The heart of good decision-making is balancing clarity and convicition

Not so long ago, there was a widespread view that Britain’s smaller businesses would escape the worst effects of the “credit crunch”. The further you ventured from the City of London and into the “real economy”, the less people worried about sub-prime loans, bank rates and the link ,went the thinking.

This may well be true. But it is no longer safe to assume that small and medium-sized businesses will be immune from the slowdown in the economies of Britain, America and elsewhere. Whether things will turn out to be as bad as Mervyn King, the Governor of the Bank of England, and others suggest, remains to be seen, of course. In the meantime, though, the feeling of gloom is strengthening and – as is inevitable with these things – is developing its own momentum. After all, one man’s cautious belt tightening is another man’s ruin.

It is obvious that through no fault of their own, many sound businesses – of all sizes – are going to come under pressure. The question is what they do about it. Many will seek to expand beyond territories currently feeling the pinch. The entrepreneur Luke Johnson has pointed out in a recent column that, although this looks a decent strategy, it can be highly risky. Reminding readers of the axiom of business that the more remote an investment the more likely you are to be ripped off, he suggests it is better to stick to what you know and can see.

Related articles

• Drop and give me 20!
• Accounts, patents and responsibilities
• New school tie network
• Jargon buster
• 'The scope for growth is huge'
• News In Brief
• 'To work together for 20 years, the chemistry must be right'
• Many happy returns

Others will batten down the hatches in the hope that the banks will soon retreat from their over-reaction to some ill-advised ventures and resume business as usual. The problem with this is nobody is willing to predict how long such a business is likely to have to hunker down in its bunker. The danger is that it dies a slow death before relief arrives.

Whatever happens, business leaders are going to have to take some tough decisions over the coming months – which businesses to wind down, which operations to develop, which people to let go etc, etc. So it is helpful that a new book entitled Making Difficult Decisions (Capstone, £14.99) has just been published. Its author, Peter Shaw, is an accomplished business coach and it is likely that the main readers are thought to be those at various levels of seniority in the sort of corporations that firms like his advise. But heads of smaller businesses, who are often faced with having to make crucial decisions on their own, could benefit from advice in this area.

Such a suggestion might be resisted by many entrepreneurs. After all, it is commonly thought that it is their decisiveness that has played a key role in helping them to succeed. That may be partly true, but to be successful a business leader – or anybody else for that matter – needs to be decisive in the right way. In other words, it is no good being totally committed to the wrong choice. Making the right choices is what the book is really about. Shaw, a former senior civil servant, says that “the heart of good decision-making is balancing clarity and conviction”. He adds: “It is the interplay between analysis and beliefs, logical thinking and the ‘gut’ reaction that is at the heart of how we make decisions.” Once made, the decision needs to be carried out with courage and communication.

Entrepreneurs are generally good at the “gut” bit. They have a hunch something will work and “go for it”. They also tend to have courage – to give up safe employment, to bet the farm on a venture. But it is the other bits – analysis, logical thinking – that can sometimes be lacking, and which a reading of this book can assist in developing.

They will certainly be useful in the coming tough times – and could also help the reader get a jump on the opposition when conditions improve.

^{# More information}

^{For more information on Business Monthly, or if you have any comments regarding the supplement, please write to Business Monthly, The Independent, 191 Marsh Wall, London E14 9RS, or e-mail businessmonthly@independent.co.uk.}