How to Make Better Decisions

Making good decisions is a crucial life skill and a defining component of success in life and business but so many times we wonder what the best course of action might be. Theoretically, we make decisions after evaluating the available information, weighing the potential impact of our actions (or inaction) and determining what appears to be the best option. But truth be told, we rarely have all the information that could guide us as we decide and as a result, decision-making is loaded with unknowns. Not only that, our perception of the best course of action is inevitably shaped by our past experiences and personal biases.

Fortunately, methods exist that have been designed to limit some percentage of the unknowns and biases inherent in decision-making. One approach, a type of strategic planning known as scenario planning, has been attributed to 1950s era executives at the RAND Corporation.

In its most simplified form, scenario planning involves imagining three possible future environments for each decision alternative: a future where things get better, a future where things get worse and a future where they stay about the same. Scenario planning also allows decision-makers to factor in variables: what you know, what you don’t know and what you don’t know you don’t know.

Scenario planning requires decision-makers (and strategic planning teams) to think outside the box and imagine what might happen if a certain road is taken and then create a story line that “paints a picture” of what your life or business will look like while on that road.

When faced with an important decision, we all tell ourselves a story that describes an idealized version of what our life will look like if we do (or avoid) a certain thing. For example, if you’re thinking of changing careers, you tell yourself a story of how much more satisfying and/or lucrative work will become if you make the change. If you’re considering a move to a warmer climate because you’ve had enough of winter, your story focuses on the avoidance of snow and ice and the warm, soft breezes that await in the new location.

If you include a scenario planning exercise in your decision process, you’ll be encouraged to fill in a few more potentially relevant details that go beyond the rosy picture that you paint as you daydream about new possibilities. If you’re seriously considering a job change, scenario planning will guide you to fully investigate, among other things, the credentials or professional experience you must earn to successfully change careers and how much time and money that will cost you. The ROI of the career change is another component you’ll examine as you objectively evaluate your likely job prospects and reasonable expectations for professional advancement and earning ability.

In addition to scenario planning, there is also a clever decision-making support tactic called the “pre-mortem” that was developed by psychologist Gary Klein, Ph.D. and his team in 1989. Inspired by the post mortem, when a coroner or hospital pathologist performs an autopsy on the deceased to determine the cause of death, Klein’s pre-mortem technique flips the script. “Our exercise,” Dr. Klein explains, “is to ask decision-makers to imagine that it is months into the future and that their plan has been carried out—-and it has failed. That is all they know; they have to explain why they think it failed.”

So you think you want to move to Florida? OK, so you move down in early November, just ahead of winter. You’ve got no snow to shovel and that’s a relief. But there are alligators on the golf course and you know, those things eat pets and people. You’ve been down there for 8 months and you’ve had to call an exterminator 3 times because there are these scary bugs crawling through your house. Not only that, but Christmas didn’t feel like Christmas when the temperature was 80 degrees. Oh, and in the winter everyone you know begged to stay with you for a week so they could escape the snow and ice but you were in no mood to entertain people because your vacation is scheduled for August. Maybe this move was not the greatest choice? The pre-mortem will make you think about many potential downsides to your decision and help you understand if you can live with the fallout.

Klein attests that the pre-mortem has proved to be a much more effective way to recognize the lurking flaws in a decision. Magical thinking, from groupthink to confirmation bias, blinds us to potential pitfalls once we’ve become attached to a decision. By forcing ourselves to imagine scenarios where a decision turned out to be disastrous, we can discover the holes in the plan.

Eventually you must pull the trigger and commit to a decision. In some cases, working through the initial phases of decision-making will lead to an obvious choice. But if a decision you can accept still seems unattainable, the final phase can be completed with an old-school pros and cons list. What have you got to lose?

Thanks for reading,
Kim

Image: Paul Gauguin (June 7, 1848 – May 8, 1903) detail of “Where Do We Come From? What Are We? Where Are We Going?” (1978-98) courtesy of the Museum of Fine Arts, Boston

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Market Research Matters

“If you build it, they will come” is a myth. When evaluating the likely prospects of a business venture, new product or service, or entrance into a new market, good market research is your non-negotiable Step One.  The ability to create and sustain profitability must be demonstrated up front, in advance of committing time and money to its launch.  The only way to reliably predict whether your shiny new idea has broad appeal is to carefully research the marketplace and examine the story that emerges.  The good news is that if you are onto something, market research will help you define the size and potential of the market; decide how and when to enter it; reveal how target customers prefer the product or service to be described, packaged and delivered; the acceptable price range; and show you how to achieve market penetration and profitability goals faster.

Many decision-makers are uncertain as to the type of data that is relevant and the advent of big data has unfortunately complicated matters.  There is copious data available, but what will help your team to make the best decision?  Dionne McPhatter is a market research guru and co-founder of The Strategy Collective, a New York City and Los Angeles marketing firm that builds custom analytics that help clients better understand their customers and make more informed business decisions.  McPhatter  recommends that decision-makers identify what is called in market research circles the “path to purchase” and arrange for the product or service to touch as many “landmarks” as possible.

Some relevant data is free, or inexpensive.  Google Trends is free and a decent place to start your search and learn how many people in your city last year searched key words associated with the product or service (I found the now-defunct Google Wonder Wheel far superior, however).  Learning about competitors who provide your service, or something similar or complementary to it, is also revealing.  Tour a few of their websites and figure out business models and marketing messages.  If you are thinking about launching a business, you will write a business plan and do lots of research.  Contact your local library to learn about business reference material such as industry magazines and demographic information.

Further, there is value in spending some money and visiting professional organization meetings and attending conferences, so that you can meet prospective clients and learn the expectations and value they place on your product or service.  Listen and learn and discreetly take notes.

As you collect and examine data, a picture of the target customer groups,  competitors and the overall marketplace will begin to emerge.  The downside is, those who amass a large amount of data can become confused about what is relevant: the data threads may be too numerous to easily prioritize.  The challenge of decision-makers is to discover the relationships and triggers between the data points and eventually see what motivates clients along the path to purchase.  From there, you can confidently develop goals and objectives, strategies and action plans and a business model that will build and sustain a profitable launch.

Thanks for reading,

Kim

 

 

Know the Stakeholders, Close the Deal

Freelance consultants,  business owners and sales professionals rise,  fall and are measured on our ability to make sales and form strategic alliances that supply vital revenue to the businesses we represent.  To get those deals done,  we rely on stakeholders within the prospective client’s organization to advocate for us.  While there is but one signature on the proposal contract,  there are always powerful influencers whom the decision-maker is inclined to consult.  To successfully close an important deal,  you must identify the three types of stakeholders who powerfully influence important buying decisions: champions,  decision-makers and blockers.  Learn the motivations of these stakeholders and figure out what is on the line for them if the deal goes through,  or is allowed to fade away.

Step 1 is getting your foot in the door,  the first hurdle of the deal.  Step 1 requires that you enlist a project champion,  for it is s/he who invites you to pursue the deal and helps you achieve Step 2,  learning the identities of whom you must convince or outwit.  Your champion knows the decision-maker for the deal and will facilitate your access.  The champion influences the decision,  but s/he is not the decision-maker.  Some champions have relatively little power within the organization.  What they do have is the respect and the ear of the decision-maker.

Paul Weinstein,  an investor and adviser to technology,  media and entertainment companies,  notes that   “Champions understand the personalities and processes on a granular level and can navigate the culture in an organization.”  Weinstein also points out that the primary motivation of the champion is often status.  Champions want their colleagues and superiors to know that they not only can recognize an innovative opportunity when it appears,  they also have the ingenuity and power to build support and get approval.

The champion is typically at a point in his/her career where risks can be taken.  S/he is deeply invested in getting the deal signed.  The key to working effectively with the champion is to collaborate on a strategy and convince the decision-maker to green-light the proposal.

While champions are comfortable with risk,  decision-makers are invariably risk-averse.  They are C-suite executives who have the power to say yes or no to big deals and they will be held accountable for the final outcome.  Their name would be on the contract and if the deal goes sour,  it would be their reputation  (or possibly their job)  on the line. Because this individual has a lot to lose,  the anxiety level associated with the decision to give thumbs up or down will be in exact proportion to the level of expected scrutiny  (and embarrassment)  should they pass on a deal that subsequently brings big profits to a competitor,   or sign off on a deal that proves to be unfortunate.

Be aware that the decision-maker is unlikely to actually use whatever it is you’re selling,  or even know much about it.  Decision-makers focus on macro issues.  They rely on others to help them reach decisions,  because they don’t have time to immerse themselves in the details of anything other than big picture issues.  They will understand a strategic alliance,  however.

Win over your decision-maker by working with your champion to supply credible evidence that portrays the deal as a winner that will make him/her look good.   Help your champion to help the decision-maker perform due diligence by providing third-party validation,  analyses and other data that refutes all naysayers,  meaning the blockers.

We perceive blockers as haters and sometimes that is true.  Blockers seldom have the power to say yes,  but they do have the power to persuade decision-makers to say no.  Like champions,  blockers are also motivated by status.  They use the power of their relationship with and access to the decision-maker in a negative way and pour on the doubt to undermine and discredit you and your proposal.  Be advised that your blocker may be a sworn enemy of your champion and that s/he may be most willing to play dirty.  Your blocker may have a competing proposal for which s/he is champion,  his/her own bid to impress the higher-ups.

Paul Weinstein urges that you take blockers very seriously and strive to either win them over to your way of thinking or devise with your champion a method to neutralize their complaints.  If there is no personal enmity between your champion and the blocker,  then relevant and credible third-party support should rectify the problem.

In summary,  Weinstein says  “the secret to closing deals lies in mastering this balance.  If you can support your champion,  coax your blocker and  convince your decision-maker,  you’re golden.  Each of the three stakeholders brings a unique set of motivations to the table.  Your job is to understand them in order to align their interests and get the deal done.”

Thanks for reading,

Kim

 

When the Sale Slips Away

Whether we like it or not,  Freelance consultants are salespeople.  Before we are able to ply our given trade,  we must first sell prospective clients on the idea of hiring us to do what we do,  whether it’s web design or floral design.  Steve W. Martin,  professor of Sales Strategy at University of Southern California’s Marshall School of Business,  says that those who sell should be cognizant of the lowest common denominator of decision-making: stress.

Martin observes that stress is the death of rational decision-making.  Stress shortens the attention span,  escalates mental exhaustion and typically results in analysis-paralysis.  Despite the  “buying signals”  that your prospective client may display,  more than likely s/he is experiencing fear and doubt when speaking with you about your product or services.

The stress this creates serves as the key factor in determining whether or not the deal gets done.  The most successful salespeople anticipate,  seek to identify and learn to counteract that stress and enable the sale.  Giving prospective clients information and diplomatically phrased and presented tactical advice that will help them fight against internal organization politics is a useful part of your sales strategy as well.  Here are a couple of more reasons that your sale dies on the vine.

Stalled sales cycle

Customers are more cautious than ever and moving them through the sales process can become an almost Sisyphean task.  Steve W. Martin correctly labels this common phenomenon as an internal problem that occurs when project sponsors do not know how to sell their concept to the senior executives who are able to give the  green light.   Further, certain sales cycles are prone to be lengthy in the best of circumstances.  It is too easy for your contact person/project sponsor to get distracted and turn attention toward developing issues and in the process push your sale to the back burner,  where it drifts into oblivion.  Then there is sometimes reluctance to take responsibility.  As a result,  project sponsors involve more of their co-workers in the decision process and you know what happens when there are too many cooks.

Product information and vendor selection

As we enthusiastically pitch our services,  prospective clients often wonder if we are telling the whole truth.  Compounding that is the reality  (or perception)  that differences between many products and services are almost insignificant.  Buyers are often skeptical because they may have been lied to by previous sales people.  The client may feel that 1). it is necessary to separate fact from fiction when talking with someone who is trying to sell something and 2). it’s pretty much all the same thing anyway.  Selling on service and operational efficiencies and the resulting benefits is the best antidote.  Avoid selling on price if at all possible, because it reduces you to a commodity.

When preparing for your next prospective client meeting,  keep in mind the inevitable presence of stress in your would-be client’s work environment.  They don’t quite know who or what to believe.  They’ve got co-workers,  subordinates and bosses judging them.  They are torn between acting in the best interest of the company and in the best interest of themselves.  There is also the now-prevalent belief that not spending money is best for the organization’s bottom line and no one’s reputation suffers for declining to spend money.  Making no decision just gets easier and easier.

Thanks for reading,

Kim

 

 

Make the Right Decisions and Do the Right Thing

I’m back with more on decision-making because in this perilous economic climate,  which shows no signs of abating,  the ability to make good decisions is so crucial.  Our survival depends upon being able to size up a situation or puzzle through a dilemma and make wise choices that will put us on the right path,  whether we are Freelancers,  business owners or employed/unemployed professionals.

But then again,  when in history has good decision-making not  been an important skill? The results of wise decisions made by the pharaohs in Egypt gave the world a magnificent civilization that thrived for 3000 years and the architectural wonders that are the Sphinx and the pyramids.  Doing business has always been about making decisions,  in ancient times and the present.

Often,  we must make decisions fast and on the fly.  Data available may be incomplete and possibly unreliable.  The ground shifts underfoot and the clock is ticking.  We’re anxious and stressed,  maybe borderline panicky.  Critical thinking is probably clouded by our biases,  born of preferences,  fears and past experiences that we pass off as intuition or gut feelings.  It’s disturbingly easy to be blind to the smart decision that is staring us in the face.

But if we intend to survive and maybe even thrive,  we have to learn to play the had that’s dealt and that means making the right decisions in a timely fashion because time is money.  We can get some much-needed assistance from author Guy Hale,  who provides useful guidance on how we can learn to make credible decisions in an imperfect world in his book  “Think Fast: Accurate Decision-Making, Problem-Solving and Planning” (2011).  Hale recommends the following:

I.  Figure things out
Analyze your situation and see the big picture.  Gain an understanding of how and why you are faced with this decision.  Did your actions,  or inaction,  bring you to this point,  or was it circumstance? Discover the root cause.

Maybe your decision is a positive one,  like you’ve been invited to work with a new client or form a strategic partnership with a colleague.  You’ll need to determine whether the arrangement is likely to be a good fit and that means weighing your options and making a decision. 

II.  Plan and act
Identify the time frame in which you must respond.  Identify potential obstacles and risks and the unknowns that may impact the outcome of the decision,  to the best of your ability.  Identify factors in your favor and how you can best employ and magnify them to your advantage.  Draw up a list of people who will become your allies,  willing to help you if needed and do the same to identify those likely to oppose you.

Use scenario planning to project possible outcomes for the decision: best-case scenario,  worse-case scenario and a couple more that split the difference.  Consider the short and long-term consequences of your choices and think also about who and what will be impacted by what you decide and how they are likely to react.

III.  Factor in Murphy’s Law
Do whatever you can to prevent events from turning sour by controlling everything that you can control,  while recognizing that some things may not go according to plan.  Have Plan B  (and maybe also Plan C)  ready to roll,  just in case.  Know that you’ve been thorough and diligent in your decision-making process and have faith.  Try to relax and roll with the punches and learn from any errors in judgment.

Thanks for reading,
Kim

Decisions, Decisions

We’re in business and all day long there are decisions to make.  Which business strategies look the most promising?  How should I price my services for this project?  Is the money they want to attend this conference really worth it?  If I pay this guy to make my website more interactive am I really going to get more billable hours out of it,  or will Mr. Web Developer be the only one getting paid in this deal?  Everyone in business had better have sharp decision-making skills,  because everything we do hinges on our judgment,   including how to interpret the data used in data-driven decision-making.

Eventually,  decision-making makes our brains tired.  Our thinking gets fuzzy and we might even become irrational.  We’re unable to stay focused and we make careless errors.  We sometimes do and say stupid things.  The name of this condition is called decision fatigue.  We bring it on by making too many decisions.

By the end of the day,  we’ve waded through so many choices and options that we get punch-drunk.  We don’t realize it,  but the more choices—i.e. decisions—we make throughout the day,  the more difficult it becomes for the brain’s cognitive processes to efficiently make another,  and still another,  choice.  Return emails now or at the end of the day?  Finish the report that’s due tomorrow or listen to a webinar? Green salad or fruit salad for lunch?

Energy and willpower eventually become depleted,  we lose self-control and we screw up.  We blow off the diet and the gym and dive into a bag of cookies instead.  We forget our budget and buy shoes we don’t need.  We ignore the report that’s due and read the Onion.

To get some rest,  our tired brains prod us to look for shortcuts and we become sloppy or reckless.  We may act impulsively because we don’t have the mental energy to consider the big picture and weigh the consequences of our actions.  We are prone to taking the easy way and that can mean doing nothing—which is a decision in itself,  but it doesn’t feel that way to the brain.  Of course,  avoiding a decision can cause problems in the long run but in the here and now,  we may just decide to  “table”  the decision.

But we have work to do and decisions to make,  so what should we do when we need to do the right thing?  Social psychologist Roy Bauminster studied mental discipline at Case Western Reserve University in Cleveland, OH and at Florida State University in Tallahassee, FL.  His work indicates that it’s best to make important decisions in the morning after eating a light,  nutritious breakfast.  Our brains derive energy from healthy food and that helps us to comprehend and value long-term prospects and bolsters decision-making ability.  In the morning we have enough willpower to exercise the self-control needed for making important strategic or financial decisions.

Bauminster advises that we tackle the big decisions first,  before we have to make numerous smaller decisions that will sap energy and lead to decision fatigue.  In practice,  schedule your client meetings for early in the day,  before late afternoon whenever possible.  Write and pitch proposals early in the day.

But then again…Bauminster’s findings indicate to me that it’s possible to get a proposal slipped into the budget late in the day, when your client is a bit tired and defenses are down.  You may alternatively have a good proposal rejected because the client is too tired to decide and it’s easy to turn you down.  It’s a roll of the dice,  I suppose.

Also,  where does this leave the night people?  The energy derived from nutritious food holds the key.  Bauminster found that decisions and choices made immediately before lunch were often less than optimal,  so if you’re more of a night person,  making decisions and seeing clients in the two hours after lunch may work.  Discussing business deals over lunch or dinner can also be beneficial  (for any of us, actually,  even morning people like me).  You must decide.

Thanks for reading,

Kim

The Data Driven Payoff

Because the February-March session sold out,  I have been invited to reprise my three-part workshop  “Become Your Own Boss: Effective Business Plan Writing”  at Boston Center for Adult Education 122 Arlington Street Boston MA on three Mondays,  May 9, 16 & 23 from 5:30 PM – 7:30 PM.  For more information or to register please visit http://bit.ly/becomeyourown59  or call 617.267.4430.

As Freelance consultants,  we know that information is nearly as valuable to us as our skill set.  Information leads us to make smart decisions about all aspects of business: what services to offer,  identifying target client groups,  determining a profitable business model,  understanding how to market our services,  gaining a competitive edge.  That good information is integral to all that we do comes as no surprise,  but until now there was no scientific evidence to support that belief.

New research done by Erik Brynjolfsson,  economist at the Massachusetts Institute of Technology Sloan School of Business,  Heekyung Kim,  graduate student in economics at MIT Sloan School and Lorin Hitt,  economist at the University of Pennsylvania Wharton School of Business proves that good information really does put money in your pocket.

The three studied 179 large businesses and found that when decisions enacted were based on reliable data,  companies achieved a 5+ % higher productivity level than businesses that relied more on “experience and intuition” for decision making.  The higher productivity could not be attributed to other factors,  such as the use of more sophisticated technology.

In the study,  data driven decision making was not primarily based on merely collecting data,  but was closely linked to how the data was utilized.  In the April 24, 2011 New York Times,  Mr. Brynolfsson stated that business decisions based on data and analysis “have huge implications for competitiveness and growth”.

Thomas Davenport,  professor of information technology and management at Babson College in Massachusetts supported the conclusions reached regarding data driven business decisions in a book written with Jeanne Harris and Robert Morison, “Analytics at Work: Smarter Results” (2010),  concluding that companies that rely heavily on data analysis are likely to outperform those that do not.

The big question is,  which data do we choose to collect and analyze and how do we best apply it?  Curating data is big business.  “The biggest change facing corporations is the explosion of data”,  said David Grossman,  technology analyst at Stifel Nicolaus in the April 24 NY Times.  “The best business is in helping customers analyze and manage all that data”.

How does a Freelancer decide what to do with data available to us?  I propose that data presented here would guide readers with excellent proficiency in mathematics and possessed of an advanced degree in the subject to become data analysts!  All others might take a look at our P & L statements and examine gross revenue and fixed and variable expenses and analyze how much it costs to generate income and what can be trimmed to make the bottom line better.

Speaking of revenue,  do some research on the services that your target clients are contracting for these days.  Are you retaining clients and signing new ones, too?  How does your 2Q 2011 active client roster compare to 2Q 2010?  Do you need to tweak your business model to maintain your competitive edge,  or might it be wiser to seek a strategic partnership?

To help figure things out,  do a free online search of Google’s Key Word Tool or Wonder Wheel and type in a descriptive phrase of your core service.  How many prospects in your locale are searching for what you sell?  Next,  type in a phrase that describes the service you think might interest clients and see how many local searches it gets.  There you have it,  data driven analysis to guide your business decisions.

Use Google Analytics to track hits to your website and report which pages receive the most attention.  You can correlate that data to the number of follow-up requests you receive and  the conversion of that follow-up to new business.  Make further use of that data to evaluate the efficacy of your website and learn how you can enhance this important marketing tool.  Will adding multimedia to your website be useful?  Or will adding pages to give more information do the trick?  Or maybe you should just simplify the text and clarify and strengthen your message?  Listen to the data and find your answers.

Thanks for reading,

Kim