In her book, Judgment and Decision Making in Accounting (2008), Professor Sarah Bonner distinguishes between judgement and decision making. She refers to judgement as a process of forming an idea, opinion, or estimate about an object, event, state, or any other phenomenon. Hence, judgement involves evaluating events and predictions about the future. In making judgements, we often invoke our beliefs to guide conclusions on what we have evaluated.
Decision making on the other hand, involves making up one’s mind about an issue. Decision making is often a consequence of our judgements. It involves choosing amongst a number of alternatives, based on the judgements we have made about them. In decision making, we invoke our preferences to guide the choices that we make.
The quality of our judgement and decision making is mainly dependent on two variables: the characteristics of the decision maker; and the cognitive processes that he/she uses to arrive at a judgement or a decision. The characteristics of a decision maker include how much someone knows about the subject under consideration, and how much they are involved in a task which requires making a judgement or a decision. Better quality judgements and decisions are made when a person is more knowledgeable on the subject, because then they can recall specific aspects or experiences that are related to the matter. Becoming knowledgeable on a subject can be achieved through practice, consultation, self-study or enrollment in some form of formal or informal education. This knowledge equips us with techniques on how to deal with a matter when the need arises.
Cognitive processes on the other hand, are the steps that are involved in arriving at a final judgement or decision. These steps can be classified as: memory retrieval, information search, problem representation, hypothesis generation, and hypothesis evaluation. It means therefore, that we make better judgements and decisions if we make ourselves more conversant with the matter under consideration, and if we take time to reflect on the matter objectively. This makes it possible for us to understand the underlying causes and evaluate different options before arriving at the most appropriate alternative.
As a businessperson, we are often inundated with several issues that require us to make judgements or decisions. For example, we need to make judgements and decisions on business partners; who to employ and how to effectively deploy them; from whom and where to buy materials or supplies; whom to sell to and where to sell from; how to position ourselves in the market; how to react to what competitors are doing; and the not small matter of responding to the needs of our customers. All these issues require us to make sound judgements and quality decisions in a timely manner. We must never forget that rushed judgements and decisions often backfire. The same applies to delayed or no decisions at all. Hence, entrepreneurs need to balance between the quality and timing of their judgements and decisions. A good judgement or decision made at the wrong time may not lead to desired results.
At Entrepreneurship Journey, we recognise the importance of quality and timely judgements and decisions. That is why all through our entrepreneurship mentorship programme, we equip our mentees with analytical tools and guide them to analyse different options and use insight to arrive at proper judgements and decisions.