Avoid Making Business Mistakes By Seeking Advice
One-time entrepreneur Jeremy Woods, currently a doctoral student in the university’s College of Business, is focusing his studies on small business decision-making mistakes. He’s exploring what is called “escalation of commitment,” a practice in which small business owners continue to pursue failing ventures simply to prove they were right, even if the cost of their mistakes keeps climbing.
“We’ve all had the ‘I’m going to make this work’ feeling, but sometimes the best decision is to walk away,” says Woods, “an action that doesn’t come easy for driven and determined entrepreneurs.” Fortunately, according to his research, escalation of commitment can be avoided by systematically seeking the input of respected colleagues.
His conclusions were presented earlier this month (May 6-8, 2011) during the Family Enterprise Research Conference in Grand Rapids MI, and will be discussed again June 15-18 at the International Council of Small Business Conference in Stockholm, Sweden.
“Consultation with outside advisers can bring more information and fresh perspectives into the decision-making process, and convince business owners to pursue alternative options,” says Woods, who based his research on a national questionnaire sponsored by business professors studying entrepreneurship. It surveyed more than 1,200 start-up business owners across the country. Woods mined the data and discovered a significant correlation between consulting with outside advisers and achieving revenues sooner.
He’s already begun taking his research further.
This month he started work with more than 400 research participants, including small business owners and graduate business students. Each is being given a business scenario that involves pursuit of a sluggish sales prospect and experimental manipulations for consultation with outside advisers. After reading the scenario, participants must answer questions about the decision-making process, including their confidence level and their perception of the value of their intended actions.
“This is when the real fun begins,” says Woods. “Not only do we have the opportunity to give small business consultants some concrete findings to justify the value of their suggestions. We also have the opportunity to work together with small business owners to identify practical ways to choose between alternative courses of action.”
Photo from the University of Cinncinatti