Making business decisions in times of uncertainty
Making business decisions in times of uncertainty
Decisions define and guide us every day. Whether you realize it or not, from the moment we wake up until the moment we go to sleep, we are in a constant state of decision-making. But, when it’s hard to predict the outcome of a choice and the risk of uncertainty feels higher, the more difficult it becomes for us to make a decision.
However, it’s important to remember that no matter what the situation, it’s impossible to predict the future. So, we must acknowledge that there’s some degree of uncertainty in almost every decision we make. In her book Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts, World Series of Poker Tournament Champion Annie Duke says, “Treating decisions as bets, I discovered, helped me avoid common decision traps, learn from results in a more rational way, and keep emotions out of the process as much as possible.”
Decisions essentially fall into three categories:
- Decisions where outcomes are known, or the “safe bet”
- Decisions where outcomes are unknown, but probabilities are known, or “statistical bet”
- Decisions where outcomes and probabilities are both unknown, or the “big bet”
Though we usually make decisions that fall under categories two and three, people psychologically lean toward decisions where outcomes are known. Researchers have found that when thinking becomes difficult, people will always choose, what they feel, is the safest outcome. But what happens when we’re faced with a situation where there is no “safe option”? When the world is constantly changing and there is a lot of uncertainty and risk?
In times of crisis, such as the current COVID-19 pandemic, people and businesses are being required to make critical, high-stakes decisions quickly. While difficult to do, there are some steps business leaders can take to help reduce the stress and paralysis caused by uncertainty.
1. Stay calm
In times of crisis our biological hard wiring sends us into “fight or flight mode” or acute stress response. This is a physiological reaction that occurs in response to a perceived harmful event, attack, or threat to survival. To counteract this natural stress response, the best thing to do, literally, is pause and take a breath. While taking a moment to step back and give yourself time to make a decision may feel counterintuitive, making decisions from a state of stress can be a tragic mistake.
Pausing doesn’t mean standing still. You can still move forward, but a step back allows you to think more clearly, take stock of what’s happening, gather data, ask the right questions, and begin to anticipate how things might unfold, which can help avoid knee-jerk reactions.
2. Teamwork makes the team work
In times of stress, it can also be easy to fall into a trap of feeling alone. Leaders in high-pressure situations may be inclined to make big decisions in a vacuum, behind closed doors. But, it’s important to remember that our brains are built to interpret the world around us to confirm our own beliefs, to avoid admittance of ignorance or error, and to blame others for bad results. Bringing in a team of more stakeholders can provide a larger perspective, encourage debate, open up a broader range of outcomes, and help leaders identify their own biases that may be sabotaging their decision-making ability.
To begin this process, leaders can ask these questions:
- What is most important right now?
- Who should the decision makers be?
- What key decisions need to be made?
- Who should have a voice?
- Who will implement those decisions?
- What might we be missing?
- How do we think things will unfold from here?
When navigating unfamiliar territory, having multiple points of view is critical to make sure the decision makers aren’t missing something.
3. Empower leadership
Strong leaders are crucial to overcoming adversity. These are people who can communicate clearly, set a good example, make decisions with integrity in the best interest of the organization, successfully delegate authority, and provide encouragement to others.
In times of crisis, leaders can emerge from surprising places. So, don’t automatically default to your usual list of managers to lead your response. Instead, choose people who are comfortable with difficulty and can provide helpful insights. These might be people who have lived through and proven their grit during a personal or professional crisis, someone who stood up for what was right (even if it caused them harm), and people who have made the right decisions (even if it was unpopular or difficult).
A team of good leaders will help you weather the storm. Remember, you can’t expect these people to be perfect, but you can expect them to help make and execute decisions.
4. Plan for every scenario
One of the best places to start when making decisions in times of uncertainty is with scenario planning and analysis. Scenario planning identifies a specific set of uncertainties and assumptions of what might happen in the future. In turn, you can determine and make decisions on how your business will change and adapt to those potential outcomes.
Detail multiple scenarios for every level of uncertainty, plan for best- and worst-case scenarios, and consider logistical and realistic plans for each. No matter what the scenario, businesses should identify response teams and emergency steps for each potential outcome as well as the steps needed to return to optimal operations after the event has stabilized. Checklists can also be an extremely helpful tool.
During this process, let go of the pressure to make a “right” decision. Recognize that no one knows what’s going to happen and that “right” doesn’t exist in times like these. All we can do is make the best decisions with information we have now.
5. One decision at a time (big or small)
When making decisions in crisis mode, it’s tempting to want to move quickly and priorities can get lost. Setting priorities at the beginning of each day can help you define and track what decisions need to get made. Remember, small choices can be just as critical as the big choices and can have long-term, strategic implications, so don’t discount the little things.
Using project management systems, a Kanban board, or even making a simple list can assist in providing a task framework from which to make one decision at a time. Here are a few other ideas on how to prioritize daily choices:
- Identify your core goals and prioritize the steps and decisions needed to move you closer to these goals.
- Make a list of three decisions or actions you can make today that, depending on your scenario analysis, will make a difference later.
- Work with your team and leaders to identify the big and small decisions or actions you should address now.
Remember, you can only do one thing at a time. And, there are only 24 hours in a day. The more you can focus your energy on and identify your priorities, the better decisions you’ll make, one choice at a time.
By taking time to breathe, putting the right team and leaders in place, and identifying your priorities, you can reduce risk, increase engagement, and make decisions with greater confidence.
In the words of Annie Duke, “We are going to do better, and be happier, if we start by recognizing that we’ll never be sure of the future. That changes our task from trying to be right every time, an impossible job, to navigating our way through the uncertainty by calibrating our beliefs to move towards, little by little, a more accurate and objective presentation of the world.”
ESG materiality assessments
With investors inquiring more and more frequently about what your company is doing in regard to responsible investment, how you treat employees and vendors, your dedication to sustainability initiatives, and other activities that fall under the ESG umbrella, it’s important to have answers to these questions.
An ESG materiality assessment empowers you to easily report your current state and outline what future initiatives will focus on. Learn what an ESG materiality assessment is, what the benefits for your organization are, how the assessment supports sustainable investment strategies, and how Goby can help support your ESG materiality assessment process and provide strategic benefits for your organization.