Are You Considering Parameters in Decision Making?
Have you ever assessed your decision making process? What are the factors you take into consideration? Too often, we neglect parameters and this is a mistake. Parameters must be included in our decision making in order to improve results.
What do I mean by this? Well, understanding risk, rewards, and the importance of various issues can help guide your decision. This includes both analytical and social issues. The realities and changes in parameters like populations, the economy, political environment, and social values should all be reviewed and considered regularly. The most important thing to keep in mind is that many variables are changing faster and more often than ever before. So, not only do you need to understand parameters, you need to keep up with the latest ones!
And while that may sound daunting, it’s the way it’s always been—change is inevitable and we must embrace it. So, don’t allow fear, uncertainty, or tradition to prevent you from trying something new.
For example, here are three different well-known approaches to decision-making. Which one are you and is it working for you?
- Nike’s advice: JUST DO IT!
- Steve Jobs: “Because the people who are crazy enough to think they can change the world are the ones who do.”
- Traditional ideology: “We have always done it that way.
Now, here are some considerations to help improve our understanding of parameters and inform how we approach decision making to get better results:
- Not making a decision is a decision. If you see the right choice and fail to act on it, that’s a mistake. For example, lots of people think about quitting their jobs, but few actually do. Similarly, we talk a lot about things like health, weight loss, reducing stress, saving money, and being more supportive, but seldom do we take action.
- We assume cause and effect when the relationship can be spurious. One of the oldest questions on cause and effect is the proverbial chicken and egg issue. Statistics and other details make it very easy to assume that a relationship among factors is a straight line. However, most relationships involve a variety of factors, as shown in the chart below:
- Analytics can produce better results, but intuition, risk, and low probabilities can be effective. We all know the lottery is a bad bet, but some people do win. Similarly, many billionaires like Gates, Bezos, and Jobs have achieved fame by pursuing high risk and out of the box alternatives. It is the outliers that create much of the innovation, excitement, and change in our society.
- Forecasting parameters can improve decision making and identify great alternatives. What are you forecasting and how will it affect your actions? For example, the pandemic has altered time perspectives in developing and analyzing forecasts. 2019, 2020, 2021, 2022, and 2023 all have different parameters and need to be considered as such.
- The biggest problem with parameters can be bias. Most bias, especially in small businesses, is simply human. Your assumptions, analysis, and data can all unknowingly affect assumptions. Analysis of different age groups like millennials and baby boomers can vary simply by using different starting and ending birth years.
- One crucial aspect of parameters is risk and outcome, which are greatly affected by probability and information. Predicting results where there are significant and consistent historical data can be fairly simple; however, predicting results for new programs or with little or inconsistent data requires developing educated estimates.
- Beware of confirmation bias. Don’t we want to believe that our ideas are terrific, and thus, focus more on their potential for success? Of course, we do. The challenges associated with the ideas are sometimes given a smaller amount of our attention; it’s just human nature. We bias our analysis towards successes and tend to ignore negatives. One business that has benefited greatly from this concept is the casino business.
- Organizations need to be open to measurement and feedback. Observing, understanding, and sharing financials, operations reports, and sales reports are the first step. A management style such as “walking around” and checking in with employees can be priceless.
At the end of the day, you can improve assumptions, results, effort, and process by simply knowing your parameters and understanding the use of analytics and intuition in your decision processes. As the saying goes, “A chain is only as strong as its weakest link.” Make sure to figure out where your weak links are as well as your strengths.
Contact us for a FREE evaluation and get an alternative perspective on your business. We’d love to help you identify ways to adapt to current trends. No one has time for BS—so we’ll cut straight to the point and answer any questions you have. Reach us at:
914-632-6977 or BShlensky@startupconnection.net
Dr. Bert Shlensky, President of StartupConnection.net, has an MBA and PhD from the Sloan School of Management at M.I.T. He served as the President of WestPoint Pepperell’s apparel fabrics business & President and CEO of Sure Fit Products. More than 2,000 clients have benefitted from his business acumen over the course of his long career. He now focuses on working with select startups and small businesses. Please visit our website: StartupConnection.net for more information.