Short answer: A decision memo is a short document that asks for one specific decision and gives the approver everything needed to make it: the options (including doing nothing), a clear recommendation, the evidence and numbers behind it, the risks and how much of them you can absorb, and what it costs to act and not to act. The memos that get approved on the first read usually contain no surprises, because the approver has been briefed along the way.
The cost of getting this wrong
A memo that states a conclusion but skips the options and the numbers comes back. Each round trip costs days, the window you were deciding about keeps closing, and the next memo you send gets read with a little less trust.
What is a decision memo?
A decision memo (or decision memorandum) is a document written to get one decision made by one person or group. It is not a status update and not a pitch. Its job is to put the choice, the options, the evidence, and the risks on one page, so the approver can say yes, no, or “not yet, because…” without a meeting.
Done well, it also becomes the record of why a decision was made, which matters long after the meeting is over.
Why some memos get approved on the first read
I’ve been on the receiving end of a lot of decision memos. The ones I could approve almost immediately had one thing in common, and it wasn’t the writing.
By the time the memo arrived, I already knew most of what was in it. The author had briefed me along the way, in short check-ins as the work developed, so the final document confirmed a direction I had already seen take shape. I could predict roughly what the decision would lead to. There was nothing to react to, only something to sign.
I call this the No-Surprise Rule: a decision memo should confirm what the approver half-knows, not introduce it. If the memo is the first time your approver hears about the options or the risk, expect questions, not a signature.
Why decision memos get sent back
The memos I sent back failed in the same few ways:
- Only a conclusion, no options. “We recommend X.” Compared with what? If I can’t see the alternatives, including doing nothing, I can’t judge whether X is the best choice or just the first one.
- Thin evidence and no numbers behind the conclusion. Claims like “the market is attractive” without comparable cases, figures, or where the figures came from.
- A vague conclusion. “We should consider moving forward” is not a decision request. The approver should know exactly what they are saying yes to: what, how much, by when.
The 5 things every decision memo needs
When I write or review a decision memo, these are the five things I look for. They are also the sections of the template below.
- The decision requested. One sentence: what exactly is being approved, how much, and by when.
- The options, including doing nothing. Two or three real alternatives, side by side. “Do nothing” is always an option and usually has a cost.
- The evidence: comparables and numbers. Enough comparable cases to show the recommendation isn’t a guess, with the numbers and their sources. (This is where survivorship bias sneaks in, so include the cases that went wrong.)
- The risks, and how much you can absorb. Not just what could go wrong, but how far you can go before you stop: the loss you can tolerate and the signal that triggers a rethink. A memo that answers this lets the approver say yes even when things might not go to plan.
- The cost of acting and the cost of not acting. What it takes to execute (money, people, time) and the opportunity cost: what you give up or delay by choosing this.
If you run a pre-mortem before writing the memo, part 4 almost writes itself.
What happens when the reasoning isn’t written down
A decision memo isn’t only for getting a yes. It is how the next person understands why things are the way they are. One well-documented case shows what happens when that understanding is missing.
In 2003, Knight Capital, then one of the largest US market makers, stopped using an old order-routing feature called Power Peg. According to the SEC’s 2013 order, the code was left on its servers, neither deleted nor deactivated. Nine years later, in 2012, the firm reused the flag that had once switched Power Peg on to trigger a new feature. One of eight servers didn’t receive the new code. When trading opened on August 1, the old feature came back to life. In about 45 minutes the system sent millions of orders, and Knight lost more than $460 million.
The SEC focused on missing controls, among them that Knight had no written procedure requiring a second person to review the deployment. But the pattern is familiar to anyone who has inherited a project: a decision made years earlier (“stop using it, but leave it in place”) carried no record that the people making the next decision could see.
Most of us don’t run trading systems. But every organization has its own Power Peg: a past decision whose reasons live only in someone’s head. A one-page decision memo, filed where the next person will find it, is the cheapest insurance against that.
Decision memo template (copy and paste)
DECISION MEMO: [Title]
To: [Approver] From: [Owner] Date: [Date]
Decision needed by: [Date]
1. DECISION REQUESTED (one sentence)
Approve [what], [how much], by [when].
2. OPTIONS
A) [Recommended option] — [one line]
B) [Alternative] — [one line]
C) Do nothing — [what happens if we don't act]
3. RECOMMENDATION AND EVIDENCE
We recommend [A] because:
- Comparable cases: [list, including ones that failed and why]
- Key numbers: [figure] (source: [source])
4. RISKS AND TOLERANCE
| Risk | Likelihood (H/M/L) | Impact | How much we can absorb | Stop / rethink signal |
|------|--------------------|--------|------------------------|-----------------------|
| | | | | |
5. COST
- Cost to execute: [money / people / time]
- Opportunity cost: [what we give up or delay]
6. REVERSIBILITY
[Easy to reverse / hard to reverse] — [why]
PRE-BRIEFED: [Who has seen this, and when]Prefer a printable version? 2 pages: the memo and the 6-point check before you send. Bonus: the pre-mortem template.
Coming soon: the Decision & Reporting Toolkit
Decision memo, pre-mortem, meeting minutes and executive brief templates, with AI prompts. Join the waitlist for the early price.
Decision memo example: before and after
The numbers below are illustrative.
Before (typical):
We recommend entering the regional cold-storage market. The opportunity is significant and the timing is right. Please approve.
After:
Decision requested: Approve $2M to build one pilot cold-storage site, decision needed by Nov 30.
Options: A) One pilot site ($2M). B) Full entry with three sites ($7M). C) Do nothing and keep leasing space.
Recommendation: A. Of four comparable entries in the past three years, two broke even within three years and two exited. Both exits built three or more sites before securing an anchor customer.
Risk and tolerance: If utilization is below 50% after 12 months, we stop and sublease. Maximum expected loss: about $600K.
Cost: $2M capex. Opportunity cost: warehouse automation slips one quarter.
Pre-briefed: CFO (Oct 10), Operations head (Oct 17).
The second version is longer by a few lines, and it is the one that can be approved in one read.
Decision memo vs. proposal vs. meeting minutes
| Decision memo | Proposal | Meeting minutes | |
|---|---|---|---|
| Purpose | Get one decision made | Persuade someone to start something | Record what a meeting produced |
| Ends with | A clear yes/no request | A pitch | Decisions, owners, open items |
| Must include | Options, evidence, risk tolerance, cost | Benefits, plan, budget | Who does what, by when |
| Lives on as | The record of why | Rarely revisited | The record of what |
If the meeting produced the decision, record it in the meeting minutes, and link the memo that explains why.
Frequently Asked Questions
Q1: What is a decision memo?
A1: A short document that asks one person or group for one specific decision and gives them the options, evidence, risks, and costs they need to make it.
Q2: How long should a decision memo be?
A2: Most fit on one page. Complex investment decisions may need an appendix for detailed numbers, but the decision, options, and recommendation should still fit on the first page.
Q3: What is the difference between a decision memo and a proposal?
A3: A proposal tries to persuade someone to start something. A decision memo lays out the options and asks for a clear yes or no, and it becomes the record of why the decision was made.
Q4: Should a decision memo include options you don’t recommend?
A4: Yes. Include two or three real alternatives, plus doing nothing. Without them, the approver can’t tell whether your recommendation is the best choice or just the first one.
Q5: Who should see a decision memo before it is sent?
A5: The approver and the key stakeholders, informally and in stages. A memo that brings no surprises is far more likely to be approved on the first read.
The bottom line
A decision memo gets approved when it brings no surprises: the options are on the table, the numbers have sources, the risks come with a limit, and the cost of doing nothing is visible. Write it that way and it does a second job too: years later, it tells the next person why.
Related reading:
- Pre-mortem: how to surface the risks nobody says out loud
- How to write meeting minutes executives actually read
- Survivorship bias: why success stories mislead you at work
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