How to make smarter decisions in tricky environments

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This week is the second instalment of our five-part series on strategic leadership, based on the modules in You Don't Need An MBA: Leadership Lessons that Cut Through the Crap.

A personal note

When COVID hit, many of us experienced – and are still experiencing – serious financial uncertainty. Businesses lost revenue, people lost jobs and the economy went into a tailspin. Those of us who are self-employed had some serious decisions to make about the way our businesses would manage in a new and uncertain environment.

One of the first things I did, after a family meeting to work out how we would get through lockdown, was make some important financial decisions. How long would we be able to operate, if we lost our existing clients and projects? How strong was our household buffer? What should we do with our investments and savings?

I had some tough calls to make. One of that concerned money tied up in an index fund. It was a big proportion of our accessible reserves and might be the tipping point for the survival of our household and business if we experienced many months of disruption.

It was a tricky bind. Index funds are a long-term investment that should never try to time the market. Successful long-range returns need the confidence to leave them alone, even in a dip.

Ultimately, though, I chose to liquidate. While I couldn’t predict what might happen in the market, the impact of losing access to the money would be serious, and our need for cash flow, in an equally uncertain credit environment, outweighed the potential benefits of holding onto the shares. Taking the hit, I transferred the money….?and within weeks, it was clear that our business would continue to thrive, and that the market would recover.

Does that mean I made a bad decision?

Absolutely not.

While the outcome couldn’t be predicted, the process was sound. We considered our context, weighed up risk, uncertainty and impact, worked out what our priorities were and applied those to our options.

The quality of the decision was not about the outcome – it was about the process. And on that front, the decision passed the test.

“Strategic thinking unleashes the power of managers to solve problems, overcome challenges and creatively take the business from where it is, to where it needs to go.” – Rich Howarth, CEO Strategic Thinking Institute

Moving from what to how

Contrary to popular wisdom, what makes a good decision good or bad isn’t the outcome – it’s how we make it. While individually, good decisions don’t guarantee good outcomes, consistently good decisions?do?lead to consistently better outcomes.

Increased decision quality is the single most effective performance intervention in a modern organisation. Decision effectiveness and financial results correlated at a 95% confidence level or higher, irrespective of your country, industry, or size. I'm going to say that again, in English.

Using a good process to make decisions is the smartest thing you can do to make more money and get more done.

When I run strategic leadership development, I am often surprised to learn that this is the first time executives have learned how to think and put rigour around their decision processes. When I teach how to run?Meetings that Matter, ?less than a third of managers know how to facilitate strategic conversations to make those decisions together. How can this be true?

The answer is complicated, but is largely because we consider "good judgment" to be a personality characteristic, rather than a skill that we develop.

What are decisions?

Here's the definition we use in?Not An MBA :

Decisions are the way we choose to try

There's a few important things about that definition:

1. It's about the?way, not about the detail. The process we use to gather information, include others, set criteria and weigh up options has more bearing on our success than the choice itself.
2. It's about?choices -?which are as much about what we?don't?do, as what we do. We need to exclude alternatives, with rationale, as we go, rather than winding up in a decision through default or inaction
3. Decisions include?action?- and are living beasts. That's why we try something, to see if it works. Good decision processes encourage us to take the minimum viable step to test our thinking, and then apply what we learn from that experiment to the next minimum viable choice.

In?You Don't Need An MBA,?we look at the three key stages in any decision process: frame, space and action. The idea is simple - as long as we know what the decision we're actually making is, how we're going to make it, and we're willing to experiment, we'll be OK.

Three questions to ask

1. Why does this matter?
2. How do we choose?
3. What’s the smallest experiment we can try?

Signs you need to make better decisions:

• You waste time going around in circles
• Your decisions don't stick
• You feel uncertain and don't know what to focus on.

How to make better decisions

To make better decisions, you don’t need to be super-intelligent or have a strategy MBA. Intelligence, like promotion, can actually hold us back, as we get too confident in the quality of our thinking and close ourselves off.

Even if you are right, it doesn’t necessarily matter! Change is a team sport, and our decision-making should reflect that.

You can improve your decisions by:

• Practising your thinking skills.?Create deliberate space away from?the busywork. Clear time in your calendar, schedule big-picture?conversations and start to nudge the culture of your team or?organisation away from what’s directly in front of them.
• Thinking carefully about process.?Who do you need involved? What criteria will you use to decide the right path? How will you test?your ideas?
• Reflecting on a decision?that didn’t go well. What was missing? Was the timing wrong? Did you fail to get the right people on?board? Were your motivations off?

Most importantly, keep asking tricky questions. Every time something makes sense, poke it with a stick – are you sure about that? How do you know? Could something else be true? Treat your decisions like babies – small, imperfect, and a constant work in progress.?

Let's bring thinking back in-house

Making good decisions is not an innate skill, and not about how smart we are. It’s about?how?we think, not what. Important questions rarely have perfect answers, so instead of searching for accuracy, we need to focus on our process.

While doubtful leaders opt-out of the thinking process, decisive leaders lean into it.

Instead of trying to be right all the time and pointing fingers at people when things?go wrong, the decisive leader is more open.

They’re careful?to set the right frame, and they pay most of their attention to engaging with people, challenging assumptions and experimenting with options by making minimum viable decisions that they can tweak.

For more on the five key skills of a strategic leader, make sure you're subscribed to Not An MBA weekly, to get the next four parts in the series. Even better, check out the?Alicia McKay Academy , where you can take a FREE?mini-naMBA ?and boost your skills.