making processes work, in reality one in six will simply go with their gut instincts.
The recession makes this style of decision-making even more risky. Long-term decisions have become more acutely important for businesses, especially SMEs. There is less room to manoeuvre and certainly less margin for error.
One of the other challenges is finding the right information to make decisions. Too little information can hinder informed decisions, while too much can cause overload. A significant number of business leaders struggle to find the right balance: 16% make decisions based on more information than they need over half of the time, and 8% say they make ‘uninformed’ decisions over half the time. We should be concerned that so many managers in both the public and private sectors regularly feel they don’t have the relevant data to make an informed decision.
Certain issues carry more weight with managers when making decisions. Cost and business continuity appear to be the top concerns, with global and environmental issues ranked least influential. We looked at decision-making both pre, and post-recession and discovered only 37% of senior managers from the public sector give the top spot to cost efficiency pre-recession, compared to 51% of privately owned businesses. Post-recession, one thing is clear: more and more business leaders are influenced by cost efficiency. Over two thirds (58%) of those we surveyed place it in the top spot. No surprises there.
Whether you are the CEO of a multinational or a partner in a small start-up, decision making comes with the job. To be a success however, business leaders have to make the right decisions, especially during a recession. As the tough times continue bosses need to encourage a culture of informed decision-making amongst their staff, and adopt it themselves. It's great to go with your gut, but not at the expense of your business...
Michael Hulme is Hon Professor at Lancaster University and author of Zurich Big Decisions