Most business decisions are chaotic, says former National Bank of Australia executive.

“I think any business decision that involves a forecast [is chaotic]which is every business decision,” he says.

Take an acquisition. A CEO looking to buy a company can go through a huge amount of data, such as loan costs, interest rates, balance sheets, profit and loss accounts, property prices and headcount numbers. But then they must consider, among other variables, the quality of the potentially acquireable company’s management team, industry prospects, possible sources of disruption, and investor reaction. None of it is cut and dried.

“When you have to move quickly and you wait until all the analyzes have come together to figure out what to do, it’s too late,” says Andrew Mohl. Louise Kennerley

Hiring and firing staff is similarly chaotic in nature. Take the latter.

A leader may look at an employee’s performance metrics, taking the results from 360-degree evaluations and the like, but context is also relevant. How long has the team member been working? Were the expectations towards them clearly expressed? Are there any extenuating circumstances, such as a change in market conditions, that should be considered?

Metrics are just a starting point. Ultimately, a judgment call is needed.

Lifting the lid

Occasionally, the lid is lifted on how decisions can be made differently between people who have the same information.

During the Sydney hostage siege in December 2014, which centered around the Lindt Cafe in Martin Place, businesses in the surrounding area took several courses of action.

A listed property company directed its employees out of the CBD within 90 minutes, hiring emergency ferries. A major power company gave its employees the choice of whether to stay or leave, assuring staff that management would support their decision. Leaders of other companies prevaricated, consulting incident management policies and the like.

The key players in the companies who acted quickly had no more facts than anyone else. They acted on impulse.

Another example was during the pandemic, when national governments with access to the same (incomplete) information on the spread of COVID-19 went their separate ways when it came to ordering vaccines.

Talking with HEAD in early 2020, former Commonwealth Bank director and AMP CEO Andrew Mohl warned that instincts are especially critical when decisions need to be made quickly.

The need for instinct

“I think when you have to move fast and wait until all the analyzes have come together to figure out what to do, it’s too late,” said Mohl HEAD.

“You will have to move on instinct, experience and wisdom.”

Faraci says that when executives balk at making business decisions, it’s often because they don’t understand that they need to make a call in a chaotic environment or because they don’t have the confidence to back themselves up.

“It is fear that holds people back. It’s the fear of making a mistake.”

Faraci has three recommendations for executives who find themselves unable to make decisions because they don’t feel they have all the data they need.

The first is being self-aware. Understand that you have to make a decision without all the data and there is nothing unusual about that.

“Whenever you ask for more information, check with yourself. Why are you doing this?” Faraci says.

The second recommendation is to surround yourself with people who will call you and tell you that you have enough information to base a decision on.

The third is to give yourself a deadline for the decision.

“You could tell your board, ‘We’re going to make a call about this by June,’ even if it terrifies you, just to put a bombshell under you.”

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