I’ve been an entrepreneur for a lot of years. At one point, I’d started, grown, and sold a couple of businesses, and I thought I knew everything there was to know about making business decisions. After all, I was a success! After I sold my companies, I became an angel investor – finding ventures that I thought were promising and plunking down my hard earned cash to give other entrepreneurs a chance at making their dreams a reality.
As it turned out, I was more like the angel of death. I made some truly terrible decisions. So bad that it started to seem like everything I touched was destined to fail. I realized that I’d been pretty lucky early on (in addition to the fact that I’d worked really hard,) but I knew the money I’d earned wasn’t going to last forever – especially if I didn’t rethink the way I made my decisions.
Here are the things I learned – the hard way – about the tendencies and motivations of people who are making lousy business decisions.
Basing decisions on your ego.
If you think you know it all and that your expertise in a narrow field will translate to every other field, you’re just flat wrong. Don’t fall prey to the fantasy that you’re King Midas and everything you touch will turn to gold. In fact, even King Midas wasn’t very happy by the end of his tale, but you’re not Midas. Assemble a team of folks whose experience rounds yours out, and you’ll have the benefit of an entire team’s input, rather than relying solely on your own knowledge.
Relying on the momentum effect.
There’s certainly some truth in the belief that past events can predict future events. The problem, though, is that the world evolves. Inevitably, things fall out of fashion and are replaced by new products. Think about the typewriter. At one point typewriters were the best technology available, and they sold like crazy. But at some point, companies had to move on – to work processors and computers – or become obsolete. If you’re sticking with the tried and true and refusing to look at other options, you’re running a high risk of making a bad decision.
Entrepreneurs have to be hungry, have to be curious. If you’re only looking to confirm the results that you expect when you research a new opportunity, then you’re likely to ignore other, potentially significant results. Make sure you’re looking at the whole picture – both negatives and positives of any decision.
Don’t become a victim of the mañana syndrome. Delaying a decision is still making a decision, and if you’re putting off making a choice, you can end up limiting your options down the road. You may be right. You may be wrong. Don’t let yourself be cheated out of success, though. Make the decision and stand by it.
Going it alone.
Just like you can’t expect yourself (or anyone else) to be an expert in every area, you can’t expect that you’ll necessarily understand all of the options and complexities of any given situation. Sometimes the very best results are achieved through compromise. If you’re the sole decision maker, then you’ll never get the benefit of working through all of the angles and options before arriving at a reasonable compromise that benefits everyone.
Making a decision is only ten percent of the process. The execution of that decision is the other ninety percent. If you fail to communicate the reasons for your decision to your staff, they may fail to understand its importance. If you neglect to plan or follow up on the execution of your decision, then you’re not getting the job done. Make sure that you implement your changes in a thoughtful, logical way.
Seeing the tree, rather than the forest.
Good decisions are made with the big picture in mind. If you’re focused on putting out fires or only thinking about next week, then you’re not going to be able to plan for the next year, or the next decade. Leave the short-term decisions to your trusted staff, and devote some energy to the long term.
Not balancing your sources.
Abraham Lincoln was a great President, but it wasn’t just because he was a smart, thoughtful man. He was great because he surrounded himself with a Cabinet comprised of his most bitter rivals. He knew the power of hearing from someone other than yes men. Don’t fall into the trap of listening to sycophants who only tell you what you want to hear. By seeking out contrary opinions, you’ll avoid making decisions based on biased sources.
One of the most significant roles we play as entrepreneurs is the decision maker. If we can improve the process by which we make the vital decisions that affect the health and profitability of our companies, then we’re certain to see more consistent and positive outcomes.