When COVID hit, many of us experienced – and are still experiencing – serious financial uncertainty. Businesses lost revenue, people lost jobs, and the economy went into a tailspin. Those of us who are self-employed had some serious decisions to make about the way our businesses would manage in a new and uncertain environment.
After a family meeting to work out how we would get through lockdown, one of the first things we did was make some important financial decisions. How long would we be able to operate if we lost our existing clients and projects? How strong was our household buffer? What should we do with our investments and savings?
We had some tough calls to make. One of those concerned money tied up in an index fund. It was a big proportion of our accessible reserves and might be the tipping point for our household and business survival if we experienced many months of disruption.
It was a tricky bind. Index funds are a long-term investment that should never try to time the market. Successful long-range returns need the confidence to leave them alone, even in a dip.
Ultimately, though, we chose to liquidate. While we couldn’t predict what might happen in the market, the impact of losing access to the money would be serious, and our need for cash flow in an equally uncertain credit environment outweighed the potential benefits of holding onto the shares. Taking the hit, we transferred the money…. and within weeks, it was clear that our business would continue to thrive and the market would recover.
Does that mean we made a bad decision? No.
While the outcome couldn’t be predicted, our process was sound. We considered our context, weighed up risk, uncertainty and impact, applied clear criteria to our choices, considered our options, and committed to a direction.
The quality of the decision was not about the outcome – it was about the process. And on that front, the decision passed the test.
“Strategic thinking unleashes the power of managers to solve problems, overcome challenges and creatively take the business from where it is, to where it needs to go.” – Rich Howarth, CEO Strategic Thinking Institute
Contrary to popular wisdom, what makes a good decision good or bad isn’t the outcome – it’s how we make it. While individually, good decisions don’t guarantee good outcomes, consistently good decisions do lead to consistently better outcomes.
Increased decision quality is the most effective performance intervention in a modern organisation. Decision effectiveness and financial results correlated at a 95% confidence level or higher, irrespective of your country, industry, or size.
When I run strategic leadership development, I am often surprised to learn that this is the first time executives have learned to think and put rigour around their decision-making processes. When I teach how to run Meetings that Matter, less than a third of managers know how to facilitate strategic conversations to make those decisions together. How can this be true?
For leaders, the way you make decisions matters. If you’re not investing in your skills and process, you’re on the back foot.
Do you know how to make good decisions?
Are you focused on the process or the outcome?