As businesses grow many decisions come to bear from marketing to funding, expansion, investments, operations, logistics, staffing, technology adoption, and so on, all to enhance the business productivity. Without a doubt, just like individuals make poor choices and bad decisions businesses do too. Business leaders and entrepreneurs make bad decisions not because they are not clever or experienced, but because they are humans. Certainly, humans are never perfect decision-makers at all, a bad decision can occur once in a while or repeatedly and such is the case with business leaders, entrepreneurs, top management, and/or owner-managers of businesses around as well.
As important as decision-making is in business operations, the good news is that business failures have been identified largely to be due to poor decision-making by the operators, owners, or business managers. Why is this good news? In my opinion, understanding the major cause of past business failures could help restrain many entrepreneurs or businesses from repeating this error clearly. Since poor decision-making has been identified as a major concern for business sustainability, therefore, making a good choice most time is important for any business, though this can be argued.
In business, no matter the structure in place, decision-making is key and is one of the main indicators of a high-performing business or one of the indicators of how healthy a business is. Remember, not having a decision-making process is in itself a decision on its own. I have observed keenly that a large number of the businesses be it large or small in Nigeria, particularly the ones in the industrialized States and areas, relish taking shortcuts as a normal practice and they hardly ever have an articulated decision-making process within their businesses. It is rather worse in small-scale businesses where decision-making could be the sole responsibility of the operators or business owners. In fact, in small-scale businesses, the most common cause of poor decision is that the operators are so dominant with excessive managerial control that they see decision-making as their sole right without any recourse to the ideas or opinions of employees or others. This is the big issue really.
Furthermore, no initiative or contributions from employees and subordinates are ever considered, key decision making is never participatory and this sometimes leads to business concerns. A decision-making responsibility before, during, and after any implementation of a task in a business should not be the entire decision of the business owners. Playing the obvious role of the sole expert in all departments, units, and concerns of the business operations by the owners is never sustainable but damaging, this action has been captured as one of the major causes of the incidence of widespread business failures amongst small -scale businesses in the country.
A good decision can enable a business to thrive and survive long-term, while a poor decision can lead a business into failure. A common behavior of leaving things to chances when decisive action ought to be taken are also decisions but a poor one at that, which can bring huge consequences on the business. This worrying development amongst small-scale business operators has cost many their fortune, particularly with the advent of the coronavirus pandemic (COVID-19) which has been impacting the economy and businesses negatively. It should be a time for decision-making for businesses and not a time to operate aloof. The coronavirus pandemic has changed the world and also signaled a new era for businesses, therefore, there is a need for business operators to take strategic decisions, most notably in the manufacturing, retail, and service sectors due to technology disruptions.
Yet business operators in these mentioned sectors disregard this all-important activity. The failure of any business or venture in making good and quality decisions could be a result of many factors, such as inexperience, lack of time, stress, overwork, and pressure from stakeholders among others. All these can lead to poor decision-making and the eventual failure of any business. The quality of decisions in any business directly impacts its performance and overall business outcomes.
Small business operators should understand that it is healthy for staff to disagree over decisions if the views defer. It only helps to make a proper and effective decision for the business at the end of the day. Leaders should purposefully create a culture where debate and disagreement are welcome. Remember, decision-making is the action or process of thinking through possible options and uncertain outcomes, and selecting the best option concerning the business. This decision-making could bother on marketing, financing, customer satisfaction, investment, and technology usage in the business.
It is often shocking that once known and thriving businesses can suddenly go under and cease to operate as a result of what most times seem to be poor decision-making and mismanagement. In the case of big and widely known multinational businesses like Kodak, Nokia, Motion Blackberry, and Motorola, the managements ignored the shift in technology and failed to be decisive in their decision making particularly on innovations until it was too late despite the vantage position.
Though Nigeria has a tough operating environment and harsh economic factors, however many of the small businesses and start-ups in the real estate, retail, manufacturing, corner shops, and service sectors among others have lost their relevancies due to poor or lack of prompt decision-making. For instance, just on Ogudu road via Ojota in Lagos State businesses that were once the toast of teeming residences and customers such as Cherries superstore, Terminal 3 restaurant, CCD stores, and The Mr. Biggs eatery Ogudu branch have all now remained permanently closed, failed, sold off or shut down to what seems to be poor decision making from the management. This is the fate of so many of the medium-small scale businesses in Lagos State and indeed Nigeria, they disappear after few years of operations and never grow to become intergenerational businesses.
One of the worst things to do in business is to ignore customers’ preferences, revolutionary innovations and also fail to adapt to changes within the business environment as quickly as possible. The high business mortality rate in Nigeria is mainly due to these reasons. Entrepreneurs and operators try to protect what they already have going for them, instead of having a decision-making process that can always suggest innovation and ways of doing things better to meet and surpass customers’ expectations.
Many businesses still follow this rigid path, particularly in the manufacturing, services, and retail businesses, lacking the foresight of the advent of online presence, e-commerce, and technological shift occasioned by COVID-19. In my view, businesses need to have a sound decision-making policy that is in tune with the current realities of aggressive social media and internet usage. We have experienced a major cultural shift in customers’ behavior with the COVID-19, businesses need a decision-making process to review their activities from time to time. This will help to adapt to the economic and environmental changes accordingly.
Multiple studies have suggested that engaging employees in the decision-making process can impact businesses positively, make them more committed to business success, have stronger connections with the businesses, increase engagements and also help produce higher quality results. Therefore, building a participatory decision-making culture is recommended for businesses particularly small-scale businesses at this time. This strategy will more than likely improve the competitive position and effectiveness of the management, operators, and business owners. Because making decision is a critical component of effective leadership, hence involving employees in the process will help businesses make better decisions. Let the truth be told inexpensive and reasonable businesses built around clothing, housing, potable water, medical care, education, home essentials, shopping and food items will always have economic demands. Thus, in as much as the adequate and proper decision-making process or policy is in place, that should give the needed competitive advantage and make businesses not to ordinarily fail. Good luck!
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Dr. Timi Olubiyi, an Entrepreneurship & Business Management expert with a Ph.D. in Business Administration from Babcock University Nigeria. A prolific investment coach, seasoned scholar, Chartered Member of the Chartered Institute for Securities & Investment (CISI), and Securities & Exchange Commission (SEC) registered capital market operator. He can be reached on the Twitter handle @drtimiolubiyi and via email: firstname.lastname@example.org, for any questions, reactions, and comments.