The new economy forces new practices in making critical business decisions. Cost overruns, late to market, and rescoping all lead to inefficiencies that can no longer be tolerated. One approach to improve performance in these areas is to ensure that your decision-making processes lead to the best choices in an efficient manner every time.
Symptoms of poor decision practice are:
- Decisions take too long – some are discussed, shelved, discussed again a year later, with no resolution
- Meetings end with no clear direction forward – decisions aren’t made and actions not taken
- Firefighting dominates useful work – with some fires clearly caused by poor earlier decisions
- Projects championed by the strong dominate what is best for the organization
- Decisions come unstuck – you decide what to do next, everyone agrees, and then something different happens
- Decisions are made without using all of available information and you know it
- Risk is ignored or padded over – all decisions are based on uncertain information and thus are risky.
It is estimated that half of all decisions fail. By “fail” I mean that some time after the “decision” was made, there is no evidence that any effort went into making it, i.e. nothing changed. The only evidence that any effort was put into the decision was the expenditure of time and money. A decision is a call to action and if no useful action occurs, the time and effort that went into making it was wasted, or worse.
The risk of making a poor decision, one that isn’t actionable and doesn’t stick, can be reduced through decision-management. Decision management is a process whose goal is to use the available uncertain, incomplete, conflicting, and evolving information to make the best possible choices with known expected risks, within time and resources available. Some of the basics of decision management are:
- Decision-management begins with assuring that everyone is addressing the same issue. This isn’t a given. I have been in many meetings where everyone thought they were addressing the same topic, but weren’t. Even if generally on topic, everyone is making different assumptions and these must be made explicit. In watching the debates on bailouts and stimulus packages in early February 2009, it was clear that the issue is not well understood or agreed to.
- To make a decision, there must be more than one alternative. If there is only one alternative and rejecting it is not an option, then the effort is for justification, not decision making. Decision-management helps develop alternative courses of action. The Wall Street bailout program of late 2008 seems to be an instance of rubber stamping a single alternative.
- A major component of decision-management is developing a clear picture of how you will know if you have a good decision - what should be measured – what is important and to whom is it important. Determining stakeholders’ values before diving in too deep is critical if you want a result that everyone can buy into. The lack of clarity with the stimulus packages being debated in Washington seems to hinge on a clear picture of what is to be measured (e.g. jobs created, home foreclosures saved, etc.). Good decision-management helps to develop measures, and at the same time, honors differences of opinion about which measures are important. This might be helpful in Washington.
- All decisions are based on estimates that are uncertain and yet we do a very poor job of taking this uncertainty into account. Past performance may be known (if it was documented), the present is obscured by its immediacy, and the future is just the best guess. In other words, very little is known with certainty. Adding uncertainty at the end of a decision making process with a “what-if” discussion is too late. Decision-management helps identify and capture the information uncertainty at the beginning of the process in an effort to produce a robust decision, one that is as immune as possible to the uncertainty.
- A key part of decision management is a process to fuse together all of the information is a timely and useful manner. Sometimes, there is need for a fast decision and sometimes, if the stakes are high and time is available, more effort needs to be placed on issue, alternative, measure, and estimate development. Good decision-management controls the time spent versus the depth of analysis to reach a decision.
In the 1990s most organizations began to review their processes to make them more efficient, agile and manageable. Making processes more efficient is mandatory in the new economy. However, many find that as they refine their processes, inefficiencies occur with poor decisions. In other words, efficient processes need efficient decision-management. Good decision-management is possible in most organizations and can alleviate many of the symptoms itemized at the beginning of this article.