How To Make Sure You Made the Right Business Decisions

One of the great things about being president of a company is that you can, within reason, do whatever you want. You don’t have to ask anyone or get permission. Of course, that depends on the magnitude of what you want to undertake, but for the most part, you get to call the shots and make all the decisions.

But leaders don’t always make good decisions, even when — and sometimes especially when — they’re in the top job. They make emotional decisions, not objective ones. They’ll make a decision based on how they feel at the moment, and then find out later that they made a bad one, and they have no way they can objectively support the decision they made.

More importantly, bad decisions probably have a bigger negative effect down the organizational chart than it does going up.

Three darts stuck in a dartboard. Sometimes it seems this is the best way to make decisions. And it's all you have if you don't measure your results.That’s because it’s the downstream people who are left to deal with the outcome of the bad decision, even though they knew it was a stupid thing to do in the first place, and you’re left with a real problem. Not only did the leader make an uninformed, emotional decision, but they’ve lost a lot of credibility in the eyes of the associates underneath them.

This is where objective measurements could make all the difference.

It’s important that you measure every new decision so that they’re made on objective data, not on opinion or emotion. Then, when you begin to analyze the results of your decision, you can pinpoint whether the decision was actually a bad one (in which case, the project should be abandoned immediately), or if there are problems with the execution.

Bottom line: If you’re going to make an important decision that will affect the company, figure out how you’re going to measure it, set up the analysis mechanism, and then define what success and failure will look like.

Set milestones and goals along the way, so you can spot negative and positive trends right away, rather than waiting until the end of a test period — Six months? One year? Can you imagine the disaster if you left a bad decision in place for a year? — to know whether this is a success or failure.

How We Proved Our Decisions Were the Right Ones

I’ve talked in the past about the Duoline factory rebuild we did several years ago, where we basically knocked down an entire factory that employed 140 people building fiberglass liners for oil field tubulars. We built a new factory that was almost fully automated, employed 19 people, and quadrupled its previous output.

In that case, I was fortunate enough to be in the position to say “I’m going to do this and we’ll see what happens.” I said I was fed up with terrible technology and bad employees. We would lose 20% of our workforce every time we had a random drug test, and our error/scrap rate was costing us $2.5 million per year.

So I said that if we were going to build a new facility, we had to be able to improve our capacity by a minimum of four times, and it had to have every one of the operations in one footprint and under one roof. (The previous facility was scattered over 23 acres.)

Also, the product could only be touched once during the creation. In other words, it couldn’t go backwards and forwards to be adjusted and tweaked. It had to be done right the first time.

Right away, we had created our expectations for measurement. We had established our goals — 400% increase in productivity and everything in one large building — and so we could start designing and building everything to get us to that goal.

We also knew how to tell if we were making those rates. One of the ways was to use an automated system that had all kinds of measurement sensors built into it so we could measure the results immediately and calculate the ROI on the automation.

Then, we could measure our daily and weekly results against the milestones we had set up to tell if we were on schedule. We didn’t have to look at the production numbers at the end of a quarter or a year, we knew every single day whether we were on track to meet the goals. If things were behind schedule, we could increase the number of shifts. If we were ahead of schedule, we could sit back and relax continue on and try to exceed our goals.

When it was all said and done, given all of our savings — 19 associates, not 140; no environmental remediation costs; waste costs of $250,000 — we saved nearly $3.5 million per year and paid off the entire redesign in eight short years.

And by setting those goals and milestones to begin with, and then measuring our progress on an ongoing basis, we were able to measure them and determine whether we were meeting them from the outset.

I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own company by making the right decision. If you would like more information, please visit my website and connect with me on Twitter, Facebook, or LinkedIn.

Photo credit: PeterPan23 (Wikimedia Commons, Public Domain)

Author: David Marshall
I’ve been a manufacturing executive, as well as a sales and marketing professional, for a few decades. Now I help companies turn around their own business. If you would like more information, please visit my website and connect with me on Twitter or LinkedIn.