How to recover from a bad decision

Knowing how to recover from a bad decision is a crucial skill to have. Bad board decisions happen. Your board will do its best to avoid them, but sometimes their best efforts may not be enough, and they’ll be forced to utter the dreaded phrase, ‘we messed up.’ Bad choices, massive fallout, missed opportunities; what do you do when you’re in that tricky situation? How do you deal with the impact? Who takes the blame? How can you ensure the mistake doesn’t happen again? This guide will help you. Knowing how to recover from a bad decision is a useful skill to have. Bad board decisions happen. Your board will do its best to avoid them, but sometimes their best efforts may not be enough, and they'll be forced to utter the dreaded phrase, ‘we messed up.’ Bad choices, massive fallout, missed opportunities; what do you do when you’re in that tricky situation? How do you deal with the impact? Who takes the blame? How can you ensure the mistake doesn’t happen again? Why do boards make bad decisions? Firstly, remember that bad board decisions can come from action or inaction. It’s much easier to spot a proactive decision that went wrong, but we should never forget that when a board does nothing, and then bad things happen, directors carry the same responsibility. Boards can make bad decisions because: They are not the right team of directors; crucial expertise may be missing. They are the right directors but are simply not living up to their potential, perhaps because their diaries are too full of other projects. They haven’t thoroughly examined company strategy and how it will create success. They fail to keep up with competitor activity. They ignore minor but repetitive underperformance. They fail to recognise a shift in the market that they will need to adapt to. They do not get along with each other and let personal squabbles dominate meetings. Moreover, if any of the above unfolds slowly, this can lead to bad decisions too. Think about it: a board lets underperformance slide for a year, then races to correct it. It doesn’t think through the ramifications and creates a lousy decision fuelled by panic. Another reason is that the board simply didn’t, and couldn’t, know crucial information before making a decision. In these instances, only hindsight offers more perspective. How to recover from a bad decision in a few easy steps Remember your role and the team you’re on If bad board decisions come back to haunt your board, remember that as a director - and expert in your field - you will likely have some valuable experience for dealing with the fallout. Furthermore, remember that you should approach the fallout alongside the rest of your colleagues. Don’t distance yourself or point fingers, even if you voted against the decision causing problems. Focus on mitigation first Have you ever been in a crisis, and constant finger-pointing or criticism prevents you from doing anything about it? Avoid this at all costs. Your first priority should always be dealing with the fallout. Depending on the situation, you might have a budget shortfall to make up, a strategy to re-examine urgently, or a PR headache that needs to be dealt with. Only when these complications have been addressed should you turn to the wrong decision itself. Be rational, constructive and decisive When analysing a bad decision, remember to keep a cool head. If you voted for that decision, own it. If you didn’t, don’t hold it over others’ heads. The key to this part of the journey is rational, constructive thinking. As a board, ask yourself: How did we get here? What have we learned? What can we do to ensure we don’t make the same mistake again? Communication is key. And remember, there may still be positives within this overall negative situation. Always be able to justify Remember, even if hindsight exposes a bad board decision, that doesn’t mean you still can’t explain your thinking at the time. And make no mistake: you should always be able to justify a decision - even if it turns out to have been terrible. Essentially, you should find yourself saying, “at the time, we believed X was the best way forward because of Y and Z.” It provides context and feeds experience into any future response to the same problem. It’s one of the reasons meeting minutes are so important. They offer a crucial insight into a board’s mindset at a certain point. Investors, employees and sometimes governments and journalists will want to know this information. There's no such thing as perfection but you should aim to get close Your board will never have a perfect record in decision-making. Realising that you’ve made bad board decisions is never easy, but when it happens, don’t retreat. Engage with the adverse effects and then focus on how to turn this experience into something constructive.

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Diploma in Corporate Governance

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