Wednesday, February 1, 2012

Improving Decision Making

Chris Stephenson, a highly successful and well respected CEO who is now a management consultant in Sydney, has recently completed a valuable study on decision making[1].

There is plenty of material available that shows the importance of making good strategic decisions and, in retrospect, it is always easy to nominate “good” or “bad” decisions. Of course, there are also plenty of models around that can work us through a process (usually quite time intensive) designed to ensure we make the “right” decision.

But most of us don’t have the time to work through some complicated decision-making model and, even if we did have the time, the evidence shows that there is still no guarantee that we will make a “good” decision every (or even most of) the time. In fact there is data that shows only about 15% of organisations have the ability to make and implement important decisions effectively.

Stephenson interviewed CEOs and Executives in Australia about their decision making processes. His interest was to find out how we can improve the quality of decision making – in other words, rather than considering decisions that had been made and then deciding were these decisions “good” or “bad”, he wanted to find out those things surrounding the final decision being made so that the probability of a “good” decision improved.

He found that the key factors that resulted in poor quality decisions were:

  • No decision-making process – Decisions are made on a case by case basis often by a small sub-group or by the CEO alone mandating a direction without any discussion.
  • Lack of transparency – Excluding stakeholders from decision-making, withholding information, side-bar discussions between the CEO and individuals outside of the TMT.
  • Low tolerance for diversity and alternate views – A low appreciation of the value of diversity and experience.
  • Disrespect – Treating those with different views as disloyal and not team contributors.
  • Data – Ignoring data when it didn’t confirm favoured outcomes. Over relying on small data samples when they supported desired outcomes. Pretending everything is OK when it’s not.
  • Dominant individuals – A CEO or others dominating the discussion and chiding anyone that offers alternative inputs.
  • Self interest – Allowing self interest to be the basis of decision outcomes rather than organisational best interest.
  • Emotional factors – Taking decisions on gut instinct without cross-checking against the data. Not appreciating the affect of personal biases on decisions.
  • Narcissism – Decisions driven by individuals with an over developed self belief and inability to comprehend other people mattering or themselves being wrong.
  • Ego – Decisions driven by one person’s agenda to further themselves.

All business decisions today are made in an environment of increasing complexity, information overload, reducing lead-times, personal motives, survival and self-serving instincts, and pressure associated with meeting market expectations. What Stephenson found out was that the quality of decisions depended a lot on:

  • Knowing who is making the decision and their accountability for it
  • Understanding the timeframe
  • A robust process
  • Transparency
  • Inclusiveness
  • Appreciating diversity
  • A sense of order
  • Accurate data
  • Mutual respect
  • Active debate on issues with everyone involved having a say

Where this second set of factors were clear throughout the organisation – in other words, this was the organisation’s culture - the quality of decision making improved significantly.

What decision making culture exists in your business? As Stephenson shows, its not hard to make it positive.

More information about Doug Long at

[1] Unpublished DBA thesis through Southern Cross University.

No comments:

Post a Comment