Best Practices for Effective Decision-Making (and My 6 Steps for Making Better Decisions)

Business managers/executives are hired for the primary reason to make good decisions.  But making good and smart decisions is very complex. Additionally, many business decisions can affect a lot of important things in the organization including people (and their families).  Good decision-making requires more than just critical thinking skills (analyzing facts and information to form a judgment) – it requires using an effective process combined and the right frameworks/tools.

Also, decision-making is based much more on emotion than logic.  This may sound counter-intuitive. But there is research from Dr. Antonio Damasio, a leading neurologist, who proved scientifically that making decisions is more emotional than logical (“Descartes’ Error: Emotion, Reason, and the Human Brain”, 2005).

There are many books on effective decision-making and there is also a blog that I’m a fan of and that I’ve been reading for years is called “Farnam Street” (named after the street where Berkshire Hathaway has its HQ in Omaha, NE) and written by Shane Parrish who studies decision-making and recently wrote a book on this topic called “The Great Mental Models: General Thinking Concepts“.

Shane Parrish aptly describes decision making as follows – “making better decisions isn’t one skill but rather a series of tools and frameworks. What distinguishes consistently good decision makers from poor ones is a series of diverse mental frameworks and tools (as well as relevant specific information).

FS.blog says that “a mind as a pattern-matching machine” and discusses that we all think “in mental models which are mental chunks of knowledge that represent a concept” – it only says that “mental models shape how you think and how you approach problems”.  Furthermore, FS.blog says that most decisions are not critical but some are and “yet most of us don’t have the right tools to think through these problems…as a result, we often fall back to the pro-con list, where you list all the positive things that happen on one side and the negative things on the other trading them off… but the pro-con list comes with a lot of blind spots”.

Also, unfortunately even some of the most successful and very smart leaders make bad decisions that are rife with cognitive biases and are just simply mis-informed because (in many cases) an effective process was not followed in the first place. This is true and in an organization it’s important to make effective decisions. When making business decisions, I striveto look for ways to improve my decision-making so I wanted to share some of my favorite articles with links below which will help others (mostly GTM/Commercial/Sales & Marketing executives in tech/SaaS) in sharpening your decision-making skills. These articles and links below will offer you new models, frameworks and “systems-thinking” tools and insightful ideas to help us all improve our business decision-making.

Also, over the past many years, to be more cognizant of my own decision-making I’ve created my own approach to making decisions which has these 6 steps:

  1. Prioritize which decisions to focus on
  2. Collect available facts / information (i.e. data and from people)
  3. Use a good process and frameworks/tools
  4. Proactively avoid bad decisions (i.e. use Inversion,  look out for ignorance / avoid “stupidity”, and avoid cognitive biases)
  5. Consider the effect of human nature & incentives
  6. Apply “Second-order Thinking” (ask “And then what?” and consider what and who this decision will affect and then how)

 

Here is a set of articles on decision-making – most of these are from FS.blog where Shane Parrish writes about better decision-making and various mental models:

Best Practices & Articles on Decision-Making

 

Also, here is a full list of 109 Mental Models from Farnam Street Blog: