Business Decision Making

By Bozidar Kralj, on March 18th, 2011

Business Decision Making – The Different Way

Business decision making should be tightly aligned with measuring decisions and possible impacts on business results, financial and non-financial, before appliance. Key thought is measurement and comparison of measured results. Without measurable and comparable results making decisions is pretty much like fishing in muddy water.

Financial measurement means calculating and estimating financial figures like: revenues, costs, profit, EVA and other financial ratios. Non financial measurement means calculation and estimation of sales, process, market, customer or any other business quantity figures.

Decisions need to be measured before their appliance. They have to be compared with major financial and business ratios and best is to compare decisions upon Economic Value Add (EVA).

Major Business Decision Making Problems

Briefly, 3 top business decision making problems are:

Non integrated information, especially Key Performance Indicators and Financial Statements
Information errors, Doubtful data quality, Information Distortion
Lack of measuring and simulating capabilities, static simulations and long implementation periods

Is it possible to make rational strategic or tactic decision based upon named issues? It would be very hard. Decisions would be based upon own Information Systems and they are not quality Decision Support Systems. Decision would be more based much more on management feeling and experience. Such decisions are hardly measurable in details and comparable with company Reporting and Planning systems.

Current business solutions to measure decision making results

There are several solutions that measure decisions and decisions before implementation like: Business Performance Management, Management Information Systems, Decision Support Systems and finally different variations of Business Intelligence platforms. Within those large solutions common “window” to make decisions are Dashboards, Key Performance Indicators, models (Activity Based Costing, EVA, Six Sigma, Balance Scorecards) and of course good old hard copies of corporate reports with financial statements and business figures prepared by comptrolling (controlling departments).

Current IT solutions are not good for effective business decision making. Effective decisions are differently structured and modeled and current solutions can not follow with built functionalities. To reed more download our Free Business Intelligence PDF.