I recently came out of a business meeting with a Director of an insurance company with one lesson, ‘Sentiment is the worst enemy of business decision’. The voice of this director kept ringing in my head throughout my 1hr 30 minutes’ drive home from work.
Decision-making is not the same as being sentimental as far as business economic activities are concerned. The outcome of the meeting and my thinking throughout my journey back home is the subject of this blog post on decision-making.
The key question is; should business decisions be based on sentiment? You know what to expect if the answer you get to the above provocative question is coming from the Insurance company director that I had a chat with.
Sentiment has no place in business decision making, rather, the four characteristics of decision making discussed below should be the compass guiding managers as they sometimes face dilemma in their decision making.
Four (4) foundational Characteristics of decision-making
This section of this article on decision making vs sentiment will briefly look at four critical aspects of decision making.
- Must be based on facts: it has long been proven that data driven decisions are better than hunch based or intuition-based decisions. Data driven leadership is a new paradigm that has even taken the long known fact of basing decision of facts and figures to the next level. I have written an earlier piece on how to gather strategic information for sound economic decision making.
- There must be a fine blend of judgement call: one cannot be an effective manager without making few judgement calls here and there. However, care must be taken to ensure that there is a perfect blend of sentiment and decision making – which bye the way is my definition of judgement call. In business valuation models for example, both technical and fundamental analysis play vital role.
- There must be feasible alternatives: decision-making has never been and would never be a straightjacket situation. Various alternatives are explored in the bid to finding what is best for a company. This is the construct upon which capital budgeting is built on. If fact, the whole exercise of making decision is choosing from options.
- The noise in the MIS must be sieved out: in this current time of information overload and big data that we now live in, having the ability and tools to sieve out noise of all kinds from any form of information system is the pillar that holds the decision making ecosystem. Management accounting information systems has evolved over the years to constantly include tools that assist managers in navigating the often rough terrain of business.
What about the Concept of kill a fly to save a nation?
Those in the secret service will be familiar with concept of killing a fly and saving a nation. The basic underlying idea is that no sentiment should be attached to any economic decision making. My only concern about the whole thing of killing a fly to save a nation is the ethical part of it.
Running a business is not very far from running a nation but the brand equity and reputation of the company, and corporate social responsibility of the company should not be taken for granted.
But, wait a minute. What happens in time of business restructuring and business turnaround? Well, you have to kill a fly when necessary to save a nation – which in this case is successfully turning the fortune of a failing business.
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