- February 6-8, 2024
Las Vegas Convention Center
Las Vegas, NV
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By Wayne Rivers, Family Business Institute
Decision making in so many family and closely-held companies is, bluntly, broken.
Some of you may have seen an HBO series called Band of Brothers, a very exciting, well-made WWII series. An officer was being demoted from his command, and some junior officers were talking afterwards. One of them said, “He wasn't a bad leader because he made bad decisions, he was a bad leader because he didn't make ANY decisions.”
That's the default setting for so many family and closely-held businesses. They refuse to make decisions! In 30 years of working with contractors, I could probably count on one hand the times that NOT making a decision was in the best interest of the company. Why, then, do otherwise rational contractors so often decide not to decide?
Not making decisions is almost never optimal in terms of planning for your business. In a recent McKinsey article, 56% of C-level executives (CEO, COO, CFO, etc.) said that they spent at least 30% of their time making decisions. The same executives said 57% of that decision-making time was spent ineffectively, going around in circles, and failing to make decisions. They spent 30% of their time making decisions, but more than half of that was wasted or ineffective time. That’s just mind boggling!
We have seven tips for how contractors can make better decisions, and two specific tips for what NOT TO DO at decision time:
1. Decide how you're going to decide. That sounds silly, but that's a step that most contractors fail to undertake. They say, “We make decisions by consensus,” but when you really drill down and analyze that statement, what they mean is that in order to make decisions they require UNANIMITY! Everybody must be on board before a decision is ratified, and only then can they move forward. The bad news: unanimity is unworkable in most cases.
Contractors must decide what decisions can be made at the manager level, what decisions need to come up the chain of command, and what decisions need to come to a vote. You are on boards at your club, your church, your civic organizations, and your banks, and boards vote! Why is it so difficult for family businesses to take a vote? What decisions need to come to a vote? What decisions are simple majority votes? What decisions need a super majority? Maybe some decisions actually require unanimity; for example, if you’re going to sell your company, maybe that needs to be a unanimous decision among siblings or partners. Contractors need a PROCESS for how they will decide.
2. Make some decisions at every single meeting. There are always some decisions you can make, even if it's just “we need to have another meeting.” Perhaps you make a partial decision on something and go ahead and get that out of the way while you prepare for making more important decisions later. A technique in our company, when we've talked about a lot of things but haven't come to crystal clear resolution, is to ask a question: “What did we decide?” Then the group articulates specifically what has been decided leading next to accountability assignments.
3. Encourage debate. Family and closely-held companies value harmony, and they have an almost morbid, paralyzing fear of disharmony. Statistics show, however, that if even one person questions decisions, it makes for stronger outcomes. This doesn't mean you have to have fist fights, obviously, but why not kick these issues around from lots of different viewpoints? Why can't somebody be a devil's advocate and ask, “We really need to think about it from this point of view. What's the risk?” and other penetrating questions.
4. Involve the right stakeholders. When we do things at FBI, we tend to bring everybody into decision making. That doesn't mean that everybody gets a vote, and it certainly doesn't mean that anybody gets veto power over decisions. But we do like to collaborate and enjoy the benefit of everybody's thinking. You have some really bright people in your company too; why wouldn't you take advantage of that? Get the right stakeholders into your meetings, get input from lots of different sources, and your decisions will be of better quality.
5. Identify Return on Investment (ROI). People say “WIIFM (what's in it for me)”? Do that at the company level or department level in whatever decisions you're making. Identify ROI. Low impact decisions get easier to make, and ones that have real impact are easier to quantify from a risk/reward perspective. Every decision has potential for gain or loss. ROI could be translated as a possibility of loss, a return of risk, or something along those lines. Think about decisions from an ROI standpoint instead of viewing every expenditure as simply another expense.
6. Make accountability crystal clear. Who's going to do it? When are they going to do it? What other people need to be involved? When are they going to do it? How are they going to do it? What's the budget for doing it, etc.? Accountability should be crystal clear with deadlines so that you know exactly what must happen when and that the people you're holding accountable know as well.
7. Commit to the path even if you don't agree with it. Here's a great example. We were talking about our Boot Camp program and planning, and we really didn't agree on things. There were two schools of thought: I was promoting one and my partner Dennis was promoting another. We ended up voting, and my side came out on top. Did Dennis bellyache or pout? No. In fact, he's running Boot Camp delivery. Once we made the decision, it was full speed ahead, and he was on board with the rest of the team.
1. Don’t rely on consensus. You've got to decide how you're going to decide. Consensus equals unanimity for so many construction firms. Forget about that! Margaret Thatcher said, “Consensus is the absence of leadership.” Leaders need to make tough decisions; step up, and do it!
2. Don't fall prey to “analysis paralysis.” It's always easy for somebody in the group to say, “We really can't make a decision today because we need more information.” People fall prey to analysis paralysis. It is very frustrating for the people in the group that want to make decisions to be held up by the people that just can't ever seem to bring themselves to do so. At some point, there is no marginal value in more and more data. Decide when you have enough and push on.
Making decisions is a part of every healthy business. Use these do and don’t tips, and you’ll be well on your way to a more prosperous future.