Business Today
Understand how business decisions are made
To take better decisions, understand how decisions are made.
Deciding factors
People are very emotional about business," Future Group chief Kishore Biyani recently told BT. I have heard many consultants and business heads say the same. Recently, I met Franz Heukamp, Secretary General of IESE Business School in Barcelona, Spain, and his take on the subject was fascinating.

Heukamp, who also teaches Managerial Decision Sciences at IESE, confirmed Biyani's view. "Executives are surprised when this becomes clear as we help them delineate the process of decisionmaking," he said. "They admit to not having been aware of their decisions being affected by sentiments."

Shamni

Sentiment also leads many to defer certain decisions. Those who do so fail to realise that postponement often has financial costs as heavy as those incurred from taking risks - which go wrong. Heukamp has also worked on the trade-off between risk and delay. "I have conducted a neuroeconomics project on this involving brain scanners," he said. "Though it is the same side of the brain that responds to both risk and the time dimension, people tend to act more swiftly when there are financial risks involved rather than when merely time is being wasted."

Successful executives try to focus their thinking on key issues, keeping personal biases and sentiments out of the picture. The following tips could help you make your own thinking more structured:

Face Yourself First: Research shows that the key to taking good decisions is having a high degree of self-awareness. Figure out your motivations, your past baggage, your hot buttons. Observe yourself when you take decisions. If you notice uncomfortable physical effects - pounding heart or sweaty palms, for instance - it means the decision is stressing you out because there are emotions at play. "Most managers like to think of themselves as perfectly rational beings," says Heukamp. It takes courage and persistence to pinpoint one's own triggers and examine them.

Draw a Tree: Experts believe that drawing a 'decision tree' with all the causes and effects of a particular decision set down in writing is a good starting point. People who do so find their thinking becoming a lot more structured.

The Big Picture: It is important to realise that the brain responds to immediate provocation much more vigorously than to concerns of the future. But if executives are to take reasoned decisions, they must curb the tendency to react immediately.

"Our first challenge is to resist being reactive," says Tony Schwartz, President and CEO of the Energy Project, and a bestselling author. "Many of our worst decisions occur after we've been triggered - meaning pushed by something or someone into negative emotion and we have reacted instinctively, fuelled by stress hormones."

Arvind Uppal, President, Asia Pacific, Whirlpool, is credited with having steadied the company after it was hit hard by its competitors. "When some decision pays off, it appears as though unusual effort must have gone into reaching it. But I tell my people that if a solution is not a simple one, it means something is clearly not all right."

When Uppal came on board, he was given the choice of radically overhauling the company and even changing its direction, but he preferred not to. Instead, he relied on the company's inherent strengths and existing resources. Thus, while taking a decision, do not be led astray by extraneous considerations. Also, in business, as in life, ask about every decision: will it result in a greater good?

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