What is a business decision?
A business decision, sometimes called an operational decision, is any choice made by a business professional that determines short-term or long-term company activities. Professionals make business decisions in response to a variety of different situations, including determining which job candidate to hire, how to distribute department budgets, when to expand into a new product market, if they should merge branches and other situations that require well-thought out actions.
Why is it important to think through a business decision?
It is important to think through a business decision because it can have a long-term impact on the efficiency and success of a business. Here are some specific examples of why it’s important to think through a business decision:
- Influences the longevity of the company: Ultimately, your ability to think through a business decision can influence the productivity of your company, the way it changes or adapts and the level of success your company achieves in the long-term.
- Enhances profitability: Thinking through business decisions can also help you make smart decisions that enhance the profitability of your company through new sales initiatives, product offerings, marketing initiatives and revenue structures.
- Affects successful hiring activities: A good business decision relating to hiring and training activities can positively impact the success of hiring initiatives, including hiring candidates with the right qualities for the job and making changes to training activities that influence the employee satisfaction and retention rates.
- Conveys your professionalism: Overall, your ability to think through and make the right decisions for your business can help convey your professionalism to your team, higher ups and external stakeholders.
Tips for making a business decision
Here are a few tips for making good business decisions that benefit your company:
- Consider the end-goal. When making an important business decision, take time to consider what you want the end goal to be. For example. A department manager identifies an end-goal as being able to keep every employee in their department even during an economic downturn. Because of this end-goal, they make the decision to reduce their department’s budget and streamline department activities.
- Weigh each potential outcome. As you figure out which business decision to choose, be sure to consider each potential outcome of a business decision. This allows you to determine the potential advantages and disadvantages of a potential business decision and whether advantages outweigh the disadvantages in the long-term.
- Seek out advice from qualified professionals or company employees. If you aren’t sure which business decision to make, you can benefit from seeking out advice from your coworkers, department employees, external consultants or upper-management personnel. If the majority of those you speak with choose one decision over another, that could help you determine which decision you need to make that works best for your business.
Types of business decisions
There are a variety of types of business decisions that business owners and professionals make at each level to promote the overall success of the company. Review these types of business decisions to determine which apply to you:
Operational decisions
Operational decisions are a type of everyday business decision that company employees make on a daily basis. Operational business decisions can include a range of decisions like product inventory, customer orders or shipping needs, departmental organization, department budgets or sales and marketing initiatives.
Strategic decisions
Strategic business decisions include any decisions that businesses make to reach a future goal. Strategic business decisions typically aim to combine a company’s long-term goals with short-term goals and ideas. This could include revamping onboarding procedures to strengthen new hire productivity, investing in a new product niche to expand their customer-base or merging two branch locations to reduce costs and strengthen communication.
Hiring decisions
Hiring decisions reflect any business decisions related to identifying hiring needs, writing job descriptions, evaluating job candidates and determine which candidates to interview or even hire to the company. It can also include decisions related to onboarding procedures, start times and training details. HR personnel, department managers and upper-management professionals typically make hiring decisions.
Financial decisions
Financial business decisions include any business decisions that promote the financial health of a company. This includes budget distribution across a company, product pricing and manufacturing costs, investment opportunities, debt payment options or the amount of money budgeted for job positions.
Business structure decisions
Business owners typically make business structure decisions prior to starting business operations. However, some business owners may determine they need to change their business structure after being in operation for a while. Business structures refer to legal entities in which companies operate. Examples include sole proprietorships, limited liability corporations (LLC), corporation, partnership or S corporation.
Business policy decisions
Business policy decisions include any decisions in reference to employee benefits, paid time off, sick leave, maternity leave, internal HR policies relating to confidentiality and other types of policies that influence customer relationships and employee welfare.
Technology decisions
Technology business decisions are those that business professionals make based on technology needs for their department or on a company-wide basis. Examples could range from HR software, communication platforms, company databases, manufacturing equipment or office equipment.
The process of decision-making involves several crucial steps that contribute to successful outcomes. In this article, we will explore each step in detail to help you enhance your decision-making skills.
- Define the Problem
To begin with, it is essential to clearly identify and define the problem at hand. This involves understanding the impact of the problem on organizational objectives. Sometimes, managerial decisions may be vague or ill-defined, which can further complicate the problem-solving process.
- Determine the Objectives
Establishing the objectives of the organization or decision maker is a critical step. This can often present challenges, such as balancing profit maximization and conducting benefit-cost analysis. Questions may arise regarding the evaluation of future benefits against present capital investment. Decisions about long-term investments for higher profits over a period of 8 to 10 years may also need to be considered. Addressing these questions is crucial to effectively determine the objectives of the firm.
- Discover the Alternatives
A sound decision-making framework requires a comprehensive exploration of available alternatives. It is important to identify and evaluate different options. The decision maker needs to consider factors within their control and understand the variables that limit the available choices. By formulating the right questions, managers can weigh the attractiveness of each alternative.
- Forecast the Consequences
Anticipating and predicting the consequences of each alternative is an important aspect of decision-making. Conditions may change based on the implementation of different actions, and uncertainty can arise when evaluating outcomes. It is crucial to carefully analyze the potential consequences and make informed decisions based on the information available.
- Make a Choice
After conducting thorough analysis and scrutiny, it is time to make a choice. This step holds significant importance in the decision-making process. The decision maker needs to quantify the objectives and outcomes to facilitate the selection of the preferred course of action. The effectiveness of this step depends on how well the problem is framed, how the objectives are defined, how the alternatives are considered, and ultimately, how the most favorable course of action is determined.
By following these steps, individuals and organizations can enhance their decision-making abilities and improve the likelihood of achieving desired outcomes. Remember, decision-making is an ongoing process that requires continual evaluation and adaptation.
