Making Decisions

Every business faces challenges in making sound decisions. Among the many questions that have to be dealt with every day are: "Which new product should we develop?" "When should it be introduced?" "What quantities should we manufacture?" "Which trade shows are worthy of the expense?" "Which rep group should we hire?" "How much of a discount should we offer a key retailer?" … And on and on it goes.

Some businesses make all their decisions based solely on "the numbers." They analyze the smallest particle of information, mining reports for every detail, even to the point of becoming "reportaholics." On the other hand, there are those not comfortable making decisions by the numbers. Their actions are based on intuition. They hear voices telling them what to do, like psychic Jonathan Edwards when he hears the voice of dear departed Aunt Millie from the great beyond telling him that the guest on his show forgot to turn off the bathwater. Still others give up control of the analytical or intuitive process altogether, leaving peers, friends, or staff members to make decisions for them.

Our industry is filled with successful companies started by entrepreneurs with little business background who took a leap of faith based on intuition. Some of them actually feel that by looking at the numbers they will undermine confidence in their own intuition, and make bad decisions.

You may be one of those who says, "I started my business on a hunch, and have been making decisions that way for ten years. I'm not going to start looking at the numbers now." Or maybe you're the other type who says, "I never read a creative publication for inspiration or needed to trust my gut feelings. The numbers tell me exactly what to do."

These examples represent the opposite ends of the spectrum of how business management decisions are made. If you occupy one or the other of these ends, and you are confident in your process and consider your business successful, then more power to you. You've found a process that works. However, not everyone is so confident. Most would like to add a little intuition to their analytical process, or use a little numbers analysis along with their "hunching" process.

Clients often ask how I, Barney, as a sales consultant, arrive at my assessments of their business and the strategic recommendations I make for them. I wish I could say that it just comes to me in a dream, but frankly it takes a lot more work than that. My process is strongly rooted in hard statistical analysis of historical market trends tempered by hard-won intuition.

Clearly I'm not a psychic. If I were, I'd have sold all my investments in 1999, or retired with my Lotto winnings. But I do have a process that distills information and accounts for experience. When it comes to information, I compare sales by item, category, and year. I factor in the addition or attrition of a business' accounts and sales representatives. I make adjustments for significant sales increases caused by the introduction of new product categories or the acquisition of new key accounts. As all good businessmen, I also take into account the dynamics of political events, and their possible impact on the economy. (For example: War is generally bad for business in our industry, unless you're a manufacturer of U.S. flags.)

Finally, I look to see what the competition is or is not doing, and how well they are — or aren't — doing it. I always compare the number of stores the competition is in, the square footage they have acquired in those stores, and even their rate of turn at retail. These numbers are all grounded in measurable quantities and precedents, from which reasonably accurate predictions can be made. Good management techniques require good information.

But, admittedly, luck and intuition have their own part to play. After I've gathered all the necessary information, I then hone my decision-making process by enhancing my analysis with quite a bit of intuitive "experience." For me, this means keeping abreast of what the trends are in fashion, as they typically trickle down to other industries. I also watch what's happening in the entertainment industry, as movies and music are great indicators of future consumer trends.

Periodically I venture into neighborhoods that are the breeding grounds of progressive urban culture. Manhattan's East Village, for example, often serves as a kind of cultural petri dish, brewing trends that can "trickle up" to the broader culture. I also keep in touch with knowledgeable industry peers and people outside the industry to get their opinions on my insights. Anything that can give you another avenue to reflect on your business and where it fits within the market will provide valuable insights to help your business — and also help hone your intuition.

In the end, there isn't one "right way" to make decisions, The best advice I can give is to assess the opportunities, evaluate information carefully, and develop a sense of intuition. And if you're lucky, somewhere between the purely analytical and purely intuitive, you'll find "the zone" where the right decisions seem to come to you as if you're psychic.

I've got to go now. My wife just told me Aunt Millie is on the line … calling from the great beyond.