Decision-Making Strategies for Your Toughest Financial Challenges

decision making strategies

Decision-making strategies are essential to managing your toughest financial challenges. Consider three tips from "The Hard Thing About Hard Things."

For financial leaders, it's critical to have smart decision-making strategies for your organization's toughest financial challenges. In "The Hard Thing About Hard Things" by venture capitalist Ben Horowitz, the author shares his experience as both a CEO and an investor, navigating the challenges that motivational business books rarely touch. Financial leaders regularly face mission-critical decisions around how to allocate resources, hiring and firing talent, and communicating about the firm's current financial position.

Here's a closer look at three strategies Horowitz recommends to help you address some of the toughest questions you face and how to capture the potential ROI from strong, confident financial leadership.

Deciding How Much to Share to Build a Culture of Trust

What decision-making strategies do you use to decide how to share financial information? For example, if you're facing a down quarter that could have a significant impact on your personnel decisions, how is that communicated to your team? Horowitz advocates for honesty and transparency, as much as possible. He notes that leaders often feel it's better to keep negative information from their teams to protect them and not let negative projections distract them.

Trust and communication exist in relationship to each other; the more your team trusts you, the less you need to communicate. However, if culturally you're focused on building trust — which positively impacts performance and long-term talent retention — transparent communication is one of the most effective ways Horowitz has found to do this.

Workforce Management and Difficult Discussions

Hiring and firing often directly impacts the work of financial leaders. For example, when financial performance is down, you may face the challenges of a layoff. Horowitz describes a conversation with a mentor who points out that when layoffs are managed poorly, it can "break the company culture." As a financial leader, what's important to consider in regard to how layoffs are addressed?

Horowitz recommends several tactics for making difficult decisions around layoffs:

  • He suggests that you focus on "getting your head right." While it's easy to get mired in mistakes that were made in the past, it's important to focus on the future. Layoffs are only made to give businesses the best chance of long-term sustainability.
  • Don't delay. "Once you decide to lay people off, the time elapsed between making that decision and executing that decision should be as short as possible," he writes. Not only does that prevent word from leaking, but it keeps the financial and managerial momentum moving toward building a stronger business.
  • Get your messaging clear. A layoff occurs when an organization fails to hit its financial goals and, as a result, the business loses excellent talent.
  • Train your managers on how to appropriately lay people off, and insist that managers lay off their own teams. It's critical for both cultural integrity and building a strong managerial team.
  • Executive leaders should be present in the office for the layoff and provide support and context for the employees impacted and those remaining.

As financial leaders, taking clear responsibility for the organization's performance and confidently making decisions that will move your organization forward can help you navigate the most treacherous financial waters.

Determining How to Allocate Resources

The request for access to resources always outstrips the resources a firm has available. Horowitz has a simple framework for how to focus your financial decisions: "Take care of the people, the products, and the profits Ð in that order." In real-time decisions, it can be difficult to make these choices. Yet Horowitz argues that without the people, the other two won't matter.

He writes, "Taking care of your people means that your company is a good place to work. Most workplaces are far from good. As organizations grow large, important work may go unnoticed, the hardest workers can get passed over by the best politicians, and bureaucratic process can choke out all the creativity and remove all the joy." And yet, when your financial and strategic decision-making strategies put people first, Horowitz says, "you too may live long enough to find your glory."

Financial leaders face a range of challenges in their roles, from managing communications to overseeing hiring-related decisions. By using decision-making strategies that help you prioritize people, use transparency to build trust and manage the toughest issues you face with grace and clarity, it's possible to capture the positive ROI and take your organization's performance to the next level.