Most of us believe we make good business decisions.
Just for fun, consider this little thought experiment:
- Imagine for a minute that the quality of each of your important business decisions was measured and tracked every month.
- And that you were assigned a “batting average” that measured the quality of each of those important decisions.
Does that sound scary… or exciting?
Imagine a system where each person on your management team had a business decision “batting average” as well. Would that help you assess the value of each person on your team?
Would it scare them to have a batting average based on the results of their important business decisions?
Batting Average and Believability-Weighted Decision Making
At my Financial Rhythm website, I just published a blog post to stimulate your thinking about tracking the results of your (and your management team’s) important business decisions.
I include a few quotes on the subject from Warren Buffett during the 1999 Berkshire Hathaway Annual Meeting that I found thought provoking.
And I included some quotes from the fantastic book Principles, where Ray Dalio talks about a unique concept he refers to as “believability-weighted decision making”.
The Big Idea
The idea is to take an important decision like a capital expenditure or other large purchase or investment and document key management’s expectation of results.
Then create a simple process where you sit down to evaluate results vs. expectation after six months, one year, eighteen months, etc.
Rinse and repeat for future big decisions and see what you find.
I bet you will find that some of your management team are better than others when it comes to the quality of their important business decisions… and outcomes.
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