How Do You Make Decisions?
I read an article this week about a global survey by the Economist Intelligence Unit and PwC on “big business decisions” – I’m talking about key, strategic decisions that affect business with big dollars attached. Almost 80% of those who responded to the survey indicate that they have to make these types of decisions at least quarterly and almost one in three estimates the value of such decisions at $1 billion or more!
While this may be very interesting, you could be thinking that since you don’t have to make multi-billion dollar decisions in your business, you don’t need to worry about the rest of my post today. I hope you will stick with me because what the survey uncovered is that most executives (68%) who make this magnitude of decisions rely more on their gut (a combination of personal experience, advice from others and instincts) than they do data. This was the most surprising finding in the survey to me because this wasn’t a survey of small businesses – with billion dollar decisions being common, the respondents are clearly large companies. While I know that we all end up making some decisions strictly on instincts, in today’s world I expected that most large company execs would rely more on data and analytics because they have the budgets to get what they need and want.
This begs the question: Why don’t more of us use real data and analysis to make the most critical decisions? I was not surprised by the results of the survey on this question – it is because the quality, accuracy, and completeness of data is not sufficient for most of us to use it. Our experiences at Advanced CFO Solutions indicate that small and medium sized businesses certainly share the challenge of getting quality, accurate and complete information to help management make better decisions with their larger counterparts.
We believe that it is the responsibility of the finance function, under the CFO or controller in small businesses, to lead the charge in providing the kind of data and analysis that the executive team and board of director’s need to make key, strategic decisions. If that isn’t happening in your organization, contact us – perhaps we can help you.
One final thought: don’t think that because I am a proponent of using data and analyses to make decisions in business, I don’t believe the “gut” has a place. Quite the contrary, I believe that good data and solid analyses should be backed up by and compared to our experience, advice from others and our instincts because there are important decision making factors that data alone just won’t provide.
Kent Thomas is the Founding Partner of Advanced CFO Solutions. In that role he has served as the outsourced CFO of over 75 different businesses. He currently serves as the Acting CFO of three global businesses. Kent is a licensed CPA and recently served as the President of the Utah Association of CPA’s. He was a founding member of the Olympus Angel Investors and is active in the Utah entrepreneurial community where he advises companies, associations, and educational institutions and is a frequent speaker on finance, accounting and entrepreneurship. Kent is married to Kim Ericson – between them they have eight children and eight grandchildren. They enjoy running, hiking, water sports (especially Lake Powell) and international travel.