Correct decisions are important because they contribute in moving forward, while wrong decisions cost money, careers and reputation of the decision-maker.
Some degree of risk is always involved in the decision-making process and FP&A personnel comes in this process to mitigate and evaluate that degree of risk.
FP&A team supports its business partners with alternatives and provides evidence to choose the best financially viable option.
Consciously or unconsciously, in most of the organizations the decision-making process ends up in:
- Identification of the decision to be taken,
- Information gathering,
- Identifying alternatives,
- Analysing alternatives,
- Choosing the best alternative,
- Implementing the decision and
- Post-decision, there are reviews, with some learnings for the future.
An investment decision can take years of implementation, pricing decisions can take months of analysis, hiring of a candidate can take six months to a year and a new product or innovation can take up to 4 years to reach its final destination.
Welcome to the corporate world, where all the possible steps are taken to mitigate business & financial risks in the decision-making process, not realising the risk of delayed decision making.
The insight behind the delay in decision making is either an uninformed decision-making team, uncertainty of variable options or lack of risk-taking ability of the leadership team. Most of our important decisions involve stakeholders who often have differing perspectives. The focus of decision-makers tends to be internal rather than the external and leads to important opportunities and threats being overlooked.
The big question for FP&A professionals is, how they contribute to improving the speed of the decision-making process without compromising the outcome of the decision.
The effort to analyse all the possible scenarios and giving equal importance to the considerations of all the stakeholders brings down the decision-making process even before its start. It may seem obvious, but all too often we launch into the analysis without properly understanding what our objective is (or should be). This can lead us to getting the right answer on the wrong question!
The biggest hurdle to fast and right decisions is criteria & information overload.
Here are some of my tips to make smarter decisions quickly:
1. Stick to your plan
It is vital that every big or small decision you make is within the scope of your mission. You don’t have the mental or physical resources to spread your net too wide and still succeed. So always ask yourself which option best moves you toward your mission’s goal, and then the choice should be simple.
2. Set a time limit
Give yourself a time frame to collect and analyse all the information that leads to the decision. With a reasonable time pressure, you will get to the heart of the matter quicker leading to the collection of opportunities and risks related to the decision faster, which you might not otherwise do.
3. Control what you can control
It’s important to focus on what is in your direct control and not to focus on uncontrollable factors to the decision. Focus on things outside your control will result in unproductive time spend and, as a consequence, in delayed projects. Focus on controllable factors, will lead you in making big decisions quickly.
4. Data to Decision
Bring a mindset shift from being data-centric to decision-centric. Get the relevant data required to analyse the situation. Your analysis should be used to improve a problem area and to influence & guide the decision, instead of an analysis that no one acts on.
5. Listen to your Gut
One thing I have learned from entrepreneurial decision making, which is a lot quicker than corporate style decision making, is entrepreneurs give equal importance to their gut feel and the fact-based business analysis shared with them. These decision-makers rely on their experience and feelings to make quick decisions. They don't mind taking risks and move confidently forward through life.
6. Take the Decision and own the outcome
The decision-maker should have the confidence to accept the outcome of their decision, which can go either way. There should not be a fear of wrong decision, rather a self-belief that I can address any shot coming of my decision.
It is important to know that, “impeccable” decisions are an illusion. Decision-making will always be an exercise in coping with an unknowable future. No amount of planning and discussion can ever promise a “quality” decision. However, it is expected from the decision-makers to own the outcome of their decision, which might lead the decision-maker to another decision.