The United Nations Millennium Project, “The Capacity to Decide,” identified decision-making as one of the top 15 global challenges facing humanity today! It is easy to understand why decision-making is viewed with such acclaim, as most monumental public and private sector events and interactions, investments, resource allocations, and control decisions determined by women and men in leadership and managerial roles.
Successful organizations function with skilled and experienced people continually and dynamically making smart and appropriate decisions and driving positive and value-add outcomes. Managers plan, organize, staff, lead, and control, their areas of responsibility, by executing workable and pragmatic decisions. Lesson-learned from the 20th century and current 21st century is a testimony that no business can reach its full potential without executives and managers making required decisions to support the achievement of approved strategies and associated financial goals on a timely basis.
“Stay committed to your decisions, but stay flexible in your approach.”
In psychology, decision-making is the cognitive process supporting the selection of a belief or a course of action among numerous different potentials. Decision-making is the practice of identifying and choosing alternatives based on the values, predisposition, favorites, and opinions of the decision-maker. Decision-making is, accordingly, a social event that can be rational or irrational and based on explicit and tacit knowledge and personal biases.
Continually making the right decisions is a technique that must be acquired as it is something with which we are not innately born. In simple terms, it is a formalized sequence where the outcome is influenced totally by the decision-makers life experience, innate knowledge, insights and beliefs, and personal bias. Personal experiences can sometimes be an ineffective coach that imparts prejudicial behaviors, as business decisions are formulated based on the unique context, environment, supporting information, obstacles, and limits of the situation.
Decision-making is referenced within the human behavior and performance areas as outlined below:
Psychological: examine individual decisions in the context of a set of needs, preferences, and values the individual has or seeks.
Cognitive: the decision-making process regarded as a continuous process integrated into environmental interactions.
Normative: analysis of individual decisions concerned with the logic of decision-making, communicative rationality, and the invariant choice outcomes.
“Checking the results of a decision against its expectations shows executives what their strengths are, where they need to improve, and where they lack knowledge or information.”
Decision-Making Information Criteria
Rational and sound decision making is a continual and proactive responsibility of management. The criteria of the information collected and used to support effective decision-include:
- Elements presented clearly.
- Consistent with similar situations, facts, and conclusions.
- Easy to understand.
- Objective / non-biased.
- Relevant to the underlining problem.
- Reliable and precise.
“As a result, most organizations are not very good at decision making. It’s no surprise that our study of 500 managers and executives found 98% fail to apply best practices when making decisions.”
Today, it is a top priority for successful companies to make rapid, knowledge-based, and high-quality strategic and tactical decisions that support their corporate strategic framework. The principal responsibility of business management, in most industrial environments, is above all, to make the right decisions on an ongoing basis.
Management at all organizational levels is decision-makers. However, the manner how a manager approaches and supports the decision-making process varies based on their position within the corporate hierarchy. To successfully climb the management ladder, managers need to acquire and hone new skills and behavior to modify the manner they use the information and create and evaluate strategic and tactical choices.
The most clearly-troubling situations are symptoms of underlying problems. These symptoms all indicate that something is wrong within an organizational activity, but they don’t identify root causes. Managers need to attack symptoms directly by working diligently to uncover the factors that cause the symptoms.
Often, time pressures cause managers to move forward after limited research and consideration or the most obvious alternatives. Practical problem solving requires a thorough and detailed assessment of the challenge, and a quick answer may not result in an appropriate or correct response and solution. Thus, managers should think through and examine all supporting information and reasonable alternative solutions to a single problem before making a final decision.
“Most decisions are not binary, and there are usually better answers waiting to be found if you do the analysis and involve the right people.”
Managers predisposed with personal biases lose sight of the bigger picture and backstory, leading to the absence of total objectivity in decision-making. They typically make poor decisions on complex and challenging issues intending to advance their agenda and career ambitions.
Poor decision-making produces an acrimonious cycle that reinforces already present anxiety and personal stress about decision making!
Managers that are not ready for leadership roles and prone to fall into the trap of making bad decisions, generally exhibit behavioral patterns such as:
- Addicted to corporate politics.
- Too much or not enough information.
- Problem misidentification.
- Can’t see the forest for the trees.
- Don’t trust themselves to lead.
- Fail to communicate the what, where, when, and how associated with their decisions.
- Absence of strategic alignment.
- Lack of clarity of purpose.
- Mismanage resources (human and financial).
- Lack of risk mitigation planning.
- Place too much emphasis on past experiences.
“Making good business decisions is a critical part of every executive’s job and is vital to every company’s well-being. Yet in a new McKinsey Global Survey on the topic, only 20 percent of respondents say their organizations excel at decision making. Further, a majority say much of the time they devote to decision making is used ineffectively.”
When we think of what makes a successful leader, one trait that usually comes to mind is decisiveness! We do not envision successful leaders standing around appearing ambiguous and uncertain. Instead, we view leaders as men and women who can quickly arrive at the most appropriate decisions and communicate the supporting details to the involved stakeholders.
Fundamental management behavior is the ability to recognize and appreciate how to balance ‘emotion with reason’ and make decisions that positively impact employees, customers, and stakeholders without reliance on negative personal bias. Making the right decisions in problematic conditions is no small feat as these types of arrangements typically involve change, doubt, anxiety, stress, and unfavorable responses of others.
Active managers generally know and appreciate when to move swiftly and progress with the available information, versus when to take more time and gather additional information. When managers choose to pursue further information, they must also know when to conclude their search and move ahead to analysis. While a large amount of information may be desirable in a perfect world, this activity typically expends unnecessary employee production time, and the vast amount of information may be paralyzing to analyze and easily support sound decision-making.
Good business decision-making encompasses:
- Freedom to select from alternatives without coercion and implies uncertainty about outcomes.
- A human and social event and involves intellectual abilities, intuition, subjective values, and judgment.
- Intellectual/conscious experience and involves extensive deliberation and thoughtful consideration of various factors influencing the ultimate choice.
- Intimacy with the environment. A manager may take one decision in one case and an opposite conclusion in a similar matter.
- Pervasive management functions performed by managers through the nature of decisions that may differ from one organizational level to another.
Managers need to evaluate all available alternatives to identify the best option. As decision-making is purposeful, the best decision maybe is not to make a decision!
Market research and real-world experience suggest that timely and successful decision-making is a direct consequence of the ability of executives and managers to understand the nuisances and details associated with pending decisions. Only with decision classification, focus, and prioritization can be associated with the appropriate knowledge and insights necessary to make the required decision. Decision types classically cover:
- Mission-Critical Decisions
- Horizontal Decisions
- Tactical Decisions
- Unplanned Decisions
The Business Decision-Making Model
The business decision-making model is a formalized step-by-step technique allowing managers and employees to solve problems and advancing opportunities by gathering and weighing evidence, examining alternatives, and choosing an appropriate path forward. The use of a process-driven decision-making model supports more effective, deliberate, and, thoughtful decisions by formally organizing relevant information and defining alternatives.
This decision-making model consists of the below activities:
- Identify and quantify problems/opportunities.
- Gather relevant information evidence.
- Weigh evidence within organizational context and evaluation criteria.
- Identify affected parties (stakeholders).
- Identify current and future risk consequences of problem/opportunity.
- Brainstorm and think creatively about potential decision actions
- Identify possible decision alternatives.
- Select top value choice among decision alternatives.
- Take action and implement the decision selected.
- Review decision result and impacts. (financial and non-financial).
- Modify original decision as required.
The consensus is a well-meaning goal, but as a management practice, it can be a hindrance to the right decisions and a formula for accepting the lowest-common-denominator concession. A more accommodating goal is to encourage the stakeholders to take ownership of their choices and outcomes versus a compulsory group consensus.
“A good decision executed quickly beats a brilliant decision implemented slowly.”
The Harvard Business Review has identified different groups of decision-makers, as outlined below:
- Maximizer collects and reviews vast quantities of information before making any decision. This group is typically inspired by finding the best response to support the open decision.
- Satisfier focuses on only the essential facts and ideas and testing them out along the way. They act as soon as they feel they have an acceptable amount of information collected, assessed, and verified.
- Single Focus embarks on one course of action, committing time and energy into creating outcomes they believe in and generally associated with past experiences and acquired knowledge.
- Multi Focus peruses numerous sources of information and associated insights while adjusting to new and different conditions.
Business Intelligence (BI) comprises the strategies, frameworks, and technologies for the data analysis of enterprise business information.
BI real-time tools generate data sets and analytical findings in reports, summaries, dashboards, and graph formats with comprehensive intelligence on the current and future state of the enterprise’s business and financial conditions and trends.
“Business intelligence (BI) is a way to reveal actionable insights in your data.”
Typically, critical business decisions are deferred or changed due to absence or nonexistence of information, frequent changes in the underlining data, or the manner interpreted. BI delivers foundational information on which to base decisions and feedback data used to evaluate the appropriateness and accuracy of decisions.
Making the right decision is only part of the process. Decisions must be made rapidly and often, especially in situations, when employees are engaged in critical customer-focused events or when an operational or financial crisis arises.
BI enables easy and real-time access to data in its original and calculated formats enabling faster and fact-based decision making. The overarching challenge is to give every user more power to complete relevant analysis in a way that ties back to organizational objectives.
Business Intelligence supports:
- Data collection and integration from multiple business applications and data sources.
- Real-time access and reporting.
- Graphical reporting: data visualization.
- Self-Service Business Intelligence.
The value outcomes resulting from BI use in a business context are as follows.
- Forecast and evaluate business scenarios.
- Discover insights and trends that would have otherwise remained buried or siloed.
- Identify and probe problems, risks, and their root causes.
- Formulate observations and suggestions on business performance and trends.
- Optimize and leverage business process productivity.
- Monitor Key Performance Indicators (KPIs).
- Track and assess market statistics and projections.
- Visualize and model business and financial activities.
“If a decision-making process is flawed and dysfunctional, decisions will go awry.”
The Way Forward
Knowledge Compass consultants successfully help clients plan and develop decision-making and business intelligence strategies and plans and mentor executives and employees in optimal decision-making.
Knowledge Compass provides consulting services with the use of an array of Frameworks, Analyses Tools, and Interactions from their Best Practices Consultant Toolbox.