The Hard Call

Monday, October 1, 2012 - 12:11

Faster and better decision-making is a key to success, so why is there not more focus on hiring or promoting decisive people? By Gerard McManus

Finding who has the "right stuff" to be a trainee pilot has traditionally involved a rigorous selection process that seeks to identify whether applicants have the capability to make fast and correct decisions.

In fact, pilot judgment, or the ability to gauge risk based on obtainable data within a time constraint during pressure situations, is arguably a more important selection component than grades, knowledge, skills and other aptitudes. There is, of course, no margin for error in aviation and with 75 per cent of crashes still caused by human factors, it is no wonder air forces try to find people among their many applicants who are good at making decisions.

In a similar vein, one of the masters of management, Peter Drucker, divined decision-making was misunderstood on two fronts.

First, the wrong belief that good decision-making was less important to organisational success than other leadership traits such as charisma and personality. Second, he rebuffed the notion only decisions at the top matter.

"This is a dangerous mistake. Decisions are made at every level of the organisation," Drucker wrote almost a decade ago.

"Making good decisions is a crucial skill at every level. It needs to be taught explicitly to everyone in organisations, based on knowledge."

Drucker also maintained that a decision was not effective unless its execution met four action criteria: identifying the name of the person accountable for carrying it out; the deadline; that the people who were implementing the decision were identified, informed, understood and approved it; and finally the people not directly involved but who were still affected by it were also informed.

Organisations, large and small, public or private, that depend on the execution of thousands of decisions for their ultimate success or failure do not place anywhere near the same emphasis on decision-making ability during the selection process or in determining the suitability of people for roles of greater responsibility.

Studies repeatedly show it is rare for organisations to engage in prospective decision-making self-analysis or retrospective investigations of mistakes to identify where slip-ups happened in the "error chain".

The natural instinct in businesses, in particular, is to move on to the next challenge or crisis, or literally hide the organisation's "black box" from would- be examiners.

Usually in such cases, it is individuals who are identified as having "messed up", rather than the organisational decision-making process itself.

Nonetheless, research by Marcia Blenko, of Bain & Company, shows there is a strong correlation between companies with a "faster metabolism" of making and executing decision and better financial results.

And the correlation, based on data from 750 companies worldwide, not surprisingly, also relates to employee engagement.

Blenko found employees are more motivated in a place where things get done and believe their workplaces are more stimulating places to work, rather than those where bureaucracies and committees stifle decision-making.

Blenko's book Decide and Deliver, which examines key aspects of the process, suggests better decision- making systems, rather than identifying individual decision-makers, as thekey to reducing mistakes and strategic blunders.

Bain & Co is able to put a slide rule over clients which examines four measurable computations: the quality of decision-making - was it a good decision and why?; the speed of the decision - compared with competitors and on the expected time to make such a decision; the yield of the decision - to what extent did the execution of the decision have the intended consequences; and the effort of the decision - whether the right amount of effort was used.

There are many formulas, sometimes enormously complex ones, for good decision-making. Not surprisingly, the decision-making mud map used by pilots can be adapted to most situations faced by organisations.

Making good decisions

Determine problem/challenge/ situation/estimate significance: How important is the decision; and prioritise decision-making process - tactical or strategic, routine or critical?

Choose the outcome objective/ identify options/alternatives/ do complete the action agenda: The doing is the execution and the true test of a decision, plus the law of diminishing see what was in the mind of the decision- maker when they made the call.

Have a "Plan B": Making a hard decision knowing there is a significant likelihood it could be the wrong one can often necessitate the need for an alternative plan in case the first one blows up. Having such a contingency provides an insurance policy against the first route. For those of us who are afraid of making tough decisions, a Plan B can give us that bit of extra confidence to push forward. It stops us being paralysed by what-ifs.

Deploy a devil's advocate: The Catholic Church created the office, the devil's advocate, five centuries ago to critique candidates for sainthood - literally to dig up dirt on their character to avoid embarrassment later on. Particularly in large organisations, employing or contracting out someone to critically "second guess" strategies can be useful.

Ethical slide rule: Tough decisions often mean pain for at least someone - staff, customers, competitors,nreturns suggests the longer you wait to seize opportunities, the smaller the return typically is because competitors seize gaps in the market or prospective employees get snapped up by other employers.

Evaluate: This is often the most forgotten, but arguably the most important step in the process of good decision-making.

Feedback tests the validity of a decision at the time it was decided to be carried out. An evaluation down the track can determine where there were gaps in the decision-making process, where there were oversights, where there was misinformation, misunderstandings, manipulation, impulsiveness or other debilitating factors.

Decision auxiliaries: Not written/not real - for major strategic decisions and even non-critical decisions about new hires, the discipline of writing down the conundrum, doing a SWOT analysis, or simply disciplining thought processes, is enormously beneficial. It also helps in being able to review down the track - to

contractors or shareholders. When there is tentativeness, it is worthwhile going back to the core values of the organisation (if such values exist) or the principles of the principals. Integrity in decision-making can have a two-fold benefit - clarity of mind and the flow-on decisions of trying to do the right thing by those affected by the decision.

In data we trust: Decisions without data, analytics and research are inherently risky. Almost every proposal, business plan redundancy list, business opportunity or policy proposal has numbers attached to it. Decisions based on gut instinct without some kind of cost-benefit analysis, risk analysis or market analysis are fraught with danger.

It's a balance, though; don't let yourself be a maximiser, weighed down by too much data and afraid of missing something, and often left unsatisfied even after making a decision. Many people would argue "analysis paralysis" is a worse mistake than one made with good judgment and a decent data set.