Decision-Management for the New Economy

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.

Decision-making maturity

I just spent a day judging a contest of pre-teens making design decisions. I learned a lot about decision-making. My day was in support of the US First Lego League (FLL) local competition. The theme this year’s event was “Climate Connections Challenge”. As part of the event the 10 -14 year-old students built robots out of Legos to compete in a simulated world. They also had to make a presentation on climate change and their community. Finally, they prove they could work as a team.

This year I was the chief Teamwork judge. To show teamwork each team (between 4 and 8 students) was given a simple task and 5 minutes to solve it. On entering the room, I welcomed them and had them gather around a table. I then put on the table a thin plywood disk and a small bag of large sized paper clips. I read them directions which were something like: “You are to build a structure that will hold the disk off the table. You can bend the paper clips in any form you like. The paper clips must be connected in some way. You can not use the plastic bag. You can not harm the plywood disk. You have 5 minutes. Go!”

Two other judges and I then observed them solving the problem. We were not interested in the solution, but in the team-work displayed during the solution. We had rubrics to guide our assessment and had time to ask questions at the end.

It dawned on me part way through the day that I had 21 samples of conceptual design decision-making by pre-teens to observe. This became clear to me too late to allow me to take formal data, but I did make the following anecdotal observations. In each, I juxtapose them to what I have observed in adult decision makers.

• As soon as I stopped reading, the kids grabbed the clips and started bending and talking at the same time. One team was so eager I feared for my safety as I jumped out of the way (slight exaggeration). There was no planning or reflection by any of the teams! I did an experiment in the late 1980s where I gave 6 professional engineers a design problem and five hours to work it. I video taped the sessions. Most of these mature engineers read the requirement over several times before beginning to generate ideas. One subject however dove right in like these pre-teens. He pursued his first and only idea and proceeded to patch on it (see next item), never leading to a reasonable solution of the problem. My conclusion from these experiences is that it takes maturity to do the up front work necessary to make decisions.
• Once the kids jumped in, they patched their way to a solution. Patching means to try different ideas until you stumble onto a solution (I discuss this further in The Mechanical Design Process). What is bad about patching is that it is usually random with no structured method to explore the design space. I saw the same with the engineer described above and other immature designers.
• When they asked clarification questions we only responded with “Read the problem description”. Few did (less than 1/3). They took our response to mean “No”. to whatever was asked. I was surprised at this and after the first few times, I made a big deal of laying down the problem description (in big font on green paper) in the same location as the wooden disk and paper clips. Only one team (out of 21) reread the description together to clarify their issue after we prompted them. My generalization of this is that, for the most part people don’t use all the information available to them.
• On the whole most of the teams did a good job of including most of the members on their team. This is a credit to FLL and the mentors who worked with the teams. I have had many college level teams that were not as inclusive.

By the way, there were three classes of solutions, 1) bend the clips so they sat on the table and the disk was supported by upward extending wire legs (most did this with great patching), 2) bend the clips so that they fastened onto the disk with downward extending legs (only saw this done once successfully), and 3) lay two clips flat on the table and set the disk on top. The last was the most elegant and simple. One team discovered this 40 sec into the five minutes. To see more teamwork, I quickly said “Great, now make the support as tall as possible” (whew!). Most teams never found this solution, but with their dive right in approach and random patching, I am not surprised.

Decision making maturity

I just returned from an ASME (American Society of Mechanical Engineers) meeting in NYC. During my time there I discussed the concept of decision making maturity with three different groups and thought it worth writing about. Best to do in context with my career.

When I was trained as an engineer, I focused on how components and assemblies were shaped, manufactured and functioned. This element-centric view of the world is not at all unique to engineers. Businesses focus on documents, e.g. POs, recepts, memos, contracts, etc)

By the 1980s I became fascinated with the process of developing the elements. This process-centric view is recent. Sure engineers have studied and developed chemical and manufacturing processes for years, but the concept of product design processes and business processes is recent. As evidence of this, in 1990, I wrote an engineering text book about how to progress from customer need to produced product. I debated long and hard about what to title it. I finally landed on "The Mechanical Design Process", a title that proved to be right on the mark (note that its 4th edition will be out in January 2009). The use of the word "process" in the title was problematic because it was only beginning to be used to discuss product evolution.

In the early 1990s my research was about how to capture and manage the evolution of products, the rationale for form and function. This was process-centric, but not getting anywhere. In about 1995, it dawned on me that "design is the evolution of information, punctuated by decisions". That started me on a decision-centric view of the business and technical worlds.

My maturity from element through process to decision is being taken by industry. While in NYC I met with a PLM (Product Lifecycle Management) guru. PLM grew out of CAD (Computer Aided Design) which was all about parts and assemblies - element-centric. PLmis currently focused on the process, i.e. the lifecycle of products. I have been trying to sell decision-centric capabilities into PLM since 2001 with no success. The push back has always been "we aren't ready for that yet" and they weren't. Now there is the beginning of interest. The product development industry is maturing through process to realize that business and technology progress is punctuated by decisions and it is the quality of those decisions that determine the product and business success.

Further, when I talked about this decision-centric view of the world five years ago to industires, audiences had no idea what I was talking about. Now I get good awareness and it is building. There is yet hope for "evolution punctuated by decisions".