The current economic environment is concerning to us all. In the midst of uncertainty, continuing to make clear-headed business decisions is exceedingly important. Let’s explore how to ensure stress due to the current economic situation doesn’t result in suboptimal decisions that may have long-term negative consequences.
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Four Economic Indicators that Can Lead to Unsuccessful Business Decisions
Informed organizations monitor a variety of economic indicators to help gauge the state of the economy and the potential impact on their business. These indicators provide insight into how much more or less expensive it will be to run the business. Some common indicators include, but are not limited to, the price of goods, employment, and the cost of money. As we write this post, these four major indicators are fueling unease:
The current indicators increase stress on everybody. The challenge is to keep that stress from resulting in poor decisions that might derail your short and long-term strategy and business results.
Stress Suppresses the Ability to Make Wise Decisions
If you’ve ever used the phrase “I can’t think straight,” it may be because stress is impacting the ability to make rational decisions. According to neuroscientists, decision-making happens in the foremost part of our brains, the prefrontal cortex. A study published in The Journal of Neuroscience found that stress-induced anxiety decreases activity in this part of the brain. As a result, we end up making quick, rash decisions or moving into another state known as paralysis analysis, which might lead to a no-decision scenario.
Why? Because stress makes it harder to process all the information we need to make the best decision. If we can keep stress from leading the process of deciding, we can make well-informed and wise decisions, even amidst uncertainty.
Five Questions to Ask Yourself to Ensure You’re Making Smart Choices
Some companies adhere strictly to the “always be prepared” motto. These companies regularly engage in scenario analysis planning and integrate economic indicators into these scenarios. They recognize there are ups and downs in the economic cycle. As a result, they also implement future-proofing processes.
Both of these capabilities enable the organization to pivot as needed. In some instances, these pivots are worthy of becoming permanent to the operation of the organization.
If these are not part of your regular approach to business, there are still steps you can take to ensure that stress doesn’t override good decisions. You can use these questions as a guide:
- Is the decision taking care of the “big stuff” first? Sometimes we’re so overwhelmed by the situation that we tackle minor decisions instead of focusing on the bigger picture. Find a way to divide decisions into categories based on agreed-upon criteria such as time, cost, impact to customers, etc. Use the criteria to organize decisions into tiers from major to minor.
- Does the decision align with your purpose and mission? Be clear about what your company does: how and why. Then, evaluate whether the decision you are about to make is in line with these priorities.
- Does the decision positively impact your relationships? Customers, partners, suppliers, and employees are all essential relationships to the survival of your company. Consider how the decision(s) affect each of these relationship types.
- How will the decision impact the long-term? Today’s quick fix will have implications down the road. Step back and try to gain insight into the impact of the decision in the long run.
- How will we use this decision to create opportunities or a competitive advantage? Your competitors are navigating the same economic environment. While the decision you need to make enables you to “survive and fight another day,” explore whether and how you might use the decision to support growth and give you a competitive edge.
We are all navigating the sea of uncertainty. In such times of economic unpredictability, it is common to feel unsure and stressed. The key is to keep panic from resulting in bad decisions that have long-term negative consequences. Consider how you can regulate your stress and even use it to your competitive advantage. Keep your focus on the long-term, and make decisions that prioritize your relationships, your purpose, and the matter at hand. By keeping a clear head, you can emerge from uncertainty even stronger than you might in times of ease.
FAQ:
A1: Because uncertainty increases stress—and stress impairs judgment. When economic indicators signal rising cost and risk, leaders can feel pressure to act quickly. The danger is that stress can drive rash decisions or trigger analysis paralysis, both of which can produce long-term negative consequences.
A2: Four indicators that often fuel unease because they affect the cost of running a business include:
- Inflation costs
- Labor participation rate
- Declining job openings
- Rising interest rates
These signals can create a sense of urgency that tempts leaders to prioritize speed over clarity.
A3: Decision-making is largely driven by the prefrontal cortex, the part of the brain responsible for rational thinking and evaluation. Research indicates stress-induced anxiety reduces activity in this region, making it harder to process information and weigh tradeoffs. The result is often one of two extremes: rash, quick decisions or no decision at all (analysis paralysis).
A4: They integrate uncertainty into their operating rhythm through scenario analysis and future-proofing processes. They monitor economic indicators, build contingency plans, and develop pivot options—some of which become permanent improvements to how the organization operates.
A5: Use these questions as a decision filter:
- Are we taking care of the big stuff first? Categorize decisions by time, cost, customer impact, and other criteria so major decisions don’t get displaced by minor ones.
- Does this align with our purpose and mission? Evaluate whether the decision supports what your company does, how, and why.
- Does this strengthen or damage key relationships? Consider customers, employees, partners, and suppliers—relationships are survival assets in uncertainty.
- What is the long-term impact? Avoid quick fixes that create downstream constraints or hidden costs.
- How can this decision create opportunity or competitive advantage? Competitors face the same environment; the best decisions preserve resilience while opening paths to growth.
A6: The goal is not to eliminate uncertainty—it is to prevent panic from driving decisions. Regulate stress, keep focus on the long term, protect essential relationships, and use disciplined decision filters to make clear-headed choices that help you emerge stronger than you would in easier times.
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