Today I will once again turn to Peter Drucker, the “father of modern management,” regarding how to make effective decisions.

As he notes in The Essential Drucker,

“Effective people do not make a great many decisions. They concentrate on the important ones. They try to think through what is strategic and generic, rather than ‘solve problems.’ They try to make the few important decisions on the highest level of conceptual understanding.”

It’s important to remember that each decision we make zaps a bit of our energy. It’s called decision fatigue, and if you spend all your time making trivial decisions, you won’t have nearly as much mental energy and focus to concentrate on the big ones. Instead, such decisions should become routine, systematized, or delegated whenever possible.

There are, of course, decisions that you will have to make. Drucker outlines the following five steps to the decision process:

1. “The clear realization that the problem was generic and could only be solved through a decision that established a rule, a principle.”
Drucker recommends first asking, “Is this a generic situation or an exception?” If it’s truly generic, it’s probably fairly simple and routine and possibly trivial. When possible, it is best to delegate such decisions or do them as your routine/system specifies.

So if you get an application from a renter who has a recent eviction and your policy is not to rent to people with recent evictions, well, that decision is obvious. In fact, it doesn’t really qualify as a decision. You just apply the procedure. Similarly, if it’s a generic decision but you don’t have a policy or procedure in place for it, this is a good time to put one together.

2. “The definition of the specifications that the answer to the problem had to satisfy, that is, of the ‘boundary condition.’”
Here you are asking, “What are the minimum goals it must attain?” The minimum is known as the “boundary condition.” If the question in front of you is whether or not to move to a fancy new office even though your current one is sufficient, ask yourself, “What is the goal here?” If your overall goal at this time is to cut costs, such a move is probably not a good idea.

Drucker makes a special point to warn about “the most dangerous of all possible decisions.” This is a decision that “…might—just might—work if nothing whatsoever goes wrong.” Entrepreneurs are often overly optimistic, which often comes back to bite them. Don’t ever make a decision that needs every little thing to go right in order to work. Something always goes wrong.

Keep reading the article “How to Make Effective Decisions in Business and in Life” here:
https://www.biggerpockets.com/blog/how-to-make-effective-decisions

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