The Dilemma of Entrepreneurial Decision-Making
This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.
Informed decision-making is a critical element of entrepreneurial success. Yet all business owners face the challenge of weighing current opportunities against future potential each time they make a decision. First I will recount a quick story to illustrate this dilemma, and then I will discuss how to overcome the dilemma with informed decision-making.
The Dilemma
I watched my son’s eyes widen as the bowl of M&Ms was passed to him. Like a starving defensive lineman might attack a buffet line, he filled both hands with as many as he could, then nudged the bowl on to the next person. While grandma read a holiday story to all the grandkids, the family gathering quickly became a sugary feast.
Just two minutes later a plate of chocolate-covered pretzels was passed to the same son. He looked at his two hands, still mostly full of M&Ms, then back at the salty-sweet treats. I could tell he wanted the pretzels more, but he didn’t have much more capacity. Then he set the M&Ms down, grabbed a large handful of pretzels, and enjoyed both.
About thirty minutes later, three-layer chocolate cake and rich cookies-and-cream ice cream were served for dessert. With eyes bigger than his stomach, my son accepted a large helping of both. After just two bites, he handed me his plate and said he was full. Afterwards he admitted that the cake and ice cream would have been his preferred treat, had he been presented with all three options at the same time.
The dilemma, therefore, has to do with understanding as much about the future as possible without neglecting the present. The proverbial bird-in-a-hand cliché certainly applies, but sometimes that bird will keep you from getting the two birds that are just around the corner.
Entrepreneurial Decision Making
Entrepreneurship is about making lots of decisions — sometimes hundreds per day. Collectively they will determine the fate of your business. Your culture, your employees, your customers, your relationships, your software, your technology, and everything else in your business is a product of the decisions you make or delegate to someone else.
So when you make a decision do you only see the bowl of M&Ms? Or are you so captivated by the potential of something better in the future that you neglect your best opportunities today?
Include the Future in Decisions
To understand the importance of including the future in your decision-making process, consider this example. Software built in the 1990s is very frustrating for programmers and engineers today. It was built on closed, proprietary platforms in a day when an open API was unheard of, with developers afraid of giving away the secret sauce recipe. Not only does this archaic software not function in the cloud, it also does not play well with others, eliminating the endless possibilities that apps and other bolt-on, value-added solutions bring to more current technology.
Embattled with technology that is going to quickly become obsolete or will require significant capital to scrap and rebuild, software from the 1990s is struggling to survive. Understanding the future often empowers entrepreneurs to make better, more informed decisions.
Find the Balance Through Scoreboards
As a word of caution, I have seen some entrepreneurs who live so far in the future that they are not grounded in the present. These folks can’t ever seem to get traction. I’ve also worked with many who are so entrenched in the M&Ms right in front of them that they can’t even consider the cake and ice cream not too far in front of them. And, unfortunately, their competitors are passing them by.
The key to balancing your decision making between the present and future is to base your perspective in reality. Reality can only come if you honestly consider your present and future through the lens of business scoreboards — monthly, weekly, and daily reports of true performance and quarterly, annual, and five-year projections grounded in time-tested, valid assumptions. When properly applied to your decision-making process, business scoreboards will help you determine if you should fill up on M&Ms or if you should wait for the cake and ice cream.
The Key Takeaway
Before each decision, ask yourself this question: “How will my decision impact the business three months, one year, and five years from now?” Deriving a conclusion founded in a realistic perspective of your present and future will help you make the best decision possible.
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