The Art of Making Tough Decisions

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The art of making tough decisions is a topic that is always worth revisiting while you develop into a leader. To help you make these decisions more confidently in your career, business, or personal life, I have condensed down my decision-making process into the steps below:

1. Evaluate If The Decision is High or Low States

Most people overthink decisions.

The reality is that many choices are low stakes and should not require excessive mental gymnastics. Two factors determine whether a decision is high or low stakes:

(1) The magnitude of the decision. How significant will the impact be? What is the financial impact?

(2) Is the decision easily reversible? If yes, consider it a low stakes decision.

A decision like marriage is a high stakes decision — the financial impact can potentially huge. In addition, the decision can only be reversed through the courts.

On the other hand, a decision to say yes or no to a new job offer is low stakes — it is generally easy to quit and find another one if I get it wrong.

2. Consider Your Audience, If You Have One

You make decisions safely within the walls of your company, isolated from your customers. Make sure you think about them as you make decisions.

Amazon keeps an empty seat at the table to represent their customers when making decisions.

The most famous case was Netflix’s decision in 2011 to separate the DVD and streaming services into two platforms Qwikster and Netflix. Having to visit two separate websites presented a miserable experience for customers. You might not always do what customers want, but at the least, please consider their experience when making decisions that affect them.

3. Ask Questions and Engage in Debate

Ask questions, form an opinion, and debate its merits and considerations.

Diverse colleagues engaged in passionate debate form an important foundation gives you visibility on the downside risk.

In private equity, I frequently see this behavior demonstrated by our investments committee. Our managing partners would ask the deal teams to debate the risks and mitigating factors of an acquisition. Halfway through the discussion, they would stop them and ask them to flip their positions. The practice forced every one to listen to the other’s argument.

For individual decisions, create a pros and cons list on a piece of paper.

Then, assign a numeric value of 1 to 10 to each pro and con. Add them up. If the result is positive, make the decision. If negative, make the opposite decision.

When I was deciding between several job offers out of college (in investment banking, tech, and consulting), I wrote down all the pros on one side, and all the cons on another. I assigned numerical values to each pro and con with a ( + ) and ( – ) and added the values. I did this for each of the jobs. I ended up choosing investment banking in Chicago because the net value was higher than the others.

You can do this for job offers, apartments, places to vacation. Heck, maybe even a spouse!

4. Make a Provisional Decision

Ask yourself, what does my gut say? Then, ask what additional information you need to make a final decision. Lastly, create a a timeline to get the missing data to make the decision.

Once you have 70% of the data, it is time to make a decision.

5. Get the Data

More data makes most decisions easier. For instance, when making decisions about products, there are four data sources that tell a lot about what consumers think about your product:

(1) Qualitative research, such as focus groups, usability, and customer behavior

(2) Surveys, which provide more insight into what customers think

(3) A/B testing, i.e. if we replace this packaging design with another, what happens?

(4) Historical data and financial metrics

6. Wait Until You Have 70% of the Data

Once you have 70% of the data, it is time to make a decision.

Deciding with less than 70% of the data data means you will be ill-informed. However, getting more data requires too much time.

Another tactic would be to time-box your decision.

Setting a deadline creates urgency to get the data. In fact, most procrastinators respond well to deadlines. This is especially useful when evaluating job offers. I would give myself one week to assess an offer. After a week passes by, I force myself to make a choice.

7. Be Open to Long-Term Bets

As an adviser working with start-ups and portfolio companies, I help organizations to move from getting decisions right 50% of the time to 70%.

Why do we choose NOT to aim for 100%?

If we are right all the time, we are likely not taking enough risk. In order for a company to maintain rapid growth, they need to maintain the risk profile that enabled them to be there in the first place.

Playing it safe is a recipe for long-term mediocrity. Here is a simple question to ask when you evaluate long-term bets. “What decision would I make if I were not afraid?” Give yourself a license to make occasional, big, bold bets.

8. Fully Commit Once You Have Made a Choice!

In decision-making, equivocation is just as bad as procrastination.

You need to commit to a decision to give it the opportunity to succeed. Second-guessing yourself lowers the odds of success. Once you make a decision, commit to it.

Hello and Welcome!

My name is William. I am a private equity investor and the owner of Million Dollar Tips. Over the last 5 years, I have been committed to growing both as a person, and as a professional.

Look at where you want to be in five years, and commit yourself getting there today! Want to learn a new language or earn a million dollars? We’re a community dedicated to help you getting there.

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