NFIB

Decisions, Decisions
07/ 26/ 2005
by Karen J. Bannen

Melody Brenna, the co-founder and CEO of Milestone, an Amarillo, Texas-based architectural ornamentation firm, recently hired a new accountant. It wasn’t a long interview process, she says. “It was someone who walked in the door, and I immediately thought, ‘She’s perfect.’ We hired her on the spot,” Brenna says. Sure, the applicant’s resume looked great, and she had the right skills; she even used the same software and had experience in the construction and manufacturing worlds—but so did some of the other candidates Brenna interviewed. What was even more important, Brenna says, is that she had a feeling about the woman—a gut instinct. She took a chance on her, and so far, the match is a good one.

What Brenna did was what Malcolm Gladwell, the author of best seller Blink: The Power of Thinking Without Thinking, calls making a decision based on “thin-slicing,” the ability to assess a person or situation based on limited information over a short period of time. And as any small-business owner knows, it’s a skill that can mean the difference between success and failure.

Just the Facts
John Fell, the founder of E-Mail Logic , an e-mail marketing firm based in Evanston, Ill., says he occasionally uses thin-slicing, too. But he’s much more likely to make decisions based on fact than feeling. Fell says he sets goals and outlines a vision of what he’d like to accomplish. Then, using that information, he is able to choose what’s right for himself and his business.

“I think the conflict I have is that I tend to be more right brain and creative, instead of working within a structure. I think for any decision that involves money or an investment, there needs to be some form of measurement. If I want to invest in a new software program, I want to figure out the financial benefits of doing it,” Fell says.

This gathering of data and information is something Gladwell calls “thick-slicing:” a process that stems from logic and deliberation—the more, the better.

Pick One
Although Brenna and Fell use different primary decisionmaking methods, experts say neither method is right or wrong. In fact, both small-business owners should be complimented for even having a method, experts say. Too often businesspeople make decisions based on non-decisiveness—they don’t do anything until they are forced into taking action at the last minute. Others simply rely on outside opinions.

“The truth is, a lot of business decisions are made based on the latest and loudest things out there,” explains David Allen, the author of Getting Things Done: The Art of Stress-free Productivity. “If you look at high-performing people, what separates them from the crowd is that they learn to make decisions before they have to.”

Smart small-business owners usually use a combination of Fell’s strategy and Brenna’s, says Harry Sapienza, Curtis L. Carson chair in entrepreneurial studies at the University of Minnesota’s Carlson School of Management.

The reason: Although the thin-slicing method may work for some things, there are other situations that require forethought and knowledge. “Some decisions are simply mechanical,” says Sapienza. “Like financing decisions: If the cost of capital will be greater if you do it one way over the other, then intuition won’t work. When decisions are objective, then the intuitive method is less effective.”

Gladwell sums it up in his book: “Successful decisionmaking relies on a balance between deliberate and instinctive thinking,” he writes. “... deliberate thinking is a wonderful tool when we have the luxury of time, the help of a computer and a clearly defined task, and the fruits of that type of analysis can set the stage for rapid cognition.”

Bottom line: You can’t be good at making snap judgments unless you’re also an accomplished long-term thinker.

What Comes Naturally
Decisionmaking processes aside, there are a few key types of decisions that successful small-business owners need to be good at making, Sapienza says. For example, decisions related to hiring new employees or creating growth opportunities—when to expand or partner with another company—are important. In both cases, a wrong decision can negatively affect your business.

Brenna knows this firsthand. She recently made a decision that could have decimated her business. In fact, on the surface, the decision was a poor one.

A few years ago, Milestone bid on a project to build a miniature English abbey, even though in her gut, Brenna knew it wasn’t something she should do. The project’s architect was scattered—a problem child, Brenna says, who showed up to meetings wearing shorts with a beer in his hand. In the end, she won the bid. But the project took a year longer than it should have, and the company lost $700,000. Still, the mistake helped her company grow, she says.

“The project is so magnificent that other architects see it and can’t believe it was possible to build,” she explains. “One of them just hired us for a $4.5 million project. He saw the abbey and said, ‘I don’t care who they are, I want them.’ So now I think of the $700,000 loss as our marketing budget for the next five years.”
Looking Back
Regardless of how you make decisions, evaluating them afterwards is key, experts say. Brenna did just that and learned from her decision. After the abbey project was complete and she could reflect on how and why she made the decision, she realized her contracts didn’t protect her the way they should. Now, every contract is written with controls built in that address revision costs with redraw bonuses.

Sapienza suggests business owners do exactly what Brenna did: Sit down periodically and think about the decisions they’ve made and why.

E-Mail Logic’s Fell does this consistently, opening up his decisions to comment by other people, he says.

“I believe in quantifying things,” he says. “If you can’t measure something, how can you improve it? There’s always a measurement for everything, and in business, it’s usually dollars.”

Finally, author David Allen says people can improve their decisionmaking by committing to movement.

“It’s easier to change direction if you’re in motion. If you’re standing still, it takes a lot of momentum to get started,” he says. “Course correction is the hallmark of a mature businessperson. The most successful people are the ones who make lots of mistakes. They just don’t make the same mistake more than once
or twice.”

Get Off the Fence – Fast!
Speed Matters Most in Decisionmaking

Having a tough time choosing a restaurant for dinner does little damage to your life’s direction. But being indecisive in business can foretellfailure. You have to be able to make decisions—and you have to be quick about it, according to Dr. J. Robert Baum, professor of entrepreneurship at Smith School of Business in Maryland. “There are studies that show faster decisionmaking leads to more success,” Baum says. “No matter what, the faster the better.”

Why does speed matter so much? Mainly because of competitive pressures, Baum says. “Someone is always trying to catch up to you,” he says. Plus, the faster you do something, the sooner you’ll know whether it was right or wrong.

If you hem and haw more than you should, consider these tips for moving on with all decisions great and small:

Get motivated. Baum says many small-business decisions can be spurred by two factors: financial incentive or fear. Figure out what motivates you to make a decision—and then make it.

Baby steps. If you’re looking for a new facility, remember, you don’t have to build your dream factory, Baum says. Too often, small-business owners get hung up on decisions because they’re trying to decide too much, when actually, making several small decisions is better than a single great one. “Go with your gut feeling, and if you can, take a very small step,” he says. “The best thing you can possibly do is experiment.”

Hand off. Don’t burden yourself with too many choices if you’re not good at thinking quickly. Delegate those decisions that aren’t going to make or break your success. “I tend to defer the little decisions,” E-Mail Logic’s John Fell says. “If I’m going to lunch with someone, wherever they want to go is fine.”

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