As many of you, who will have read my previous newsletters this year, will know I have been reading over the summer holidays and going through some old files. What memories!

Interestingly they also reminded me of how often the basics of business still remain unchanged. And one such area is in the way we make business decisions. Why is it that so many companies keep making costly mistakes?

The reasons business people make the wrong decisions, in fact, stems from a multiplicity of causes. A colleague of mine, Deborah Sawyer, a number of years ago identified seven deadly sins of business decision-making that alas are too familiar to us all.

Her list included:

1. We already have all the answers – the longer someone has worked in an industry the more inclined they are to believe they know all the answers about that industry. The same applies for someone who has worked with a particular company for a long time and is immersed in that particular company’s viewpoint.

Symptoms include –
a) familiarity breeds contempt;
b) arrogance in that we would never go outside for information (I guess these people don’t have customers, suppliers, have any needs for products or services, don’t participate in conferences, etc!);
c)“old boy’s knowledge”.

2. Asking the wrong question – my favourite – getting to the right decision means having the right information. And having the right information means asking the right questions. Here lies the kernel of another reason why many business people make the wrong decisions – they do not ask the right question.

3. Old Demon Ego – Decisions which companies should never take, and would never take if egos could be set aside, do get taken because decision-makers can’t give up their pet ideas. Whilst decision makers often know they should go and get some objective input to test their idea, they deliberately avoid doing so. That’s because they know an input of information will likely show up the flaws in the pet project. That would mean they would have to abandon the idea!

Symptoms include:
a) unwise acquisitions
b) diversification bites
c) failing overseas
d) entrepreneurial weakness

Have you hugged your pet idea today?

4. Flying by the Seat of your Pants Saves Money – Doesn’t It? – Executives often fall for this one! By not seeking out the information to support decision making, they “save” the company money.

Symptoms include:
a) winging it overseas
b) fools rush in
c) leaving it too late

It is important to remember here that most readily available information is generalised and intended to inform in a general way. Rarely is generalised information, which just about anyone can access, tailored enough to support business decision making, which has to occur in the context of a paritcular company’s situation.

5. If It Works for Them, It’ll Work for Us (All Aboard the Bandwagon) – Rather than

undertake soul searching to find the right choices, a company instead looks around at what others in its industry have done and simply mimics them. By imitating what others do, there is no need to take an idea and test it in the context of your own company to see if there is a fit.

Some symptoms include:
a) following the fashions
b) safety in numbers
c) why is no-one else doing this?

This sin is most usually made in mature industries where there are a limited number of players and everyone knows everyone else.

6. Hear No Evil – Another way companies avoid making the right decision is by making sure they never hear anything unpleasant. We all know this one and some of the symptoms include:

a) don’t tell me what I ask to hear!
b) shoot the messenger

Here is a recent example – “As Vladimir Putin has surrounded himself with hardliners who reinforce his worldview, the Russian president’s access to reliable — if inconvenient — information has diminished. The result is a dangerous feedback loop which encourages an increasingly belligerent stance, reflects Seva Gunitsky for Foreign Affairs.”

7. No Decision Can be the Same as a Bad Decision (Hurry Up and Wait) – Failure to make a decision does not just mean a lost opportunity. It can also take away the chance to take corrective action to an existing business situation.

Symptoms include:
a) decision drag (also known as procrastination)
b) head in the sand
c) eye off the future

Every company and every industry runs the risk of thinking that the status quo will continue indefinitely. Many decisions taken or not taken rest on this assumption.

One of my biggest weakness is No. 4. Which sin(s) do you feel you are committing today as you move forward?

Excerpts: Sawyer, D., (1999) “Getting it Right, Avoiding the High Cost of Wrong Decisions”, St. Lucie Press, USA.