Decision Making: Who Calls The Shots In Your Small Business?
Recently, I read an article in the Economist about sports. What do sports and small business have in common you may wonder. Well, they have at least one blatant topic in common: decision making.
Imagine this. The sports team of your choice played a great season, put in tough work, and made it all the way to the finals. You’re watching the decision making game, and your team is on foreign ground; they’re the away team. The referee calls favour after favour for the home team and eventually your team has lost. What despair; what an awful ref! But maybe it isn’t the referee’s fault. Let me explain…
Referees and small business owners alike have trouble making their own decisions, whether they are willing to admit it or not. The reason is subconsciously we depend on crowd-sourcing, which consists of making decisions by picking up on the home team’s fans and energy. In business, economists coined the term anchoring, which means that professionals have a tendency to be overly influenced by outside suggestion. Do you find yourself easily influenced by outside opinion, the media or your competitors? You’re not alone.
Another topic covered in the Economist editorial was that of loss aversion. Loss aversion is the concept that people care more about evading a loss than about producing a similar-sized gain. Why are we as small business owners putting our efforts into avoiding loss, when we could be putting that same energy, if not more, into producing profits? It’s a question that we entrepreneurs must ask ourselves; profit or loss? I’m with profit (of course); see you at the finish line.