Importance of Decision making

Do you have the right principles for making good decisions or are you depending on the throwing of dice? Is there a right and a wrong way to make a decision?

Decision making is an important skill which any one who wants to be a leader or who wants to achieve anything great in life must have. It is the mark of great leadership to be decisive and to make the right decisions at the right time for the right reasons. The opposite is also true: an inability to be decisive and to make the right decisions can be a huge liability and a great cause of failure. So how do you become a decisive person with a knack for making the right decisions?

One very important starting point is to understand the essence of decision making. It was during studying management accounting that I came across the concept of sunk costs. This was in the context of decision making for business purposes. The principle underlying decision making in management accounting is that management decisions can only affect the future.Therefore in making decisions managers require information about future costs and revenues which would be affected by the decision under review, and they must not be misled by events, costs and revenues which are in the past and about which they can do nothing. Sunk costs, which are in the past, are therefore considered irrelevant in decision making.

It seemed pretty obvious and common sense when I read it. But it occurred to me that quite a number of times I myself had not followed this simple principle. It further occurred to me that the principle is in fact not only applicable to the management scene, but more or less to any area of life. It brought out several very important ideas and concepts about decision making, dealing with the past and planning for the future: Firstly, you must accept the fact that you cannot change the past. No matter how good a decision you make, it will have no effect on the past. Yet how often we stay focused on the past and fill our minds with regret. People have a habit of running things in their minds over and over again. This can be bad things as well as good things. Our past mistakes often haunt us to an extent where we seem unable to move ahead in particular areas of our lives.

Our past good times and successes can also be hindrances if we focus too much on “the good old days.” There are many people that are stuck, reminiscing on the past and wishing they could have that kind of life again. If you are stuck in the past you will not be totally in the present and you will not see the good future ahead of you.

Remember your past for the valuable lessons and experiences you got from it, but do not become prisoner to it. If you made mistakes, learn from them. Do not use those mistakes as reference points that will stop you from ever trying again and from taking risks.