A business is defined by its ability to make good decisions, at all levels. But how can you make sure that it will?
‘Houston, we have a problem.’ Probably the most famous understatement ever spoken was beamed down to NASA following an explosion on board Apollo 13. On top of the problem of how to get the stricken astronauts back home, NASA also had to find a way to make their oxygen last long enough for them to make it. In the film of the same name, a group of NASA engineers were put into a room with only the materials that were on board Apollo 13 and asked to make a carbon dioxide filter. Their leaders told them; find a solution or the astronauts will die. And (spoiler alert!) they did.
On a thankfully less dramatic level, that is how we would all like organisations to work; the leaders recognise a problem, direct the people best placed to solve it, give them what they need, and stand back and leave them to it. But in reality, that is rarely the case.
Typically, decision-making in businesses involves too many people – some with opinions that they express loud and frequently and others too scared to speak up. The cumulative effect is that decisions are made too slowly, without adequate consideration of the facts, options and circumstances. The impact of poor decision-making on a business is considerable; it frustrates and demotivates individuals, creates tensions within teams and lowers overall performance.
So what’s going wrong? It’s certainly not that we don’t have the necessary tools to make ‘good’ decisions. We have more data and information than we know what to do with. This recent article in the Wall Street Journal explained how the world-renowned Wharton Business School has added business analytics to its MBA programme, on the basis that analytics is a discipline that ‘helps leaders make better decisions’. The science of analytics suggests that is right – we have access to huge amounts of data in the modern world and the algorithms available to explore and analyse that data are becoming more powerful by the day. In some cases, then, analytics will help you make a better decision – but it means nothing if the culture of your business means that decision making becomes stuck.
Let’s go back to basics for a moment and think about how humans make decisions. Back in 2007, David Snowden and Mary Boone wrote this article in the Harvard Business Review, explaining how humans make decisions in simple and in complicated situations. The authors argue that leaders operate in five broad contexts – simple, complicated, complex, chaotic and disordered – which required different forms of decision-making.
In a simple context, for example, leaders assess the facts, categorise them and then respond, usually basing their response on established practice. But even in this situation, decision-making can go awry; leaders can be blinded to new ways of thinking because of the length of their experience and familiarity with the business.
In a complicated context, by contrast, there may be many ‘right’ answers. Complicated situations required a leader to sense, analyse – investigate the options – and respond. In this case, experts in the particular are often called upon, but they also can suffer from entrained thinking so the role of the leader is to listen to the experts while simultaneously welcoming out-of-the-box ideas from others.
In other words, many things can go wrong in decision-making. The secret is to maximise your chances of the organisation or team as a whole making a good decision – and that means getting your culture right.
So here are our top tips for being a decision maker as opposed to a decision blocker:
You don’t need to be right all the time
Martin Glenn, the former President of PepsiCo UK and United Biscuits and now Chief executive of the Football Association, says in the book What Do Leaders Really Do? that decision-making in business isn’t necessarily about being right or wrong:
“As opposed to pure science, in commerce there are not that many objective right and wrongs. Being excellent in business is about being 80% right.”
Know when to stop analysing
Glenn also says that a point of view is worth 1,000 IQ points. As a leader, saying ‘this is the core of the problem’ is far more useful than saying ‘I think we need another review’.
Leaders don’t know everything
Kevin Roberts, the recently retired worldwide CEO of Saatchi & Saatchi, points out that the further up the organisation you do, the more out of touch with customers you become. There’s a constant risk that the people around you either don’t know enough to form an opinion, or are afraid to say if they do. Roberts’ approach was to drive decision making down as close to the consumer as possible: “In my view, decision-making is down to the people who have to make it work.”
Kevin Roberts again, quoted in What Do Leaders Really Do?:
“We all have the same information, the same knowledge and the same facts. We have the internet. If we all apply rationality and logic we all get to the same place. How does that result in competitive advantage? It doesn’t. Competitive advantage in any business comes from innovation, and innovation comes from the generation of ideas, which comes from a culture of creativity.”
If you accept that creativity is the root of competitive advantage, you also have to accept that people make mistakes – a culture of creativity can’t co-exist with a culture where people are afraid to speak up and to experiment.
In this great article from Forbes magazine, Daniel Kahneman, author of Thinking Fast and Slow, talks about effective decision making. He argues that good systems to support decision-making within a business is the key: “Organisations can approximate rationality much better than individuals because they have processes and procedures. You can improve systematic thinking with relatively little cost so decisions are more properly anchored in evidence.”
Recognise the pitfalls
Kahneman also makes the point that people like familiarity – “People are not accustomed to thinking hard and are often content to trust a plausible judgment that comes quickly to mind” – and tend to avoid hard questions – “When faced with a difficult question, we often swap it out for an easier one without even noticing the substitution. ”
Get the structure right
Corporate structure can often get in the way of good decision-making. Job roles that are poorly defined and encourage a lack of accountability can sap organisational energy and encourage ‘decision- avoidance’. Be clear about who’s in charge of the problem.
What decisions are you currently ‘sitting on’ and why? Which of the above tips do you need to embrace to move it forward?
“I am not a product of my circumstances; I am a product of my decisions.” Stephen Covey