What Is a Business Decision? Definition and Types

Updated March 10, 2023

Whether you're a business owner, someone in a business leadership role or a department employee, it's important to understand how to make good business decisions. Business decisions encompass any decisions that affect business operations, goals and future activities. By understanding the importance of business decisions and different types, you can make sure you apply the right decision-making skills to a variety of different situations.

In this article, we define what a business decision is, review the importance of making good business decisions, provide tips for making good business decisions and list the types of business decisions that companies make.

What is a business decision?

A business decision, sometimes called an operational decision, is any choice made by a business professional that determines short-term or long-term company activities. Professionals make business decisions in response to a variety of different situations, including determining which job candidate to hire, how to distribute department budgets, when to expand into a new product market, if they should merge branches and other situations that require well-thought out actions.

Why is it important to think through a business decision?

It is important to think through a business decision because it can have a long-term impact on the efficiency and success of a business. Here are some specific examples of why it's important to think through a business decision:

Influences the longevity of the company: Ultimately, your ability to think through a business decision can influence the productivity of your company, the way it changes or adapts and the level of success your company achieves in the long-term.
Enhances profitability: Thinking through business decisions can also help you make smart decisions that enhance the profitability of your company through new sales initiatives, product offerings, marketing initiatives and revenue structures.
Affects successful hiring activities: A good business decision relating to hiring and training activities can positively impact the success of hiring initiatives, including hiring candidates with the right qualities for the job and making changes to training activities that influence the employee satisfaction and retention rates.
Conveys your professionalism: Overall, your ability to think through and make the right decisions for your business can help convey your professionalism to your team, higher ups and external stakeholders.

Tips for making a business decision

Here are a few tips for making good business decisions that benefit your company:

Consider the end-goal. When making an important business decision, take time to consider what you want the end goal to be. For example. A department manager identifies an end-goal as being able to keep every employee in their department even during an economic downturn. Because of this end-goal, they make the decision to reduce their department's budget and streamline department activities.
Weigh each potential outcome. As you figure out which business decision to choose, be sure to consider each potential outcome of a business decision. This allows you to determine the potential advantages and disadvantages of a potential business decision and whether advantages outweigh the disadvantages in the long-term.
Seek out advice from qualified professionals or company employees. If you aren't sure which business decision to make, you can benefit from seeking out advice from your coworkers, department employees, external consultants or upper-management personnel. If the majority of those you speak with choose one decision over another, that could help you determine which decision you need to make that works best for your business.

Types of business decisions

There are a variety of types of business decisions that business owners and professionals make at each level to promote the overall success of the company. Review these types of business decisions to determine which apply to you:

Operational decisions

Operational decisions are a type of everyday business decision that company employees make on a daily basis. Operational business decisions can include a range of decisions like product inventory, customer orders or shipping needs, departmental organization, department budgets or sales and marketing initiatives.

Strategic decisions

Strategic business decisions include any decisions that businesses make to reach a future goal. Strategic business decisions typically aim to combine a company's long-term goals with short-term goals and ideas. This could include revamping onboarding procedures to strengthen new hire productivity, investing in a new product niche to expand their customer-base or merging two branch locations to reduce costs and strengthen communication.

Hiring decisions

Hiring decisions reflect any business decisions related to identifying hiring needs, writing job descriptions, evaluating job candidates and determine which candidates to interview or even hire to the company. It can also include decisions related to onboarding procedures, start times and training details. HR personnel, department managers and upper-management professionals typically make hiring decisions.

Financial decisions

Financial business decisions include any business decisions that promote the financial health of a company. This includes budget distribution across a company, product pricing and manufacturing costs, investment opportunities, debt payment options or the amount of money budgeted for job positions.

Business structure decisions

Business owners typically make business structure decisions prior to starting business operations. However, some business owners may determine they need to change their business structure after being in operation for a while. Business structures refer to legal entities in which companies operate. Examples include sole proprietorships, limited liability corporations (LLC), corporation, partnership or S corporation.

Business policy decisions

Business policy decisions include any decisions in reference to employee benefits, paid time off, sick leave, maternity leave, internal HR policies relating to confidentiality and other types of policies that influence customer relationships and employee welfare.

Technology decisions

Technology business decisions are those that business professionals make based on technology needs for their department or on a company-wide basis. Examples could range from HR software, communication platforms, company databases, manufacturing equipment or office equipment.