Botched, Dumb, Stupid– Call It By Any Name; But, Bad Decisions, Bad Deals, Bad Negotiations… Are All Bad for Business…

Botched, dumb, stupid– wreckage of deals gone bad litters the business landscape… Bad business decisions have been made throughout the course of human history. The question is; What can you learn from them? And if possible; How can you avoid them?

In order to understand the effects of bad decisions, it’s important to first establish what you mean by bad decisions, or better yet the difference between– ‘mistake’ vs. ‘bad decision’ vs. ‘wrong decision’… For example; hiring the wrong person is a ‘mistake’… Not doing a background check is a ‘bad decision’…

The mistake was something you did without intention, while the bad decision was made intentionally, often without regard for the consequence… It’s easy to dismiss bad decisions by reclassifying them as mistakes: It takes the edge off, and softens the blow. But it’s much worse than that; reclassifying a bad decision as a mistake removes your sense of responsibility, making it no longer your fault. And, it’s a lot easier to live with bad decisions, if they are not your fault…

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Consequently, you are more likely to make the same bad decision– over and over again, if you simply consider it a mistake; such behavior is, by definition, insane… We all make mistakes and we all make bad decisions– they are part of human experience… But, let’s not confuse one with the other… While even the best leaders aren’t perfect decision-makers, it’s still true that a ‘wrong decision’ is different from a ‘bad decision’; A wrong decision is a best guess when you may not have all the facts, e.g.; Option #1 vs. Option #2. A decision is bad when the facts are staring you in the face; e.g.; launching a new product when engineering warns you of near certain failure… Getting business decisions right is tough…

A company must continuously make choices and do it fast– faster than competitors– and more important, to ensure that decisions get translated into action… When a company makes a really bad decision, it’s likely that more than one organizational element isn’t working right… every company makes millions of decisions every year, from big strategic decisions, such as; launching a new product line, to daily decisions about marketing, procurement, customer service… and some of these decisions can go terribly wrong…

One thing you can learn from all these cautionary tales is that it’s easy for organizations to foul-up the decision processes. When the decision stars fall-out of alignment, a company can run into serious trouble quickly. So it’s worth reflecting on decisions– the good, the bad, the ugly… and, executives can learn much from the pitfalls of the past…

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In the article The Worst Business Decisions Ever Made by Lily Herman writes: What is your answer if someone asked you to name the worst business decision ever made? Not the worst decision you’ve ever made, but worst decision in the history of business decisions… It’s a great question to think about but more important to learn from bad decisions of lore, in order to prevent them from happening to you… According to ‘The Atlantic’; they asked 17 prominent business people for their opinions and as expected they differed greatly… For example, here are a few takeaways:

  • Consumer Matters: In 1983, Coca-Cola launched ‘New Coke’, as a new weapon in its market-share battle with Pepsi. But consumers boycotted and just three months later, Coke brought back their iconic ‘Coca-Cola Classic’… By 1986, Coke was back on top, and some alleged it was all a marketing scheme! What can we learn from Coca-Cola’s gigantic business mess with the creation of New Coke? No matter how much money you pour into a new enterprise, if your consumer hates it, change it quickly… Luckily, Coca-Cola came to its senses very fast, took the new product off the market, and was back on its feet within three years…
  • Creativity is Vital: After Apple forced out Steve Jobs, the company’s creativity ground to a halt. When he returned, Jobs transformed Apple into the biggest company on Earth, proving how a founder’s grand vision is typically underestimated but impossible to replicate… Although he was considered a tough boss, Jobs was also a visionary who completely shifted the way people thought about electronics… What Apple had forgotten was, a company’s ability to innovate (especially in the tech industry) is everything, and a company isn’t just the product it makes; it’s about the people who work there. Make sure you’re hiring the best people you can find who can create the best product possible— and not forgetting their value when things get a little rough…
  • Do Your Research: In 2008, Bank of America purchased Countrywide Financial, an aggressive and abusive sub-prime-mortgage lender, for $4 billion, but the real costs came after the mortgage bubble burst. Between fines, penalties, legal settlements, the deal cost Bank of America an additional $40 billion… the example of the Bank of America debacle illustrates the importance of doing your research before taking the leap in business, whether that be accepting a new job offer, taking a risk at work, or leaving your job or career altogether. Additionally, don’t ignore the signs of a problem— if a business or company seems like trouble, those issues won’t magically disappear once you begin to work there…
  • Bad Decisions in History: Cautionary tales in history has been full of bad decisions: The ancient Trojans brought the famous wooden horse inside their city walls, not realizing it was full of Greek soldiers who would open the gates from the inside… Napoleon decided to invade Russia and returned with just a tiny fraction of his once grand army… The Titanic was outfitted with only enough lifeboats for a third of the total passengers and crew it could carry… What goes wrong with decisions like these? Sometimes it’s just individual arrogance or foolishness or just plain dumb.. that produces a bad decision…

In the article Why You Make Bad Decisions by Dan writes: Bad news for you: Research suggests your brain is hardwired to make poor decisions… Let me explain: You tend to think of rational decision-making and problem solving as a process where you evaluate multiple options, and eventually decide on the best one… But in fact, research shows that 69% of the time you only look at one option, and that is the one staring you in the face… you then decide– ‘whether or not’– to say yes…

Research call this exaggerated narrow focus, or ‘whether or not’ decision-making. Studies show, in most business decisions, you fail to consider more than one option– 70% of the time, i.e.; you look at a proposal, or an offer, or an idea… and you decide ‘whether or not’ to say yes…  your brain is blinded 70% of the time to the multiple options available, and you are stuck evaluating them one by one… This reality leads to sub-optimal outcomes, which drives haggling and win-lose behaviors…

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In addition, you become overly attached– emotional and inflexible– about ideas that you like.  And it leads to a false sense of certainty about how good your decisions really are… Unfortunately, deep thought seems to be falling by the wayside in many companies, e.g.; companies that claim strategic interest in innovation and forward thinking, actually tend to discourage deep probing of complex subjects that matter to success…

According to Julie Hunt; more business executives have tendencies to actually discourage creative thinking in employees, while repeating the corporate mantras, e.g.; ‘think outside the box’, ‘push the envelope’, ‘provide thought leadership’… instead, some executives look for external answers in hackneyed recycled material from the latest ‘business management gurus’… These executives seem to prefer the glib over the substantive…

In fact ‘shallow thinking’ is used to validate the core strategy of many enterprises… Shallow thinking impacts the quality and depth of information and analysis available to executives upon which they base decisions… and most important, its ‘shallow thinking’ that masks executive management’s unwillingness to listen to others… By thinking superficially about issues that are actually difficult and complex, company executives can over-simplify goals and pursue answers for the wrong questions… Bad business decisions have been made throughout the course of human history… The question is; What can you learn from them?

There are consequences to any decision; often they can be unpredictable, unexpected… and in hindsight– it’s easy to say you would have made a different decision– but you made the decision with the information available to you, at the time… and if the decision actually achieved the desired outcome, even with unforeseen consequences, then it was a good decision– and others will judge your decision in hindsight… In reality, you make the best possible decision with the best possible information available, at that time… and try to eliminate any biases or preconceived notions about the issue… then, you must accept and live with the outcome and the unforeseen consequences…

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According to Erika Andersen; almost without exception bad decisions result from one of three things; when a decision-maker: 1.) did not bother to get all relevant facts… 2.) made invalid assumptions based on ego, wishful thinking, fear… 3.) did not trust the input of their own advisors…

Of course, it’s easy to see the folly in decisions in retrospect; hindsight is 20/20; no one can make ‘right’ decision all the time; but if executives approach decisions with– little more curiosity, little more open-mind, little less certain of their ‘rightness’… then their business might be in a much better place…