Principle Based Decisions

Do you have a method of making decisions in your business? That may sound like a silly question, but it’s not.

Everybody Has Their Own Way

The difficulty with making decisions for a company arises largely from the different approaches people use. There are those who make decisions largely on an emotional basis, those who use analysis, those who look at how others have made decisions and people who make principle based decisions. Let’s take a brief look at each method.

Emotion Based Decisions

This is one that is easy to fall into but has considerable shortcomings. Just examine your personal life. How many times in the heat of the moment have you done or said something, only to realize later you were acting out of your emotions. Looking back you may wish you had delayed and more carefully considered the appropriate response. The flaw here is failure to consider and properly analyze the facts. But there is another flaw we will discuss later.

Analysis Based Decisions

People who are analytical by nature have the tendency to be highly reliant on analyzing the facts to make a decision. This of course introduces the opposite of emotion based decisions in that it fails to consider the emotional impact on people. If you are one who thinks that emotions have no place in business, then please tell me how you can avoid them. Another danger to this approach is to spend so much time analyzing that a decision is never made. Like emotion based decision, this method also has the same additional flaw that we will discuss later.

Principle Based Decisions

Principles are often thought of as generally accepted rules. Yet, those generally accepted rules could in fact be wrong. The principles I am referring to here are a general law or truth. In science, the principle of causality is an accepted truth, yet like other “first” principles of any discipline, it cannot be proved but only observed in operation. However, without assuming it to be true, science could not be practiced.

When it comes to business decisions, it is wise to have a set of principles that you adhere to a closely as possible. This is the additional flaw in both pure emotion based and analysis based decision making. Principle based decisions require the adherence to a set of standards that are over-arching and impact the development of policies and procedures. Let me elaborate with some examples of principles that a business may use to make decisions.

  • Truth matters. All employees should demonstrate a high level of integrity
  • Employees matter. Any action taken by the company should consider this
  • Customers matter. Without them there is no business. How will a decision impact them?
  • Vendors matter. Like customers, they are necessary to operate a business

This is just a brief list and is not intended to be all-encompassing. The point is that things like truth (integrity), employees, customers, and vendors should be foundational to decision making.

The nice thing about principle based decisions is that they present a basis for performing a meaningful analysis (think of the integrity issue) and they also encompass the emotional impact (think employees, customers, and vendors matter). Unchanging principles are the starting point for sound decision making.

Does your company have a set of principles, and, if so, are they clearly communicated to management and employees?

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.


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