Small businesses make hundreds of decisions each and every week. Most don't make the biggest difference (what ink to use in the printer) though others are critical and need time and resources to mull over - determining a strategic direction or looking at the ways to finance business growth, for instance.
When it comes to making decisions, businesses get it right only half of the time. That's the revelation popularised by Paul Foot, professor of business sciences and author of the book 'Why Decisions Fail: Avoiding the Blunders and Traps that Lead to Debacles'.
When it comes to making decisions, businesses get it right only half of the time.
By studying hundreds of decisions over a 20-year period, Professor Foot found that while half of business decisions had their desired result, for the other half, management blunders scuttled any attempt at improvement. That might not be a big deal if you're deciding on toner, but it could mean sink or swim for small-business owners making a major financial decision.
Sure, big data and analytics are helping even micro-companies get a better view of the market and their customers, but they're just a guide. At the end of the day, it all comes down to leaders making the right decision.
With this in mind, it helps to understand yourself a little better as a small-business owner. What archetypal decision maker are you? Studies by McKinsey and Company identified five distinct styles that all leaders fall into.
A person who is identified as a Visionary takes risks. Working from intuition rather than hard facts, around 14 per cent of decision-makers hold this type of trait, McKinsey found. They prefer action and can often fall on the side of radical change.
That's not always the best way to go. This type of personality may not be able to see the wood for the trees, and are prone to operating alone. If this sounds like you, research shows that you might benefit by bringing more trusted people into your inner circle.
Also, reflect on the big decisions a little longer. While your impulsiveness gets things done quickly, not everything needs to be that way.
Next in line is the Motivator - a group occupied by 12 per cent of decision-makers. These people are strong, charismatic storytellers, and lead through (as the name suggests) exceptional motivational skills. They can be quick to embrace change and create a vision for the people they manage.
Motivators can also prefer storytelling over facts, and can stray from formal guidelines rather easily. When it comes to making a decision, Motivators could benefit from listening instead of talking; taking in the facts and still acting with trademark confidence.
The most balanced of all decision-making personalities, and also the most common. People who are identified as a Catalyst often avoid the impulsive, "gut reaction" decisions that can lead down a bad path.
Catalysts benefit from group decision, though this can naturally prove time-intensive. Another downside is that a middle-of-the-road style can sometimes bring only average results - jack of all trades, master of none.
There are strategic management goals for Catalysts, too. Look for opportunities to take a different approach, and utilise a team when you feel like collaboration will help. Just be sure to take an executive decision when a general consensus is reached.
Around a quarter of all decision-makers have the Flexible personality type. These leaders are considered the most versatile, open-minded and adaptable. They welcome change - though sometimes unable to affect it on their own - while they are comfortable in reaching out for the opinions of others.
They can also fall into what McKinsey terms "paralysis by analysis", where by waiting for the right time to make a decision means they miss the boat. If Flexible leaders concentrate on taking a well-measured risk every now and again, they may find themselves more open to innovation.
— Paul McGillicuddy (@phmcgillicuddy) January 25, 2016
Guardians are sticklers for due process and planning, incorporating as many facts as possible. Around two in every 10 people fall into this category, which is not necessarily a bad thing for some small businesses. After all, Guardians can be cautious and defensive, leading to healthy business continuity.
However, few are going to set the world on fire without the ability to make quick market decisions before their competitors do. Guardians can look to improve by inviting frank criticism from people who challenge the status quo. When major decisions need making, creating an ad hoc task force can help to speed up their decision-making.
Whichever you are...
When it comes to deciding whether to use a business loan or debtor finance, we think that's no decision at all. Take a look at our solutions to see how fast finance decisions can work for your small business, and with minimal risk.
Need any assistance? The team at Earlypay are always happy to help.
If you'd like to learn how Earlypay's Invoice Finance & Equipment Finance can help you boost your working capital to fund growth or keep on top of day-to-day operations of your business, contact Earlypay's helpful team today on 1300 760 205, visit our sign-up form or contact [email protected].