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Four Tough but Essential Decisions Every Business Leader Must Make: Who, What, Why & How?

“Why do I have to do it?” That was what my friend’s daughter provocatively asked him recently. She didn’t want to do something he had requested of her and like many kids was now questioning his reasoning as well as his authority.

This happens in the work environment too. When you are the boss, your team members are likely to sometimes ask you a similar question. And whilst it may be done less bluntly, they will still be questioning your reasoning and authority.

Last week I spoke about honesty in the workplace and it caused a lot of discussion online and in various LinkedIn groups. This week I want to speak about the difficult decisions we, as leaders, are sometimes forced to take.

Organisational structure

Individuals are all too often promoted for good performance in their current positions and not for their people-management skills or because their abilities are suited to the future positions. This is coined the “Peter Principle” in management theory, named after Laurence J. Peter. His book on the topic, co-authored with Raymond Hull, suggests that people tend to get promoted until they reach their “position of incompetence”. In fact  it has been shown that CEOs who fail are quite often found to have made poor people choices  that they have then been unsuccessful in dealing with appropriately.  (>>Tweet this<<)

True leaders accept mistakes, both theirs and their teams, and personally own their bad decisions. However, that doesn’t just mean firing the under-performing employee. It also means firing someone that doesn’t “deserve” to be fired, just because your priorities have changed. It also means taking the time to explain why; no hiding behind HR to do the dirty work or just h anding over the official letters in silence. Taking the responsibility of one’s acts can sometimes be painful, but that’s what distinguishes a true manager.

Portfolio management

In the garden, you keep your plants healthy by regularly trimming them. You remove the dead wood and cut back the longer stems so the plant will bush out and have more new growth and flowers. The same is true in business.

Both P&G and Unilever have done some radical pruning of their br ands over the years. P&G has around 300 br ands today, a third less than just a decade ago. And Unilever continues to frequently reduce the number of its stock-keeping units (SKUs). Since introducing its “ Path to Growth” initiative almost fifteen years ago, the number of its br ands has been culled from 1,600 down to just 400.

Retail organisations are no longer willing to offer increased space for ever-exp anding numbers of br ands and variants. This is especially true in recent years with the start of a clear increase in the numbers of supermarket chains offering smaller stores. Therefore it makes sense to regularly review your own portfolio and cut the “long tail” of slowest movers. The “Pareto Principle” or 80-20 rule helps a lot to make these difficult decisions.

People management

Most major organisations go through periods of growth followed by times of headcount reduction. These latter cutbacks often result in emotional pain for many of the previously loyal employees, and often for the staff who remain too. You would think that someone would notice these cycles and come out with a better way of managing a workforce.

Personnel cuts are usually claimed to be for cost-cutting reasons, but are all too often followed by new hiring initiatives within months if not even weeks of the event! Now I underst and that staffing needs change and new projects may require new skills. But I blame management for being short-sighted when they make such layoffs. Whilst a business needs a core of different staff functions, the requirements of short-term projects should be met with temporary hires. This will avoid the costly practices of first hiring and then firing staff shortly afterwards.

Luckily young professionals are looking for more freedom in their careers today than my security-seeking generation ever were. Therefore why not identify your own staffing cycles and take advantage of this trend to find alternative ways of meeting temporary skill requirements?

Resource allocation

Almost every department must occasionally defend both its headcount and its budget. Whilst intellectually we may underst and that we can’t have it all, we still complain when seeing others getting more than they need (or deserve?).

Unfortunately too many businesses set their goals by looking in the rear-view mirror (>>Tweet this<<), rather than by contemplating plausible future scenarios. Basing tomorrow’s needs on what was done last year, or worse still on what competition did, guarantees that budgets will not be available where they are most needed. If however resources are managed from the top down, in line with company rather than personal objectives, the business is more likely to get to where it is headed. How do you manage yours?

These four decisions are amongst the most difficult a leader will ever have to make. To summarise, they cover the who, what, why and how you run your business. It is in making these tough decisions that leaders prove why they are where they are. What decisions have you found the toughest to make in your own career and why?

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