Entrepreneurs: Build In This Safeguard When Grappling With a Big Decision

Businessman and businesswoman walking by large office windows discussing a matter.

In the first of this two-part series on crucial business decisions, I discussed famed management professor Peter Drucker's six steps to an effective decision. To recapitulate, when we must make a major decision, Drucker exhorts us to focus on:

  1. Classifying the problem

  2. Defining the problem

  3. Specifying the answer to the problem

  4. Deciding what is "right," rather than what is acceptable, in order to meet the boundary conditions (i.e., minimum goals to be obtained)

  5. Building into the decision the action to carry it out

  6. Testing the validity and effectiveness of the decision against the actual course of events

In part one, I argued for the value of using decision-making frameworks like Drucker's. In truly crucial decisions, it's also prudent as a safeguard to ask a small group of trusted advisors for a documented, consensus opinion on a recommended course of action, which you can then accept or reject.

Using the safeguard

Optimally, you'll cultivate this informal board of advisors in advance, and use it to get regular feedback and advice on your business a few times a year. Having a sounding board to help optimize your business is nearly as important as the personal efforts you make as a leader to improve your company.

As for populating this team, mix colleagues and mentors who know you and your business well with an external subject-matter expert or two who can bring fresh perspectives to deliberations. In my experience, four to five people of various backgrounds makes for a decent informal board for most small businesses. And incidentally, providing a modest monetary honorarium each quarter to your advisors is always appreciated.

To return to our crucial-decision scenario, after providing your board with an analysis of the situation, and your own progress on the decision thus far, ask them to provide a consensus recommendation within a few business days. This can be in the form of an email from a designated person who documents the group's thoughts.

If you're following Drucker's decision-making framework above, you can meet with your board in person or perhaps in a Skype session, introduce the issue, and complete the first two steps together. This allows your advisors a chance to refine their understanding -- and perhaps yours -- before they meet separately to discuss the issue and arrive at a consensus recommendation.

An uncomfortable but valuable part of the process

Now for a step which in some cases may seem confrontational. Along with receiving a recommended course of action from the group, ask each advisor individually to briefly document his or her own final recommendation, from describing the situation as they understand it, to why they agree or disagree with the consensus advice.

Does this put your advisory board members on the spot? Sure it does. But obtaining a summary from each will prove invaluable when you revisit your decision later, as Drucker exhorts you to do in step six: "[Test] the validity and effectiveness of the decision against the actual course of events."

Major decisions are one of the many phenomena our long-term memories tend to subvert, perhaps because they're often wrought with emotion. We can misremember what a colleague advises, to their detriment. Or we can ascribe great advice to someone who remained relatively quiet during the heat of the discussion. The purpose of getting each member's advice in writing isn't to point fingers later on, but to gain a nuanced understanding of the situation from multiple perspectives, one which you can return to and consider as time goes on.

For example, an accountant, a lawyer, an engineer, and a fellow entrepreneur may all understandably weigh decision factors differently as they reach a consensus for your benefit. Ultimately, reading each individual analysis will strengthen your own decision-making muscle, and most people will be happy to document their personal thoughts once you explain the rationale.

There's one last piece of documentation to undertake. After considering the group's wisdom, make sure to write down privately why you're accepting or rejecting the consensus recommendation, or blending it with your own budding course of action. This will keep you, ambitious entrepreneur, honest with yourself during your postmortem analysis, and it will hone your ability to make the right choice when the next high-stakes situation arises.

Crucial decisions are labor-intensive

As should be obvious by now, the right way to go about making the biggest decisions is to plunge into...a lot of work. In addition to following a decision-making framework, you're also asking for several hours of time and at least two separate meetings of your advisory board. Employing this safeguard will probably be rare, but when a truly big decision arises, you'll know intuitively that it's time to trudge willingly down this path.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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