How Thinking Critically Can Help You Make Better Business Decisions

How often are your decisions based on a gut instinct? Applying some structure to the way you make decisions can make a huge difference on your business's path to success.
President and Founder, Clarion Enterprises Ltd.
December 29, 2014

As a small-business owner, you have to make decisions on a multitude of issues that affect your business, from marketing strategies to who to hire to maintain and grow your business. The quality of thinking that goes into these crucial decisions can have a major impact on the future of your company.

A recent survey shows that critical thinking is crucial for growing a business and achieving success in the 21st century. Critical thinking skills include making decisions, solving problems and taking appropriate action. Three out of four major industry players surveyed rated the pace of change in business as the leading reason why such skills are necessary, followed by global competitiveness and the nature of how work is accomplished today.

We all know we have to take a disciplined approach when problem solving and making decisions. But the reality is, we often make knee-jerk decisions or decisions based on our gut feelings. To avoid that, it could help to stop for a moment and consider your thinking skills. Do you use formal problem-solving or critical-thinking tools in your daily business activities? Has your approach to analyzing business problems and finding solutions always been successful? If not, you might need to iron out some defects in your approach.

While everyone thinks, not everyone thinks systematically. "Intelligence is something we are born with," says Edward de Bono, an expert in the fields of creativity, innovation and thinking. "Thinking is a skill that must be learned."

Learning how to use some of the proven thinking methodologies or tools will make you a more effective leader. Try adding any of the following three powerful thinking tools to your business toolkit, and you're likely to see your business grow.

Making Better Decisions

In today's complex and fast-paced business environment, decisions are made rapidly, often with insufficient information. This can lead to bad decisions—unless you follow a structured methodology for making decisions. One popular process to maximize your critical thinking skills is the Kepner-Tregoe (KT) Decision Analysis, named after Charles Kepner and Benjamin Tregoe, the researchers who developed the method. In its simplest form, the KT Decision Analysis can be summarized in the following step-by-step activities:

  • State the decision and develop objectives. Write a clear statement about the decision to be resolved, and state the specific results and benefits the decision is to achieve.
  • Classify objectives into musts and wants. The "must" objectives are essential to guarantee a successful decision; the "want" objectives provide a sense of how the alternatives generated perform relative to each other.
  • Weigh the wants objectives. Assign a rating of one to 10 based on their relative importance.
  • Generate a list of alternatives. Disregard alternatives that don't meet the musts.
  • Compare alternatives against the wants. Assign a relative score for each alternative based on how the alternative satisfies the want objectives.
  • Calculate the weighted score of each alternative.
  • Identify potential downsides for each alternative.
  • Make the best balanced choice. Having clearly identified the value and the risks each alternative poses, you're now better prepared to weigh the potential gains against the potential risks.

As Kepner and Tregoe state in The New Rational Manager, "The more complex and difficult the decision, the more important it is to take it one step at a time, paying full attention to each of the three elements of the decision-making process: objectives, alternatives and potential risks." This powerful process helps you reduce the potential for errors.

There's now an app that takes you through the entire KT process step by step to help you solve problems and make difficult decisions. You can access it here.

Analyzing Problems More Effectively

A key part of problem solving involves asking yourself the right questions. If you ask yourself the wrong questions, you may get great answers, but they won't solve your problems. You'll waste a lot of time by not clearly defining what the problem is.

The ThinkX Productive Thinking Model is a good tool to use to help you avoid this trap. Its thorough, six-step framework for problem solving will help you think more clearly:

Step 1: What’s going on? This is an in-depth exploration of what exactly needs to be fixed. For example, you may need to determine who's been affected, why it's a concern and what the vision is. This is the part where you switch from what it is to what it might be. It's the ultimate goal you want to achieve.

Step 2: What’s success? This step asks you to envision how it might be different living in a future in which the issue is resolved. Next, you define specific, observable success criteria.

Step 3: What’s the question? Come up with the essential questions that must be answered to achieve the targeted future. This is different from the standard process of defining the problem because it requires that each problem be phrased as a question, not a statement, which is much more effective.

"Problem statements are usually inert. Problem questions, on the other hand, invite answers," says Tim Hurson, originator of this model and author of Think Better: An Innovator's Guide to Productive Thinking. Compare "We don't have enough in the budget," which is an opinion about the condition, with "How might we increase our budget?" which automatically prompts a search for answers.

Step 4: Generate answers. This step requires making a long list of possible answers to the key strategic questions you generated in step three. What you generate here will lead to steps five and six.

Step 5: Forge the solution. Choose the best answer to the key questions you asked.

Step 6: Align the resources. Determine what you need to put the solution into play.

Assessing Risks and Rewards

As a business owner, risk is an ever-present companion. Every day, you make a multitude of decisions, big and small, and they each carry some potential downsides. Here, too, it helps to have a structured approach to think through the possibility of a bad outcome from the decisions you make. Success isn't about avoiding risks; rather, it's about knowing how to mitigate potential risks.

A well-thought out process for assessing the viability of any decisions you need to make comes from Michael Kallet's recently published book, Think Smarter: Critical Thinking to Improve Problem-Solving and Decision-Making Skills. When looking at the downsides and upsides of a course of action, Kallet adds nine other crucial steps. Some of these are assessing the probability of the downside and knowing your absorption capabilityhow easy or difficult will it be to absorb or recover from the downside? You also need to give some thought to controllabilitythat is, do you have control over the situation? For example, do you have control over the risk of a bad pricing decision?

It's also crucial to consider reversibility: Can you reverse the decision if things don't turn out well after you make your decision? And what about having a mitigation strategy in place? This means having a plan for minimizing the impact of the decision if a downside occurs.

Finally, it's important to have some preeminent metrics, or a measure you can use to predict a downside far enough in advance that you can avoid the prediction coming true. These metrics are milestones you can use to track the progress en route so you can, for example, reallocate resources or make up for delays.

This is an easy method to adopt to help you evaluate your potential risks. While no one can predict the vagaries of the future, adopting a systematic thinking approach will give you some peace of mind. It's just smart thinking.

One of the most powerful quotes on thinking comes from an anonymous source. It goes like this: "Thought is action in rehearsal." Get in the habit of sustained, systematic thinking before you embark too quickly in different directions. This deep thought will give you an advantage, both in your life and in your business. 

Bruna Martinuzzi is the founder of Clarion Enterprises Ltd. and the author of two books: Presenting with Credibility: Practical Tools and Techniques for Effective Presentations and The Leader as a Mensch: Become the Kind of Person Others Want to Follow.

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Photo: Getty Images

President and Founder, Clarion Enterprises Ltd.