Businessman stamping approved stamp on document in meeting
Delaware, the second smallest state by land mass, has an outsized impact on the business world. More than 60% of Fortune 500 companies are incorporated there. Delaware’s grip on incorporations is almost exclusively a function of its unique judicial systems for business. Delaware’s statutes offer flexibility, and its well-developed case law gives substantial guidance to corporations. This combination is the primary reason companies continue to incorporate in Delaware. Legal protection in decision-making is one of the preeminent reasons—because decision-making itself is a complex business.
Businesses employ accountants, finance teams, legal counsel, and C-suite executives to comb through data and make decisions. Teams can pore over spreadsheets and reports, make excellent decisions, and still get disastrous results. The downside of a business decision gone wrong can be catastrophic, leading to diminished morale, lost revenue, damaged reputation, and even litigation. It’s the last issue that Delaware courts were concerned with: What was the incentive to make bold business decisions if litigation always loomed?
Through case law and statutes, Delaware offers businesses a significant haven from the downsides of their decisions. Corporations there—through statutory and case law protections—enjoy protection from business decisions gone wrong and can therefore be more aggressive in their decision-making. They’re smart to do so; results like these have driven business leaders to cautiously adopt all available corporate protections—including insurance and independent legal opinions—to shield themselves from liability. But what about planning for success?
The downsides of business decisions are often sensational and far more likely to make the news than the completion of a successful project. Business leaders are wise to focus on downside protection and loss mitigation. However, businesses shouldn’t just look for ways to survive—they should look for ways to get ahead and eke out any possible advantage. In fact, it might be equally risky not to focus on driving a company forward.
That can be challenging when business leaders face dozens of decisions a day. So, here are three ways leaders can set themselves up for success:
1. Adopt technology that promotes great decisions.
The pandemic changed the workplace dramatically. During the height of the pandemic, organizations had to rethink everything—even things as simple as how to get access to physical resources or ensure collaboration. Though some businesses have embraced a return to work, others have remained in hybrid or fully remote work arrangements. Any of those situations can work, but it’s critical that companies maintain the ability to adapt to events such as COVID-19 and improve their businesses with technology.
Matt Giffune, cofounder at Occupier, a transaction and portfolio management software helping commercial tenants and brokers manage their real estate footprint, has seen people in the real estate world who embrace technology achieve superior results. For example, lease management software that allowed comprehensive access for everyone, from underwriters to construction managers to C-suite executives, had a positive effect.
“Everyone was working from a single source of truth,” said Giffune. “The centralized information allowed as many people as needed to offer their insights and work from a stable set of information. For example, if someone knew about particular zoning difficulties or finding subcontractors in a certain area, teams could work to remediate those problems before approaching critical deadlines. By increasing access to stable, shared data, companies will likely benefit from diverse perspectives and continue to make excellent decisions.”
As a protective measure, businesses must continue investing in technology that protects their operations from becoming brittle. However, using that technology to increase collaboration and drive profits is a distinct possibility in many companies and should be pursued relentlessly. Giving teams the technology they need to make sound business decisions is crucial to success.
2. Create diverse and inclusive hiring practices.
The world has become increasingly globalized and diverse. Companies that embrace fair and inclusive hiring practices benefit from significant short- and long-term returns on investment beyond the obvious moral and legal benefits.
One study showed that firms that included women in leadership positions enjoyed a $42 million increase in firm value. In the long term, racial and ethnic proportions will likely shift dramatically in the U.S. Organizations that are ahead of the curve in creating hiring processes that ensure their teams reflect broader population characteristics might experience increased benefits, such as greater economic impacts.
A key approach to promoting excellent hiring processes is acknowledging hiring biases and seeking ways to eliminate them. For example, Microsoft’s old hiring process included one channel where everyone involved could see the others’ candidate feedback. This led to a phenomenon where people made decisions based on others’ opinions. Microsoft changed the process to make feedback private until after interviewers gave their own feedback on the candidate. By deliberately shielding hiring managers from others’ opinions, they got more accurate pictures of candidates’ skills and made decisions not informed by others’ perceptions.
With the stakes so high and much to gain, leaders should invest in processes like Microsoft’s to ensure excellent, unbiased hiring results. In turn, hiring great people will provide the right infrastructure to make the best business decisions.
3. Invest in impactful product offerings.
The hyper-competitive business landscape doesn’t allow people to rest on their laurels. With inflation on the rise—increasing 10.8% from April 2021 to April 2022—companies need continuous innovation to compete for consumer spending. Company leaders should consider investing in new, premium offerings to stand out.
Not all companies have the capabilities for new research and development and product launches, but they still need ways to capture consumers’ attention. Many companies are turning to offering customers premium options or increasing consumers’ perceptions of their offerings to capture their attention. Starbucks, for example, is increasingly focusing on creating experiences customers can’t trade down from. By increasing the desirability of their products and making them difficult to replicate at home, Starbucks continues to increase customers’ willingness to spend.
Of course, business leaders must be careful that they aren’t simply delivering price spikes and nothing more. If companies can find ways to increase value for customers, they are likely to be met with less resistance when they raise prices to offset inflation. Companies looking to maximize profits and secure their futures must invest in the right product strategies to achieve the best results. Investing in market research and deciding to reinvest in product offerings will yield optimal business results.
Although the downsides of bad decision-making are important to weigh, company leaders should set themselves up in this area and give decision-making a Delaware-sized focus. Strategizing on mitigating loss is essential, but investing in the right technology, people, and products will drive companies toward profitability and allow them to compete in a competitive landscape.
