Being successful is hard enough without putting a self-induced finger in your eye. Often when companies make bad decisions, it’s not actually the company: It comes back to you, the CEO. Although, I ran a very successful company for 15 years and had a once-in-a-lifetime exit, I made three mistakes I wish I could take back. On the other hand, my lessons learned are now advice I can pass along to you so you can improve your decision-making ability.

Every CEO needs a process—and a healthy dose of self awareness

Everyone is going to make bad decisions, CEOs among them, but if you have a process in place and knowledge about how you work, you can reduce the likelihood of making a bad decision that could derail your company.

For most contractors, common bad decisions happen around:

  • Increasing the size of projects you construct or customers you serve
  • Unplanned rapid growth
  • Going into a new line of business
  • Going into geographical areas that you are unfamiliar with
  • Waiting too long to terminate poor performers
  • Making poor hires for critical functions

So, why do CEOs make bad decisions? I have found it mostly comes down to not understanding your blind spots and not having a quality decision-making process.

What are your blind spots?

You can be the cause of problems when you’re unaware of or unwilling to acknowledge your blind spots. These can include arrogance, being a control freak, or surrounding yourself with “yes” people. This is why it is very important that you know yourself. The more self aware you are, the less likely it is that you will make a bad decision. And, if you do make a bad one, you will be more likely to face facts and cut your losses quickly.

One way to ensure you know yourself better is to use assessment tools. In my CEO coaching practice, I use the DISC and StrengthFinders tools. Regardless of the tool you choose, understanding your strengths and getting insights into your work style helps you become more self aware. For example, CEOs who score high in dominance are more likely to cut off debate or not create an atmosphere where dissenters feel safe enough to express their concerns.

Bad decisions #1 and #2: Failing to listen to my dissenters

Although by nature I’m more of a consensus builder, I was guilty of this twice. The company I ran was looking to expand a line of business we were in and found an acquisition target that I fell in love with. Although the operational due diligence team didn’t find any walk-away issues during their due diligence, one of my direct reports had objections and concerns. Instead of taking the time to explore his concerns, I shut down the discussion based on how I responded, my body language, etc.

I also assumed a dominant stance when we found a renewable urban wind startup opportunity to invest in that would benefit, if successful, every main division within Roth. I fell in love with the idea again and—again—when concerns arose I shut down conversation and deliberation. To my credit, in both cases when I could see I screwed up, we immediately restructured and adjusted.

However, both of these mistakes were avoidable if I had been willing to explore explored dissenting opinions. If you are in the process of making a big decision and you are not hearing any dissenting opinions, be very concerned. I recommend forcing a discussion about what could go wrong, and if it did go wrong, what would you do about it. Also do a SWOT analysis on the decision. For bigger decisions with potentially bigger outcomes and impacts on your business, bring in independent advisors or a CEO coach to advise you and your team. This is especially important if the decision’s subject matter is outside your wheelhouse of knowledge.

Bad decision #3: Not listening to my gut

The third bad decision I made was to approve a rapidly increasing line of business that was not part of our core. I allowed my positive views of the rock star direct report who was responsible for this piece of the business to cloud my judgment as to whether or not we should take on this new growth. I didn’t go with my gut feeling and gave my direct report too much rope before adjusting.

Take these 5 steps for better decision making

Obviously, I’ve learned how to avoid bad decisions the hard way. Based on these experiences, I recommend you take these five steps to reduce the likelihood of making bad decisions in your own business:

  1. Know yourself and be self aware that you might be cutting off deliberations or concerns.
  2. Require an analysis of what could go wrong and what you would do about it.
  3. Perform a SWOT analysis on the opportunity at hand.
  4. Bring in advisors or a coach who has made decisions like the one you are contemplating.
  5. Make the call.

Afterwards, evaluate the process and the results of the decision to identify ways to make your process better. Also, face facts. If the facts change, you have to adjust to reality. This is hard for some CEOs because of the ownership they feel of the decision. But hanging on to something too long will only make the mess worse.

Making important decisions is a privilege we have as CEOs, but we also have to be aware of ourselves and of the realities and adjust accordingly. I learned more from my mistakes than from my successes. To remind me not to cut off deliberations of concerns ever again, I had the stock certificate of the wind investment framed and put on my desk so I had to humble myself everyday. However, it still eats at me that these three bad decisions were preventable. I hope this advice helps you to avoid making a bad decision the next time one is on your plate.