PKF Tauranga News • 2025-03-12

Effective Decision Making

In today’s business environment, effective decision-making is key to navigating change and achieving sustainable growth.

For small to medium sized enterprises where there can be fewer individuals at a senior decision-making level, there is arguably a greater need to have a strong decision-making process to ensure decisions are not made in a vacuum.

However, how many business owners make decisions, is ad hoc, ‘on the fly’ and inconsistent.

There are various decision-making frameworks that can be beneficial in ensuring that decisions are clear, well thought out, and have the business’s vision in mind. Some common elements to those frameworks are:

Define the criteria against which a decision will be tested and ensure the criteria is transparent, measurable and where possible assign explicit probabilities to whether the criteria are achievable. For example, rather than aiming to ‘increase profitability’, aim to ‘increase gross margin by 5% over an 18 month period’ and assess the likelihood of achieving that objective.
Discuss the decision with others. Whether discussing a proposition at the dinner table or with a trusted business advisor or ideally an independent Director (whether formal or someone who provides that support informally), valuable feedback will be received. The process of ‘thinking out loud’ will also help crystallise your own thinking and help form a view.
Pro-actively seek out and consider information that might contradict the investment hypothesis.
Consider whether the decision to proceed aligns with the strategic objectives of the business and is in alignment with previous decisions.
Is there an opportunity cost? This could be readily identifiable or something unforeseen, i.e., commitment to a path now may rule out the option of pursuing a different opportunity later.
Is the rationale, expected outcomes, and plan for implementation able to be clearly communicated to others.
Finally, there is the consideration of speed. Sometimes decisions do need to be made quickly. But ideally, pause, and take your time. It’s a bit like the decision to reply to an angry text, email, Facebook message or on-line review as soon as you read it … we all know it is best to not hit reply, but to wait and reply later when you are cool and calm.

The above list is not based on a formal decision making framework, but it does provide a sense of what it takes to ensure good decisions are made.

By employing a structured process business owners can test their ideas at a fact-based level to ensure the best possible outcome.

See more PKF Tauranga News items