To face the key decisions that as a director you need to make good decisions each day, you need capacity and training. For example, financial decision making is very sensitive, so the director needs to analyze the external and internal variables that may affect the development of activities in the organization.
The role of administrators in relation to decision-making, according to the Inter-American Investment Corporation (IIC), can be divided primarily into four areas: investments, financing dividends, asset management and dividend policy.
In the area of investments, the financial director needs to determine the right size for the company. Doing a market study and having clear objectives of the company will help this end. It is necessary to analyze well the demand, technology and equipment, means of financing and the existing human resources.
Once you have this data, as a director you need to analyze if the resources with which you account adapt to the desired optimal size of the company. If not, you will have to identify what type of assets you should buy or in the opposite case, sell or dispose of them to achieve functional management.
To achieve business continuity in the long term, it is essential to define the credit strategy. Having financing will allow the company to maintain a constant capital income since the savings margin does not allow the operation to continue if there is no additional liquidity.
Defining the different aspects of the financing strategy will help you make good decisions. You can consider all the options of sources willing to give credit to the company and define the best option. Similarly, you have the option of designing a mixed financing strategy that is, combining short and long-term credits to meet investment goals.
Adequate asset management is required for the company to properly cover its obligations. As a financial director, you have to ensure that existing assets are handled in the best way. In general, you need to prioritize the management of current assets before the management of fixed assets. Current assets are those that in the future will be converted into cash, such as accounts receivable or inventories. The fixed ones lack liquidity because they are needed for the operation of the operation permanently, such as offices, warehouses, vehicles and others.
One of the most important financial decisions that you need to take as a director has to do with the dividend policy that the company wants to carry out. It has to do with the proportion of profit that will be delivered to the shareholders. It has to be established if the generated profits are reinvested in the organization or if they are distributed among the shareholders. As in the case of financing, we can have a mixed policy in this aspect, considering that in order to grow in the long term it must be reinvested in the short term.
How to make good decisions as a director?
When you accept the responsibility of directing or managing a business, deciding is a permanent challenge; therefore, self-knowledge of the priorities and values of the company is important.
Human Resources specialists make six suggestions to guide financial managers. They can help you feel better about the decisions you have made or will be made in the future.
The sense of control of choice makes us feel better
To understand this phrase, let’s read this example: Choosing the treatment improves the outcome in patients. During an investigation, a number of equally ineffective treatment options were offered to a group of people. They were only placebos although the participants were told they were powerful analgesics. Some patients were assigned to the treatment and others could decide which one to take.
Can you guess who your “painkiller” seemed best? Clear. To those who had the possibility to choose it. For what is this? Choose for oneself, instead of others or circumstances choose for us, gives us the illusion of control.
Decide what you have to do to make the decision
When you do not know what to decide, instead of delaying or leaving a decision pending, decide what you will do to decide.
People tend to postpone relevant decisions that involve some difficulty, effort, investment or important consequences, says Alcántara. It is believed that the passage of time will facilitate everything, but in reality, a decision not taken can generate economic and organizational damage, as well as a mental burden.
Decide what you have to do to make good decisions and thus avoid stress, is to establish criteria that facilitate your decision, get more information and know cases or similar situations.
Consider the conditions in which you make the decisions
We must try not to decide under extreme conditions, be positive, negative or pressure.
For example, if you make the purchase when you are hungry, your hunger will condition your purchase. A study carried out in 2013 on the decision-making process concludes that one is not poor because one decides badly, but one decides badly when one is poor.
Poverty prevents or hinders cognitive functions. The stress generated by financial concerns negatively affects the decisions of people with fewer resources, which means that the poorer we are the less margin and ability we have to stop being.
If we have to decide, it is better to do so, being aware of how present circumstances can affect those decisions and condition the immediate future.
Be careful also to decide when we are very “at ease”, he says, because it can generate the illusion that the decision we are making is not as important as it seems and to do it lightly, with negative consequences.
Decide on what matters to you now, not on what “should” matter to you
Consider your current values as criteria to make good decisions.
In general, it is a mistake to decide based on the values that you would like to have your life in the future, instead of deciding according to your current motivations.
For example, if you have never shown an interest in languages and it is a field of knowledge that you are not good at, it is somewhat risky to consider the possibility of forging an international career in the medium term. So do not make important decisions about your future based on an interest that you do not have yet, since you might never have it.
Decide to give you the time you need to decide
The Bushmen, one of the oldest peoples of the world originating in southern Africa, usually hunt with poisoned arrows. That is why, when there is a conflict, they hide them and sit down to negotiate, days or weeks, if necessary.
Sometimes, it is a good option to decide later. In the words of Adam Smith, if you approach each situation as a matter of life or death, you will die many times. Deciding is not easy, because knowing the relevant factors is not easy either, including our interests.
If you do not have time, you should decide now. But if you have it, do not push yourself.
Accept the consequences of your decisions and relax
Before deciding, analyze the possible negative consequences of each of the available alternatives and prepare to accept those that may touch you with what you finally choose.
It is difficult to ensure that there is always a “correct choice” and even if it were, changes in future circumstances and conditions relativize the value of past decisions.
In professional life and in your business you can make a mistake in a decision. However, the real bad decision is to live without accepting the mistake. Doing this will help you to make good decisions.