Decision-Making in the Family Business

Decision-Making in the Family Business

When You Come to a Fork in the Road… Take It

– Yogi Berra

Each of us makes hundreds of decisions every day – from what to wear to when to eat to whether to drive to work or take the train. Many of these decisions are minor or made out of habit, but they are still decisions – choosing one course of action over another. You could say that all of us, no matter who we are or what we do, are experienced decision makers. However, that doesn’t mean that we all are equally skilled in making decisions. So what makes a good decision “good?” What makes a bad decision “bad?”

Since we can’t know in advance how every decision will work out, perhaps the key to “good” decisions is in the process we use.

In all types of organizations, decision-making is critical, and often, strenuous. Making decisions can be tough for a number of reasons, including situational, structural and organizational factors. In a family-owned business, these difficulties are compounded by complexity, emotionality and multiple (sometimes competing) agendas.

Family businesses know from experience that conflicts can quickly erupt from decisions big and small. Thus, there is a definite advantage for family businesses to examine their typical decision-making processes. There is even greater benefit to be derived from agreeing in advance on appropriate decision making models for specific situations before conflicts arise.

There are four processes that family businesses can use to make sound decisions:

  • Autocratic – One person makes the decision alone.
  • Consultative – Decisions are arrived at by one primary decision maker after receiving input from others.
  • Democratic – Majority rules.
  • Consensus – A shared decision; everyone may not agree, but everyone understands and supports the decision.