How To Make Better Decisions As A CEO
Life is all about decision-making. Every day people make important choices about their lives and carve out their paths to success, both personally and professionally. Decision-making techniques will vary from person to person, but as a CEO of a company, yours carry a big responsibility.
As CEO, the decisions you make can have a huge impact on your team and your company’s future. Some decisions will be made purely on intuition and gut feeling, and others will need a substantial amount of data to back them up. So, if your inner Sherlock Holmes is battling your inner Dr Watson, how do you use both skills to make the best decisions as a CEO?
In this article, we’ll look at key decision-making techniques for CEOs.
What is a modern CEO?
Being a CEO today is a very different role than it was even 10 or 20 years ago. Historically, the suited and booted CEO of a company would spend most of their time behind the scenes, but nowadays CEOs are just as likely to go to work in a hoodie and trainers and catch up with their team over an informal coffee.
Many modern CEOs are motivated to learn and develop their own skills – not just those of their teams. Some focus on creating workplaces that encourage the best work from their teams and promote a respectful and healthy workplace culture. They strive to set a good example for their teams and demonstrate their commitment to the company values. Nowadays, having a CEO title is much more than just being the boss.
Whatever your executive style, as a CEO you must be able to make valuable judgments, nurture your team’s decision-making abilities, and drive the business forward by making decisions that support the business strategy and company goals.
Different approaches to decision-making
Whether you’re a seasoned CEO or new to the role, you’re going to be faced with making strategic decisions to forward the business frequently. High-level decisions will always carry an element of risk, but you are responsible for driving the business by taking those calculated risks.
Just like different businesses have different business strategies, different leadership styles have different decision-making techniques – there is no right or wrong approach, just what is right for you and your company.
Gut feeling vs data-led decisions – which one’s best?
Business decisions sound like they should be rational by their very nature, but in reality, decision-making often occurs in the face of uncertainty – when you’ve exhausted the data you’ve gathered and all you’ve got to draw on to make the final call is your gut feeling.
‘Gut feeling’ might sound like a flowery term to describe the instinct you naturally have to make a decision – like it was gifted to you when you passed CEO school. However, what it actually is, is a honed-in skill you’ve developed over years of experience and reflective working that allows you to make the best judgments you can based on the information you’re presented with.
Ultimately, there is no ‘best’ way to make decisions, each decision you make will require a proportion of both gut feel and hard data. There will be times when you realise that further data gathering and analysis won’t help you cement a decision either way, that’s when using your intuition and gut feeling can help you to move forwards. There will also be situations when your data alone speaks for itself. It’s up to you to calculate the ‘unknowns’ in your decision and use both methods to help you reach the best outcome.
Making decisions without all the facts
As a leader, you will have to get comfortable with making decisions with incomplete information – at times you might risk losing precious momentum by waiting for all of the information to be present before making a decision. Acting quickly (using your gut feeling and intuition) on the information you do have might be your best option. Time is a luxury that is not always on your side when it comes to making tough choices, but as CEO, it is your job to make and stand by complex decisions.
“Nothing comes to my desk if it is perfectly solvable. Otherwise, someone else would have solved it.” – Barack Obama
Don’t be the only one making decisions
As a CEO, you may feel like you are solely responsible for the company’s decisions, but extensive decision-making over time may lead to you losing the mental energy needed to make sound decisions – beware of decision fatigue.
Decision fatigue is defined as the reduced ability to make effective decisions after long periods of decision-making. A person who has decision fatigue is more likely to make poor choices and see increased deterioration in the quality of their decisions. The more you drain your decision-making energies the harder it becomes to make rational decisions and can even lead to the complete avoidance of making decisions at all.
Remember, you don’t have to make all the decisions yourself – if someone has the expertise, authority and experience to handle making a call, encourage them. Giving experienced employees the opportunity and autonomy in making decisions for the business grows a well-rounded team of individuals who can collectively make valuable business decisions either with, or without you.
Trust your team
Smart leaders know that they, and they alone are not going to make the business successful. They fully understand the importance of appointing the right people in the right positions around them to see their business thrive. Being able to involve others in the decision-making process is a strength – use your team’s shared experience to fill in the gaps that your data doesn’t tell you. Trust that your people have probably been through similar situations and have come to their conclusions one way or another to solve the problem based on their past experiences.
Be aware of experience bias
Experience bias is something that occurs when we use our past experiences to form opinions and make judgments on a certain topic without remembering that our personal experience of a situation is not the whole truth.
We all think our version of reality is the objective truth, but in order to avoid experience bias, we need to remember that our singular perception of a situation isn’t the only perspective to consider. We’re human, and it is notoriously difficult to completely disregard our biases.
Making decisions as a group can help with this: studies have shown that decision-making as a diverse group can help keep everyone’s experience bias in check. New research by Cloverpop revealed that:
• Inclusive teams make better business decisions up to 87% of the time
• Teams that follow an inclusive process make decisions two times faster with half the meetings
• Decisions made and executed by diverse teams delivered 60% better results
A diversity of opinion should always be welcomed in the workplace so never ignore someone’s input, no matter their position in the company. You never know what golden ideas or inspiration can come from simply listening to someone whose experiences are different to your own.
Good communication is key – explain the what and the why
When presented with new ideas, processes or problems, intelligent teams need to know the ‘why’ in order to choose to buy into a decision or not. If you don’t communicate your point of view or reasoning for a decision clearly and timely (there’s nothing worse than being the last to know something important), you may find it much harder to get the support and backing of those involved. Always make sure that you’re communicating directly and openly to the stakeholders in question.
Embrace new technology
In today’s business world, a CEO needs to lead their team in navigating an ever-evolving and expanding digital space. Creating a data-led culture that’s collaborative and interactive company-wide, and embracing new technology, business tools and analytics to anchor valuable decision-making, is key to driving forward a successful business.
“Stone Age. Bronze Age. Iron Age. We define entire epics of humanity by the technology they use.” – Reed Hastings, Netflix CEO
Make sure your data is trustworthy
If you’re usually more comfortable making decisions on instinct in the first instance, it might feel quite alien to consider putting your trust in data or analytics. However, if you trust the source and integrity of your data, you can sleep easy knowing that you’ve made accurate choices based on the reliability of your data.
Together with your team, you can build processes and frameworks to introduce diligent quality checks to make sure you’re generating reliable, consistent business metrics and quality-controlled data from your business management tools.
Always be one step ahead
Being able to make decisions ahead of time is extremely valuable in business. By using business management tools like the scenario planning feature in Float, you can easily explore multiple outcomes of a potential decision to map out which one is best for you.
Scenario planning is a way for you to prepare for potential problems in your business ahead of time and is becoming increasingly popular with business owners around the globe. You can’t predict the future, but by using scenario planning, you can certainly prepare for it.
Check out what other CEOs have been scenario planning for – infographic
Welcome constructive criticism
Encouraging healthy conflict in the workplace is a powerful thing. Having people around you that know when you are wrong and can challenge your opinion is crucial – as is becoming comfortable with confrontation or knowing when you need to change your point of view.
“Growth and comfort do not coexist.” – Ginny Rometty, IBM CEO
Group discussion and taking on meaningful feedback from your teams can give you a holistic view of a particular problem you might never have gained otherwise.
It’s ok to be wrong
If you are a leader, at some point you are going to be wrong. That comes with the territory. But the way you handle those moments and amend or retract a decision is crucial. Admitting mistakes is never easy, but not acting quickly and responsibly to reverse a bad decision can destroy your credibility and reputation both internally in your organisation or externally to customers and clients.
Decision-making is a process, not a singular action: define your objectives, do your research and fact-finding, evaluate your alternatives, identify the best option, implement, review and reflect. This process can be refined, iterated on and improved over time and can be as extensive as you need it to be to make the best decisions for you and your business.