How Top CEOs Make Decisions

Sunday, September 1, 2013 - 10:17

CEOs reveal some of the most successful business decisions come from having great staff. By Amy Birchall

The most crucial role in any enterprise is usually the CEO because she or he is responsible for determining strategy and providing leadership. And while the choices they make may not always have ideal outcomes (as the leadership teams at Lehmann Brothers, General Motors – before their 2009 Chapter 11 bankruptcy – and Kodak may attest), each business leader has a unique approach to decision-making.

Take Amazon founder Jeff Bezos, for example. He believes informed decisions are so important he makes his senior executives read six-page printed memos, called narratives, in silence for up to 30 minutes at the beginning of meetings. He claims this helps the company make better decisions because it guarantees the group's undivided attention and promotes clear thinking.

"Full sentences are harder to write. They have verbs. The paragraphs have topic sentences. There is no way to write a six-page, narratively structured memo and not have clear thinking," Bezos told Fortune.

Former Apple CEO Steve Jobs believed good staff needed to be trusted to make decisions, rather than allowing those at the top to call the shots."If you want to hire great people and have them stay working for you, you have to let them make a lot of decisions and you have to be run by ideas, not hierarchy. The best ideas have to win, otherwise good people don't stay," he said.

Mt asked CEOs, start-up founders and global directors about how they make decisions. Some, such as the newly appointed Australian global CEO of research agency Millward Brown, Travyn Rhall, says the biggest challenges were making and implementing decisions quickly. Others said they based their decisions on extensive consultations with employees. None admitted to acting on gut feeling or intuition alone.

Difficult decisions are no stranger to social entrepreneur Rebecca Law, who abandoned a high-level corporate career to found marketing business Nourish Co. midway through last year.

"I was a senior marketing manager, and had the opportunity to take a significant promotion at a senior leadership level. I realised if I took the promotion, I'd be on that ladder forever. So I decided to jump off," she says.

Within six months, she went from earning nothing to six-figures, and says smart decisions have played a key role in her success.

"Two years ago, developed a set of principles that both define how I live my life and the foundations of our business. One of these principles is courage – too often I have seen decision-makers take a safe position or avoid making tough decisions at the expense of great opportunities.At Nourish Co., we make decisions that might not always seem sensible, but as long as we can say we've acted with courage we're happy to take the chance," she says.

"Stay true to your vision and the principles on which the business is founded, and you won't ever regret a decision, even if occasionally they don't turn out as you planned."

An emphasis on consultation throughout the decision-making process is particularly important for Stephen Borg, global director of strategy and market development at electronics manufacturer AOPEN.

"The decision process varies depending on the urgency and impact of the decision, but at any level I always encourage collaboration, whether that be with clients, partners or other team members," he says.

"Our business is fast-moving, so decisions often need to be made quickly. This means you have to rely on a mixture of gut feeling and a deep understanding of the market to make a decision." Borg leaves difficult decisions until after morning exercise."I get most clarity during that time and it takes away some of the emotion of the decision. It helps me to avoid knee-jerk reactions," he explains.

Founder of financial product comparison website Fred Schebesta adopts a similar approach. He asks others for input before making decisions, particularly when the outcome will directly affect them. He also seeks evidence that the outcome of the decision will align with company goals.

"If there's no evidence to back up this decision, it never hurts to create some and conduct a small experiment to guide the final decision," he says.

Gary Swart, CEO of the world's largest online workplace, oDesk, believes making any decision is better than no decision at all. Whether the outcome is positive or negative, he says that once a decision is made, "everyone on the team must get behind it".

Other business leaders, such as chief executive of Australia's leading online furniture retailer Milan Direct Dean Ramler claim that familiarity with every aspect of the business means it is easy to make smart decisions.

"When team members come to me for assistance, I can quickly make a decision hat steers Milan Direct in the right direction because I'm all over the finer details of the business," Ramler says.

"Some people would call this 'gut feeling', but I would say it is more about an understanding of your business that allows for quick decision-making." The decision-making process can also vary depending on a company's size and revenue.

For cofounder of travel search website Adioso Tom Howard, making decisions on a lean, start-up budget presents its own unique challenges and opportunities.

"When you're cashed-up, it's very easy to make decisions that involve throwing money at problems. But by staying scrappy and lean, you can only ever make decisions that cost little money, and so all you have to think about is which of your options will deliver the biggest upside," he says.

Adioso, which was founded in 2008 and received seed funding from Silicon Valley and travel industry investors, almost went broke after its founders were unable to access the airline data required to build the product. Howard says looking for the best outcome with the fewest downsides helped keep the business afloat. To compensate for a lack of airline data, they redesigned the product.

"When faced with the decision of whether we should persist in building the company, it actually turned out to be pretty easy – the cost of continuing was just more of our time and enough funds to cover our living expenses, while the upside was we'd be ahead of the curve in the travel market and be in a position to generate huge growth and success."