Bad decisions are an unfortunate part of entrepreneurship. Some bad decisions are costly. Some cost money, some cost time, and all of them cost us our own mental space.
Last week, a CEO that I mentor brought forward a story about a bad decision he had made that was costing his business and exorbitant amount of money each month. It led to a discussion about bad decisions – why we make them, why we hang on to them, and how to let them go.
Why We Make Bad Decisions
We make bad decisions primarily for three reasons:
- We choose emotions over logic.
- We lack information.
- We follow the crowd.
If you’ve ever made a decision by “gut feel,” this is exactly what I mean by making decisions based on emotions, rather than logic. It means we’re using our instincts rather than objective, concrete information to make important decisions. “I feel like we are losing a lot of customers,” or, “I feel like we’re not making enough money this month,” are also great examples of making decisions based on emotions.
Our mentors at PDBM work with our clients to track important key metrics, so they can learn to make decisions based on objective measurements. We want to look at concrete numbers and make sure that the decisions we make best reflect what is actually going on.
We also make bad decisions because oftentimes we just follow the crowd. If Joe down the street priced his services a certain way, then that must be right, so I’m going to do it too – but cheaper! It’s easier to follow what others are doing and just assume they are right, rather than doing the hard work of finding out the important information, asking for help, and making objective decisions.
Why We Hang Onto Bad Decisions
So you made a bad decision, now what? Why is it that when we make bad decisions, we always hang onto them for far too long? We notice that this bad decision is now costing us money, or it’s keeping us up at night, but we don’t put an end to the bleeding, we just keep fighting it. We find ourselves saying things like, “I’ll figure it out.” We’re entrepreneurs – we’re natural problem solvers – we dug this grave, so let’s figure it out. Put up your hand if you’re in this boat! Our ego definitely gets in the way of hanging onto this bad decision for far too long.
Secondly, you might hang on to this decision and try to figure it out because you’re too scared of conflict on the other side. You hired a staff member who isn’t working out, but you’re too afraid to fire them because you don’t want to upset them. Maybe you have a customer who is causing trouble in your business, but you’re afraid of losing that revenue. The important thing to understand here is that if it’s keeping you up at night, and causing you enough mental stress (amongst possible financial and time stress), it most likely is having an impact on your other staff members and your other customers.
Lastly, you might not want to cut the problem loose because you don’t know what steps to take on the other side. The fear of the unknown is harder to deal with than the problems that are in front of you currently. Our PDBM Mentors work with our clients to build a “Fire Escape Plan” specifically for this reason.
Think about the purpose of a Fire Escape Plan for a house that’s on fire. It tells exactly what to do if you’re in a bedroom with a closed door, if you’re in the basement, or if you’re just trapped on the upper level. It gives all the steps for every scenario so the person knows exactly what to expect and what to do.
Developing a Fire Escape Plan with a PDBM Mentor can help you deal with the unknowns on the other side.
How To Let Go Of Bad Decisions
If you made a bad decision that you’ve decided you’re going to take action on fixing, follow this framework.
First, we need to take the emotion out of this decision, and we do that with numbers. Find the relevant numbers from pre-decision, to post-decision. If hiring this underperforming staff member is costing you money and you want to fix the situation, let’s make sure this is actually what is happening. Grab revenue numbers, expense numbers, and all relevant customer numbers, and do a comparison. Knowing the black and white metrics will show you whether how you feel is actually true or not.
Secondly, we need to lay the land – aka, Pros and Cons. This will help you map out all the possible scenarios that could happen, and help you play the “what if” game. This exercise basically prepares you for all possible outcomes. The more prepared you are, the less of a surprise they are if they actually happen. If you’re detail orientated, map out your action steps for each of these possible outcomes. This is also where your Fire Escape Plan fits into play. You’ve basically already wrote yourself a playbook for your decision.
Last, have the next move ready. If your decision revolves around terminating this staff member, know what moves you need to take next to decrease the amount of time in between hiring a new person. Have a new candidate in the pipeline, or begin working on your Hiring Hierarchy with your mentor early. We want the next steps to be actionable almost immediately upon terminating this employee. If you’re unsure what the next steps are, our PDBM Mentors can help you map that out. The more prepared you are, the quicker you can execute.
Listen, we all have made bad decisions in our business. It doesn’t mean you need to get caught in this trap of living with the bad decision. It’s time to stop letting these things eat away at your time, your money, and most importantly, your mental space.
Our PDBM team can always help you navigate these murky waters. Book a call with our team here, and let’s see if our mentorship is the right fit for you and your business.