Decision Making - Hat, Haircut or Tattoo?

I have spent most of my professional life swimming in the SME pond – both as a business owner and an advisor.

One of the things that struck me was the difficulty some teams have in devoting the right amount of time to decision making within their business. Some rush into grand commitments that really demand much better appraisal and discussion, while others seem to be paralysed by almost every decision, whether it’s a relocation to a bigger site or leasing a new coffee machine.

Teams displaying the former characteristics can quickly threaten their entire business, while the latter results in stagnation and missed opportunities. These behaviours seem particularly evident when teams are new to business ownership, for example in the immediate post-MBO period. As an MBO architect, and frequent NED / Chairman I found this frustrating.

In the realm of decision-making, few frameworks stand out for their simplicity and clarity like James Clear’s “Hat, Haircut, Tattoo” principle. Clear introduces this framework as a way to categorise decisions based on their lasting impact, helping us to assess the gravity of our potential choices and, perhaps, avoid overthinking the simpler issues.

The concept breaks down decisions into three categories: “Hat,” “Haircut,” and “Tattoo.” A "Hat" decision is one you can easily reverse—like changing a hat. It doesn’t carry long-term consequences and is typically low-stakes. Think of experimenting with a new task management tool or trying out a new exercise routine. If it doesn’t work, you can take it off without much impact.

A “Haircut” decision, on the other hand, is one that’s still reversible, but takes time to recover from—similar to a bad haircut. It involves more commitment, but fairly soon, things can go back to the way they were, or can be further modified. Trying some new software tools, or medium scale financial decisions, such as leasing a new piece of kit, fit into this category. It’s not permanent, but it takes some effort and time to restore the original state.

The “Tattoo” decision represents choices that are permanent or extremely difficult to reverse. These decisions leave an indelible mark, whether good or bad. Marrying someone, launching a new business, or having children are examples of "Tattoo" decisions—life-altering and demanding thorough consideration.

Understanding which category a decision falls into helps us manage risk and allocate our energy appropriately. Not every decision demands a pro-and-con list or deep analysis. By recognising "Hat" decisions as reversible and low-impact, we can move faster. For "Tattoo" decisions, we should slow down, reflecting on the long-term implications and making sure they are discussed at the appropriate level within the organisation.

For me, the "Hat Haircut or Tattoo" question works incredibly well. Within a company structure It also offers clarity on how and where things should be delegated (dont get me started on that one). I now ask teams to categorise their proposals in this simple way.

I am grateful to my long-standing friend, Mark Elliott, for drawing James Clear’s work to my attention. You might like James Clear’s 3-2-1 newsletter too and his best-selling book Atomic Habits.