Decision-making: The determining factor for business success

Throughout our professional and personal lives we are required to make decisions. Some — the bigger ones — can change the direction of a business or can set the course of our own life journey.

We don't live and work in a vacuum — making good decisions also involves being able to anticipate how others make decisions. It is also well known that much small decision-making is done automatically in the background to free up thinking capacity for more difficult decisions. This heuristic approach to making quick, good-enough decisions can lead to biased decision-making, however.

Biases range from groupthink to overconfidence bias (where past successes lead to a reduced perception of future risks) and confirmation bias (which involves interpreting evidence in ways that favour existing beliefs).

Understanding our biases is crucial when making important strategic investment or hiring decisions, says the neuroscientist and director of Worldview Stanford, Brie Linkenhoker. Her view is that it isn't possible to eliminate biases but that we need to be aware of them when making decisions that could impact a company for the next five, ten, or 20 years.

Increasingly, the quality of decision-making is the determining factor in business success or failure.

I believe that inspiring leadership and strong decision-making go hand in hand. Throughout my business career I have often been decisive — I prefer to take a view rather than sit on the fence. With hindsight, of course, it's always possible to analyse decisions and work out how you might have taken a different course.

There are many facets to our roles as management accountants, but improving decision-making in organisations is accepted as one of the most crucial. To do this we need to ensure there is a culture embedded where evidence and expertise are used in decision-making and performance management. This defines our profession as at the intersection of finance and business. A good example of where this has happened is at RWE, one of Europe's leading power-generation companies. RWE implemented a project to identify the sorts of bias in decision-making. Finance was given a mandate to counter these potential biases and ensure that decision-making and performance management were based on the relevant information.

We don't always come up with the insights needed through our own analysis, but often through collaborative conversations and the questions that are raised in those conversations.

To have the good conversations requires accountants to complement their core technical skills with business understanding and soft skills.

Working with Oxford University and Pearson, UK-based innovation foundation Nesta has identified the top 20 skills needed in the future. It is no surprise that its report, The Future of Skills: Employment in 2030, identifies judgement and decision-making in the top slot. When drilling down into each occupation type, it highlights active learning as a key factor that could boost the chances of professional occupations' growing.

Our own research makes similar conclusions. In its first phase, The Future of Finance research involved face-to-face interviews with more than 300 individuals, representing 130 organisations in 14 countries. In one interview, a banking professional explained that their organisation looked for "broad capability and a mindset rather than the ability to use certain tools and techniques" when hiring finance professionals.

This growth mindset, coupled with lifelong learning, is the key that will unlock future opportunities for individual members to develop, stay relevant, and continue to drive innovation in their workplaces.