9 habits that lead to terrible decisions (Harvard Business Review)

By Jack Zenger & Joseph Folkman

Source: https://hbr.org/2015/03/tips-for-coaching-someone-remotely   March 18, 2015.

Several years ago we came up with a great idea for a new leadership-development offering we thought would be valuable to everyone. We had research demonstrating that when people embarked on a self-development program, their success increased dramatically when they received follow-up encouragement.  We developed a software application to offer that sort of encouragement. People could enter their development goals, and the software would send them reminders every week or month asking how they were doing, to motivate them to keep on going. We invested a lot of time and money in this product. But it turned out that people did not like receiving the e-mails and found them more annoying than motivating. Some of our users came up with a name for this type of software. They called it “nagware.” Needless to say, this product never reached the potential we had envisioned. Some possibilities came immediately to mind – people make poor decisions when under severe time pressure or when they don’t have access to all the important information (unless they are explaining the decision to their boss, and then it is often someone else’s fault). But we wanted a more objective answer. In an effort to understand the root cause of poor decision making, we looked at 360-feedback data from more than 50,000 leaders and compared the behavior of those who were perceived to be making poor decisions with that of the people perceived to be making very good decisions. We did a factor analysis of the behaviors that made the most statistical difference between the best and worst decision makers. Nine factors emerged as the most common paths to poor decision making. Here they are in order from most to least significant.

Laziness. This showed up as a failure to check facts, to take the initiative, to confirm assumptions, or to gather additional input. Basically, such people were perceived to be sloppy in their work and unwilling to put themselves out. They relied on past experience and expected results simply to be an extrapolation of the past.

Not anticipating unexpected events. It is discouraging to consistently consider the possibility of negative events in our lives, and so most people assume the worst will not happen. Unfortunately, bad things happen fairly often. People die, get divorced, and have accidents. Markets crash, house prices go down, and friends are unreliable. There is excellent research demonstrating that if people just take the time to consider what might go wrong, they are actually very good at anticipating problems. But many people just get so excited about a decision they are making that they never take the time to do that simple due-diligence.

Indecisiveness. At the other end of the scale, when faced with a complex decision that will be based on constantly changing data, it’s easy to continue to study the data, ask for one more report, or perform yet one more analysis before a decision gets made. When the reports and the analysis take much longer than expected, poor decision makers delay, and the opportunity is missed. It takes courage to look at the data, consider the consequences responsibly, and then move forward. Oftentimes indecision is worse than making the wrong decision. Those most paralyzed by fear are the ones who believe that one mistake will ruin their careers and so avoid any risk at all.

Remaining locked in the past. Some people make poor decisions because they’re using the same old data or processes they always have. Such people get used to approaches that worked in the past and tend not to look for approaches that will work better. Better the devil they know. But, too often, when a decision is destined to go wrong, it’s because the old process is based on assumptions that are no longer true. Poor decision makers fail to keep those base assumptions in mind when applying the tried and true.

Having no strategic alignment. Bad decisions sometimes stem from a failure to connect the problem to the overall strategy. In the absence of a clear strategy that provides context, many solutions appear to make sense. When tightly linked to a clear strategy, the better solutions quickly begin to rise to the top.

Over-dependence. Some decisions are never made because one person is waiting for another, who in turn is waiting for someone else’s decision or input. Effective decision makers find a way to act independently when necessary.

Isolation. Some of those leaders are waiting for input because they’ve not taken steps to get it in a timely manner or have not established the relationships that would enable them to draw on other people’s expertise when they need to. All our research (and many others’) on effective decision making recognizes that involving others with the relevant knowledge, experience, and expertise improves the quality of the decision. This is not news. So the question is why. Sometimes people lack the necessary networking skills to access the right information. Other times, we’ve found, people do not involve others because they want the credit for a decision. Unfortunately they get to take the blame for the bad decisions, as well.

Lack of technical depth. Organizations today are very complex, and even the best leaders do not have enough technical depth to fully understand multifaceted issues. But when decision makers rely on others’ knowledge and expertise without any perspective of their own, they have a difficult time integrating that information to make effective decisions. And when they lack even basic knowledge and expertise, they have no way to tell if a decision is brilliant or terrible. We continue to find that the best executives have deep expertise. And when they still don’t have the technical depth to understand the implications of the decisions they face, they make it their business to find the talent they need to help them.

Failure to communicate the what, where, when, and how associated with their decisions. Some good decisions become bad decisions because people don’t understand – or even know about — them. Communicating a decision, its rational and implications, is critical to the successful implementation of a decision. Waiting too long for others’ input. Failing to get the right input at the right time. Failing to understand that input through insufficient skills. Failing to understand when something that worked in the past will not work now. Failing to know when to make a decision without all the right information and when to wait for more advice. It’s no wonder good people make bad decisions. The path to good decision making is narrow, and it’s far from straight. But keeping in mind the pitfalls can make any leader a more effective decision maker.

6 funding strategies to start a business when you’re low on money (entrepreneur.com)

By Deborah Mitchell

Source: http://www.entrepreneur.com/article/242901 April 06, 2015

When I unexpectedly lost my job at CBS News five years ago, I decided to start my own business. With a few dollars saved and a 401(k), I hunkered down, hung out my shingle, and Deborah Mitchell Media Associates, LLC, was born.

With a new business comes new financial responsibilities added on to the old responsibilities of a mortgage, monthly bills and food. As a television producer I have done hundreds of stories on reinvention and being an entrepreneur, but there is nothing quite like going through it in real life. The biggest surprise in starting a business is how fast I burned through money.

“Starting a business from scratch can be a daunting task, especially if one has limited funds,” says trading coach Geoffry Wong, who has 20-plus years of experience working with Goldman Sachs and now works with a select group of private clients. “In today’s world, one must understand that branding yourself is very important. Make sure you are an expert in your field.”

Since my parents were not in a position to fund my entrepreneurial dreams, I asked Wong to outline a few ways anyone can launch and run a business when family funding is not an option:

  1. Determine how much money you need. 

How much money do you really need? Wong says a new business owner has to come up with a valuation of the company’s worth — and that’s very difficult in the corporate world. Start by asking yourself how much you can actually produce. You don’t know because you have never done this on your own. You can bill a certain amount of hours, but you have no client base, and you’ll have to go out and get it. Coming up with a concrete business idea, being able to show that there is profitability after everything else is paid, and keeping the overhead low are things you must carefully consider.

  1. Keep business overhead low. 

Everything — rent, computers, office supplies, utilities, etc. — will be an expense even before you start making profits. This is more commonly known as burn factor. You might have to work from your home or apartment instead of having a fancy address. This will save you money. Every business owner we talked with all echoed the same theme: Keep your overhead at the lowest level possible. For example, if you must rent a building, look in an area that is a little more marginal than the heart of the city.

  1. Approach friends and extended family. 

If your parents or siblings do not have the financial ability to help, look to grandparents, aunts and uncles, cousins and friends. Go to them with a great business plan in terms of future expectations of cash flow, revenues with profit potential, and figure this whole thing out after all your expenses are paid. A creative way to entice your friends and extended family to help is to have them invest $1 per share. Let’s say you need $10,000. A friend could invest and buy 1,000 shares for $1,000, and he would own 10 percent of the company. Limit the amount of shares so that you maintain majority of ownership. Should your company produce a profit, you could offer a second round and sell shares for $2 each, which would enable the initial investors to buy out at a profit.

  1. Borrow from the bank. 

This is probably the hardest thing to do because of the regulations of the banking community. They don’t want to lend money anymore because they got hurt in the real estate market. People were buying homes with no money down and the domino effect happened. Those with limited credit couldn’t pay back the money and went into foreclosure, and the banks had to eat those notes.

Now, bank requirements are so strict that it’s almost impossible to get a mortgage — or to get any sort of money from the bank — unless you have a perfect credit score.

  1. Look to crowdfunding. 

When friends and family are not an option, you can always resort to crowdfunding. The concept consists of amassing small amounts of money from total strangers who believe in your ideas and are swayed by your brand’s story. Many online companies offer the platform, most notably Kickstarter, Indiegogo and Crowdfunder. But don’t confuse this with easy money. For your story to reach the masses, you have to actively promote it on social media and get as many people as possible to talk about it and pay for it.

  1. Tap into your 401(k). 

Check with your accountant, but you can borrow a certain amount of money from your IRA as long as you pay it back the next year. You get penalized if you don’t. That’s not the worst thing in the world if you have at least $100,000. But tapping into your 401(k) is a last resort because that’s money that goes to you tax free. In all these cases, a written agreement is important.

“You just want something that’s very general: interest rate, duration of time, the repayment schedule if it’s a loan. It’s imperative,” Wong says. “When you mix friends, family and money, it can be a dangerous combination, so make sure it’s spelled out in a contract. People should keep in mind that even with friends, if the company goes belly up for some reason, people you owe money to are not going to be happy. You want to put up a fairly decent contract to protect yourself.”