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One of the biggest causes of never-ending meetings, project cost and time overrun, and fire fighting, is poor decision-making practices. Since decision making in business and management commits resources, it is important that the most robust decisions possible are made the first time. In a study of nearly 400 business decisions made by senior managers in medium to large organizations, it was found that half of the decisions failed. The decisions made were based on a mix of analytical and experimental information, expert opinion, and gut feel. In half of the decisions studied, either action was not taken, or the decision made had no discernable effect on the organization two years later. Of the decisions that failed, resources were expended — time, money, personnel, or equipment — without achieving anything. In other words, half the decisions made were not robust. They were not able to withstand the uncertainty, conflict, or change common in the work environment, or they could not elicit the buy-in necessary to make them stick.
The study found three main classes of "blunders:"
- Decision makers use failure-prone practices in 2 out of 3 decisions made. Further, there seems to be little insight into the poor track record of these practices and failures are seldom studied.
- Decision makers base many decisions on premature commitments. In other words, many decisions are actually efforts to justify a premature conclusion, rather than using evidence to select the best action.
- Decision makers spend time and money on the wrong things — tasks that do not add value to making the best possible decision. Hence, they don't have a strategy to determine what-to-do-next. So, how can you make decisions that are right for your organization? How can you make robust decisions, ones that avoid the blunders?
The most effective way to make robust decisions is to:
- Make sure you have a process you use to make decisions. This does not necessarily mean a rigid set of steps that you follow every time, but it does mean formal process that you can fall back on for difficult decisions and relax, as warranted, for easy ones. The process must, at a minimum, have:
- Ensure that everyone on the decision-making team understands the problem — they are working on the same issue, they have bought into the alternatives being considered and they have worked together to generate a set of discriminating criteria. It is imperative that there be more than one alternative to consider. If not, they are not making a decision, but only justifying a someone's pet idea (Blunder 2).
- Manage the evaluation of the alternatives using measures defined by the criteria.
- Manage uncertainty. This does not mean eliminate uncertainty, but rather to recognize it, eliminate what is easy to address and make the results as incentive as possible to that which remains.
- Combine or fuse the evaluations to develop a shared vision of the value of each alternative.
- Base what-to-do-next on the fused evaluation. Having a strategy here can defuse paralysis by analysis, relieve waiting for something to happen and counteract Blunder 3.
- Capture and record the rationale behind the decision, not just the result of the decision (the usual practice). This and the previous four items counteract Blunder 1.
Avoid the blunders that plague decision making in business and management through the use Accord business decision software, read the book Making Robust Decisions, or invest in decision-making training.
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