How to avoid making bad decisions in Business organizations

Decision making forms the core of our lives and any organization. Decision making in large organizations exists in a hierarchy. As illustrated in the figure. 

Strategic decisions are long term high stake decisions made by the Senior Leadership Team (SLT) and Board members. The SLT might include, the CEO, CFO, Senior Managers, Directors, etc. Strategic decisions affect the long term performance of an organization and relate to a company's aims and objectives. Good strategic decisions can be very rewarding to an organization.

On the hand Tactical decisions are midterm decisions made by Managers and Heads of Departments(HoDs). They are key initiatives established to achieve the overall organization strategy. Tactical decisions determine the day to day implementation of a company's activities aligned to achieving a specific goal. 

Operational decisions are essentially functional decisions made by the employee body during the execution of the day to day business operations. They are mainly administrative in nature and can be implemented quickly with low risk. 

In all levels in an organization or business, decision making is always constrained; not all decisions can be made by an individual due to a number of factors which could be a general lack of skill, economic constraints, legal implications, etc. That notwithstanding, every member of the organization has a stake in the decision making process. These decisions however segmented they might appear can at times be flawed due to a number of reasons detailed as follows;

• Emotional tagging: Emotions sometimes get attached to certain experiences in past memories and subconsciously influence judgment. A previous electric shock can signal impulses of flight at the sight of bare wires from an unplugged electrical appliance even if it is clear the appliance is not plugged into mains supply! Similarly, in business, previous good dealings with a particular company can be prejudice for further business dealings. 

•  Cognitive pattern perception: A human brain is very complex and odd as it might sound majority of our judgments are based on smart guesses it makes in correlation with information from our past experiences. Imagine while driving a car, a little child abruptly enters the road, the brain will process this scene and subconsciously create an estimate of the next position of the child and basing on this a decision to avoid her is quickly taken without delay. Similarly, when organizational leaders are faced with unfamiliar situations, their brain invokes similar patterns from past experiences to make quick judgments of a situation and  trigger action. The brains ability to recognize patterns in life experiences and make guesstimates is the sole reason for quick decision making, otherwise decisions would be too slow and often catastrophic. Pattern perception often results in good judgment though not all the time. It is not foolproof! The brain gets it wrong sometimes and can be difficult to correct the situation.

As already stated, the emotions you attach to a situation as well as your general perception of a situation based on experiences in the past can lead to flawed judgment. These past experiences could be; 

1. Misleading experiences manifesting in the face of an unfamiliar situation and lead you to think you are familiar with that particular situation. The brain might allude to an experience that does not befit  the situation at hand.
2. Inappropriate self-interest because perhaps we have gainfully profited from making certain decisions. It is not uncommon for a contracts officer to award a new contract to a company that previously rewarded him for previous contracts! 
3. Misleading prejudgments subconsciously prime the mind basing on past decisions you have made well before you become consciously aware of the situation. For instance childhood biases can influence decisions made years into your career!
4. Inappropriate attachment in the form of favored choices or tastes, interest, affection etc, can lead to biased decision making.

How to prevent clouded judgment and decision making

•  Information collection and analysis: It is imperative to do data collection and analysis, market research as well as get an expert opinion about a business prospect, product or entity to broaden the experience and knowledge. This enables making of informed unprejudiced decisions. It may be preferable doing independent studies by independent consultants so as to get a balanced view of the business prospect.
• Structured governance: Organizations keep their leaders in check against prejudgments by instituting structures that evaluate and review business proposals being considered prior to adoption. Such structures might include but not limited to; contracts committees, Vetting committees, Special committees, etc.
• Debate and challenge: This can be informal like chatting with a friend or could comprise of formally constituting a decision group depending on the organization and preference. This serves as a good check against biases and prejudgments that might arise. The subject of decision groups has been extensively discussed by lateral thinker Edward de Bono.
• Monitoring and supervision: This is the ultimate tool to biased decision making when all the rest have yielded little or no result. To keep leaders in check clear goals need to be set and performance measures calibrated against milestones achieved over a certain period. It keeps management focused on the target  goals and as such favorable decisions are made towards achieving those goals.

It goes without saying, it is not possible to avoid bad decisions completely in as much you strive to. Majority decisions especially if they are not strategic, are based on gut and instinct which often predisposes you to erroneous judgments. Nonetheless, it is possible to keep them to a minimum level through the measures identified.