Think Chess Not Checkers in Business Decisions — Part five
In our last installment of decision-making, we focused on recognizing the value of considering a range of alternatives over just one. If you are trying to manage the risk of making poor choices, considering many alternatives is far more likely to improve the odds of getting the best outcome. And the truth is, strategic thinkers always do this!
I have found it useful to consider the cause and effect links between the outcomes you want and the alternatives you might consider. An excellent tool for doing this is the 5 Whys.
5 Whys is an iterative interrogative technique used to explore the cause-and-effect relationships underlying a particular problem. While the technique's primary goal is to determine the root cause of a defect, I have found it helpful in forcing me to pause and question my answers. A “look before you leap” brake.
While using the 5 why technique may be reminiscent of your 3-year-old (why, why?), it is actually quite effective in getting at the root of a problem, here is an example.
Revenue is down. (the problem)
Why? - We have fewer customers.
Why? - A competitor has opened its doors, and people are going there. (Second why)
Why? - Their customer service is superior. (Third why)
Why? - They have a stronger training program. (Fourth why)
Why? - They have focused on building a culture that values each employee and ensures they are thriving in their position. (Fifth why, a root cause)
Complete the risk management loop and recognize how important it is to consider your alternatives' consequences about your objectives. The goal is clear: Be sure you really understand your alternatives' consequences before you make a final choice. If you don’t do it now, you will surely do it afterward, and you might not be happy with the result. Addressing the possible consequences helps you understand not only your objectives but your original problem too.
Make sure you describe the consequences completely and precisely, or you’ll hamper your ability to make better decisions. Here are four steps that will help you manage the risk and hone your ability to assess the impact of the different consequences.
4 Steps to Manage the Risk and Consequences of Decisions
Think ahead to the distant future.
Pretend that you’ve actually made the decision—what do you foresee as the results? If you’re planning a remodel of your home, for example, you’d want to picture the structure years into the future and consider things like a growing family, room additions, or the impact of changes on marketability and value down the road.
Describe the characteristics of each alternative’s consequences.
Use charts, numbers, facts, and subjective judgments to help create a more vivid picture. Later go over these descriptions and weigh them against your objectives. See item #4 for an illustration of the application.
Cross off any second-rate alternatives.
Don’t forge ahead down a different path just because it’s different. The status quo may serve as the best alternative, so compare it to others with fresh eyes. If they don’t measure up, eliminate them.
If you wear glasses, you’ll certainly recognize this technique. Do you recall the last time you visited the optometrist? Do you know how they go through a selection process when searching for the best lens amongst the alternatives to produce the best version of your corrected sight? Do that! Continue to group alternatives in pairs, comparing both, until you develop the alternatives you can live with.
Using your final alternatives, create a consequences table.
Using Excel or an alternative (yes, that was intentional) spreadsheet program, list objectives down the left-hand side of the sheet and your alternatives along the top to create your consequence table. For example, a job seeker listed the following as her objectives: “monthly salary,” “flexibility of work schedule,” business skills development,” “vacation,” “benefits,” and “enjoyment of the job. Under each alternative, she listed what she knew about each of the positions she was considering. One job paid $2,500 a month and offered higher flexibility of work schedule, while another paid $3,000, offered no flexibility, and was deemed boring.
The example is simplistic but effective and transferable. She was able to compare and contrast her choices as part of making the best choice for her.
The consequences table, aside from being orderly, provides a vehicle to make visual comparisons to judge trade-offs later on. It also requires discipline and focus, especially to be clear about how alternatives interact with objectives.
Additional Decision-Making Techniques
Experience the consequences before you commit.
Say you are considering moving into a house in the suburbs. You might want to drive the commute during rush hour before you buy.
Use scales.
Verbal descriptions of consequences may not completely help you resolve a problem; therefore, use scales to measure values. The A to F grade scale in schools provides a good example of a subjective scale. “Meaningful” scales are just that: they provide levels of meaning that are personal to you.
Use the information that’s currently available.
You might have many of the facts, but you’ll probably have to use your own judgment regarding that fact that isn’t present. We can’t know everything!
Experts can help explain the consequences.
Say you want to plan for your child’s college but aren’t quite sure how to do it. Wouldn’t it make sense to seek an expert, someone with a financial background, to get their perspective? Sure it would. You might want to start with your CPA and measure her answers against those of your banker or a financial planner. See how this works?
Acknowledge uncertainties.
There will always be some consequences that will remain mysteries, and your only task is to ask how the uncertainty might influence your final decision.
We can help you with the decision-making process and assist you as you develop the alternatives ideas you need to make the best choice for your business challenge. Our team of subject matter experts has been servicing businesses in Tampa Bay and Florida for decades.