Emotions and Decision Making
Small business/SME ownership and management is often very personal. Many see their venture as more than just a way to make money. It is also a reflection of their passion, aspirations, commitment, and enthusiasm. Although being emotionally invested fuels motivation as well as innovative thinking, it can also impair one's ability to make rational choices in important situations. Decisions based solely on feelings instead of rational thinking can result in errors, overlooked opportunities, or financial losses. So, how can small business owners and managers reduce emotional distractions and make rational, objective choices?
Recognize The Impact of Emotions
Understanding the role of emotions is the initial step in removing emotions from decision-making. Emotions are often seen as natural and can be advantageous in many situations. Action can be driven by excitement, whereas concern can aid in identifying risks. Uncontrolled emotions such as anxiety, anger, or excessive confidence can result in hasty or ill-advised choices. Remember, analyze data and metrics, but keep intuition available.
Create A Decision-Making Framework
A structured framework can aid in separating feelings from the decision-making process. If using a structured framework, decisions are based on data and logic and not “gut” feelings by carrying out a consistent procedure.
A typical structure might involve:
This methodical approach reduces the chances of making hasty decisions influenced by feelings.
Seek Outside Opinions
Emotional decision-making is heightened when isolation is present. Stress as well as anxiety can impair a business owner's (or manager’s) ability to make clear decisions when confronted with challenges on their own. Seeking input from reliable outside sources can offer new viewpoints and help counteract emotional biases.
Even casual conversations with colleagues can uncover areas of oversight and produce different approaches. Employees, also, can offer useful perspectives that reflect the actual situation in the workplace, making their input highly valuable to the business. Use available resources.
Recognize Emotions
Developing the ability to recognize and manage one's emotions is important for making rational decisions and avoiding being controlled by emotions. Individuals who better understand their emotions and can identify when their feelings are impacting their decision-making allows them to redirect their focus to make rational decisions rather than emotional decisions.
Establish Specific Objectives
Establishing specific objectives as well as measurable indicators can help guide decision-making that is based on a strategic vision rather than immediate feelings. For example, if the main goal of the business is to boost profitability by 15% within the year, any decision can then be compared to that standard.
Having clearly defined goals makes it much easier to support decisions by ensuring they are in line with these goals, therefore decreasing the likelihood of making emotionally driven choices.
Reduce Number of Decisions
Making too many decisions can result in decision fatigue, causing individuals to make choices based on emotions rather than logic. Due to decision fatigue, individuals tend to be more prone to taking shortcuts or acting on instincts instead of conducting thorough deliberations. Combat decision fatigue by:
Learn from the Past
Reflection based on past decisions is an effective strategy to improve future decision making. Reflecting on the past is a great way to recognize recurring emotional biases by reflecting on previous achievements and/or setbacks.
Conclusion
Although emotions play a crucial role in small businesses and SMEs, owners and managers need to find a middle ground between their passion and being objective. Management can make more logical decisions and reduce emotional influence by using the strategies discussed above. Over time, owners and managers using these strategies will be able to detach emotions from the process of making decisions.