An essential part of a CEO’s job is constantly making arduous, perplexing and nerve-racking decisions that can make or break their organisations. Although it is a task not everyone is cut out for, decision making under tough circumstances defines you as a CEO. Navigating the line between making decisions based on appeasing customers versus making necessary, but often unattractive, financial decisions is an art that most CEOs master with experience. This article focuses on how CEOs make tough decisions for sustaining their businesses.
Nobody’s perfect; every successful CEO has made several mistakes and openly admits to it. This is simply part of the learning process and comes with the territory. The philosophy of leading without making mistakes results in procrastination, something you cannot afford, especially in crisis situations.
Speed is of the essence when it comes to decision making; any problem left unattended tends to pose a more complicated solution with time. Furthermore, great decisions depend on upon your ability to look ahead and predict the likely outcome. The best CEOs try to make a series of very good, but never perfect, projections about their businesses. It is important to not be discouraged by mistakes or failures. Failures are only stepping stones to success.
Netflix Inc’s CEO Reed Hastings recently decided to launch a separate DVD rental service called ‘Qwikster’. But immense consumer backlash prompted him to apologise and reverse course immediately.
Surround yourself with trusted advisors and seek consensus.
Since you can’t research every aspect of important decisions yourself, you will have to depend on the expertise of others at some point. Ultimately, the strength of your leadership is based on the quality of the advice you receive. It is essential to never isolate yourself when making decisions because others will often have critical knowledge and experiences worth considering. Through discussion and collaborative decision-making, you can develop a group understanding of the problem and develop a plan of action with potential outcomes and consequences.
As a rule of thumb, surround yourself with very smart, confident, and committed board of directors and staff to advise you on strategic decisions. You will inevitably have to make the call based on the information available. You must act despite uncertainty. Leaders don’t have the luxury of hindsight and must do their best with the information at hand. However, this requires consideration of the whole picture, not just part of it.
For example, when McDonnell Douglas, the CEO of Boeing, took over the company from his uncle, he sought advice from a number of people encouraged him to change the management style from an authoritative rule into a professionally managed company. That was his defining moment because he was able to build participative management.
Take personal responsibility for the outcomes.
Own up to a mistake made, even if your intentions were noble or your advisors were to blame for giving you bad information. If you make a good decision leading to a good outcome, you must give credit to your advisors. If on the other hand, a decision you made leads to a negative outcome, you alone must take the blame.
The boldest decisions tend to be the safest, but you must always question the validity of your decisions and the methods by which they are arrived at, regardless of their nature. Although very challenging at times, you must be willing to do what you believe is the right thing, even at your own peril. This, however, does not validate taking a dramatic stand (when it’s not called for) to assert your beliefs.
Jamie Dimon, CEO of JP Morgan Chase dismissed concerns about a large position in credit-default swaps in 2012 put on by the London branch of JPM’s Chief Investment Office. This trade later led to a loss of over $6 billion and was a source of immense embarrassment for the CEO. He publicly apologised and admitted to the fact that this was caused by mere ignorance.
Don’t let public opinion get in the way of principles.
Do not chase popularity; instead, make decisions based on principles and let the chips fall where they may. It is absolutely necessary to maintain high ethical standards for fair and transparent decision making. Others might need to know why you are making a particular decision. Sharing information eliminates potential concerns and questions before they arise.
Customers tend to form impressions about a company when a CEO finds himself/herself in an intense crisis with media attention. Any negative connotation can result in permanent damage to a brand. Companies usually focus too much on the operational issue, but there is always a reputational issue that shapes the long-term vision of the company to customers and shareholders.
Sony’s CEO Akio Morita’s creation of the ‘Walkman’ serves as a timeless example of how defending your gut feeling and vision can translate into success. Defying his advisors, public opinion and consumer demand, Morita went on to launch the Walkman which turned out be Sony’s most revolutionary and profitable product of that era.