Decisionitis
Decisionitis – The disease of not being able to efficiently make decisions.
I just read an article in the latest issue of the Harvard Business Review, titled “The Decision-Driven Organization” by three partners of Bain & Company, Marcia Blenko, Michael Mankins, and Paul Rogers. They compiled a study of organizations, and their processes of restructuring. They noted that “many CEOs assumed that organizational structure – the boxes and lines on a company’s org chart – is a key determinant of financial performance,” and that CEOs believe that to battle innovation, the best process would be creating the best structure for channeling towards innovation.
The research found that CEOs needed to focus on the decision making. “A corporation’s structure, similarly, will produce better performance if and only if it improves the organization’s ability to make and execute key decisions better and faster than competitors…the reorganization challenge is to structure the company so that its leaders can make decisions that produce more and better innovation over time.” CEOs restructure constantly, trying to shake things up, make the company profitable, etc. But shaking things up the wrong way doesn’t help. The authors studied companies which restructured, and most did not improve profitability or productivity. In that automotive industry, Chrysler’s restructuring did nothing, because they just shook things up. Ford on the other hand, hired Alan Mullally from Boeing, and he started by making critical decisions and then looking into the corporate structure.
This issue of HBR attracted my attention because of the title, “Managing Change,” and it related a lot to the recent posts on Change I’ve been writing. I never looked at it through the way of making decisions, and after reading this article, it made a lot of sense to me. But I also read it in a different way, in a new way, related to my last few posts. Now my last three posts related to change, are The Strategy of Time, The Quickest Change, and Change Strategy.
The Strategy of Time, discusses management teams that focus on the present instead of the future. In other words, management which focuses on solving problems that are currently on the table, instead of focusing on tackling future opportunities. Companies end up missing the boat of new technologies, or new business models, because they’re too busy focusing on their current profit or other business problems. By placing decision makers, that focus on the future, and can also handle the present will put a company in a position to be able to tackle their current problems while taking advantages of opportunities.
The Quickest Change, is in summary, about how in an industry, the company who makes the quickest change, can win, even if they’re decisions aren’t of the highest quality, they will be one step closer than the competition. I recommend you take a look at the OODA loop for a more detailed analogy of this. Now this is almost impossible, when decisions are too difficult to make in an organization. If there are too many levels of bureaucracy, it is almost impossible. If it requires more people to take a deeper look into a decision, and to finally come to a final decision, it is almost impossible. To have quick change, CEOs need to leave managers able to make their own decisions. They need to let the responsibility rest on the managers’ shoulders, within reason. If managers hired are innovative, and put in place to lead the company into the future, than their ideas and their instincts should be trusted enough to make decisions. If they’re not, then the right managers need to be put in their place.
The Change Strategy, is based on an e-book by author of 33 Strategies of War, Robert Greene, and in there, I discuss how important Change is to an organization. And that a company culture, and structure that is open to change can change quick. Now this is true, but this is where I missed the point of this article from HBR. That to have a change culture, you need decisiveness, integrated throughout all levels. Robert Greene discusses Google as an example. Google allows employees to spend 20% of their time working on their own projects that their passionate about. This allows employees to make their own decisions about which products and services to offer, and work passionately on it. If these decisions become valuable to the company, then they are implemented in Beta form. Allowing them to release it quickly, before more competitors have the opportunity to, and continue building it with the help of consumers’ feedback. Putting decisions in the hands of all employees, allows Google to be the number one internet company in the world.
Instinct - The Common Trait
Through this article, I decided to look at how organizations typically handle decisions, followed by how individuals handle decisions, and finally how animals handle decisions. The main area to look at it, in terms of efficiency, is between how organizations and individuals execute decisions. Individuals use their instinct, analysis and judgement. The problem comes with judgement, because it uses added personal biases, closed-mindness, and historical experiences which all cloud a decision. Now an organization includes multiple individuals making a decision. Therefore, each of these individuals will add their judgements, which may be flawed. Some individuals also take their sweet time making a decision. The process is repeated over and over again, making the decision process very lengthy and multiplied with personal biases. I have friends who will ponder a simple decision, such as purchasing a cellular phone for months. Repeat this process over and over with several levels of management, and you can see how lengthy of a process it can become for even more critical decisions.
I found that all three have a common train, Instinct. Instinct is defined as the inherent inclination of a living organism toward a particular behaviour. On a level that more of us can relate to, it is that feeling in your gut, that you should do something. Now instinct has been studied many times, and it is very intricate. Instinct, will take all the data that you have that is related to a situation and make a decision whether to accept it intrinsically or not. It will use your biases, your open/closed mindness, a quick analysis of the environment, and historical data to make a decision in an instant. The problem is that we take this information and data, and cloud it with our judgements and our analysis. Now this sometimes may be okay, but it can also cloud a good decision. We have instinct, which we’ve discussed above. Instinct can make a very good decision for us, but then we cloud it with additional biases, and closed mindness. We include the judgements of other people, multiplying the bias each time. It can get to the point, where even the first decision maker will go against his instincts. If a CEO can trust the instincts of the organization’s managers, then the managers can efficiently make their own decisions, and the bureaucracy isn’t necessary. Organizations can strive through being mobile, and giving all employees the responsibility of making their own decisions for the company’s best interests. This responsibility can spark the innovation in an organization, and allow employees to be motivated to leave their own legacy on the company.
We need to promote instinct based decisions, but first we have to promote decisions throughout an organization. CEOs need to implement a decision executing management style. Where decisions are the focus of the organizations. Where policies are in the place, to allow decisions to be more effective, efficient, quicker, and with creativity. These have to implemented not only with senior management, but employees also. Having a system like Google has, will not only solve an organization’s problems, but will also allow it to rise above and beyond the status quo, and innovate at a top level.
Diagnostics Test - Testing the Disruptive Judgements
McKinsey Quarterly recently released an article about trusting your instinct for decisions, “how to test your decision making instincts“. And found that although Instinct, is a great trait of humans, we need to assess them for biases. I disagree with one part of this, that instinct is still instinct, and these biases you see below are the judgements which can disrupt the decision-making.
Essentially, how is this situation different or similar from other situations we have experienced. Are there going to be uncertainties that can cause a problem in the instinct based decision making process. “…we can also develop a list of uncertainties and assess whether we have sufficient experience to judge them well.”
2. The Feedback Test: Did we get reliable feedback in past situations?
Did we learn the right lessons in past situations? Was the feedback skewed towards being good? Would the negative aspects of the past results impact this situation? We have to be able to judge our past experiences properly. Those are the historical data which can skew our decisions. We need to avoid using our instinct if this data is unreliable.
3. The Measured-Emotions Test: Are the emotions we have experienced in similar or related situations measured?
Emotions can skew a decision, and especially instinct. We could have a bad feeling about a decision, but our emotions or attachments can skew us to make these decisions. This is especially seen in escalation of commitment, where we’re too far committed into a project that we don’t want to stop even though the odds say that it won’t work. Think of this as a game of poker, you’re in a hand with half of your chips, you have Ace high, and there is a flush draw on the table. Four other players are in the game, but someone calls you all in and you call because you’re already half in. Also, having negative experiences in a situation can push a decision away and skew you instinct.
4. The Independence Test: Are we likely to be influenced by any inappropriate personal interests or attachments?
Here, we have to look at the personal interests involved in a decision. “If we are trying to decide between two office locations for an organization, one of which is much more personally convenient, we should be cautious. Our subconscious will have more positive emotional tags for the more convenient location.” We have to make sure that we avoid these biases.
The Decisionitis Cure - Three Prescriptions
There are a number of steps an organization has to take to make decisions, to begin with, Make Decisions.
Decide which employees you want to lead the decision making in your organization. Which managers you want to focus on the future, and which to handle the present. But most important, is deciding which managers who have good instincts that you can trust. That will make a good manager. Analysis is also important, but the most efficient and important are managers with instinct. McKinsey Quarterly recently issued an article titled, When can you trust your gut?, and this can give your employees and managers some great insight into analyzing its trust in Instincts. The authors, a Nobel Laureate, and renowned psychologist, discuss that intuition can be used in situations of structure, but not volatility. For example, in deciding which way to enter a new market, but not in picking stocks during a volatile market. If you read Straight from the Gut by Jack Welch, he made decisions with leadership to succeed in the future. He sold/cut the companies which weren’t in the Top 3 of their respective industries. And he maintained that decision making principle through placing the same kind of leadership at every level.Find out which decisions are crucial to the success of the company and make them. In the article mentioned above, the authors discuss Ford. When Alan Mullally began at Ford, he started by making key decisions, instead of the typical shuffling around of the status quo restructuring. He took reign of the company, and found out what their consumers wanted, and decided that that was what they were going to do. Everyone knew they had to cut their additional brands, Aston Martin, Volvo, Mercury, and he did just that. The previous management, had biases and historical data involved. They already spent a lot of money on those brands and employees were attached to them. But without judgement and biases, Alan Mullally came in and made the crucial decisions needed. Employees with trusted instincts should be sought after for an organization, and should be a crucial part of the selection and interview process.
Prescription 2: A Decisive Company Culture
Create a company culture where making decisions is encouraged. I conducted my own little study, and asked 20 people at various levels and various companies, how often they made decisions, have they ever refrained from making a decision, and why. The results were disparaging, although 70% said they made over 5 decisions per year, only 10% made decisions that had a major impact on the company. Out of every person I interviewed, 90% had refrained from making decisions, and the reasons behind them were, the lengthy process of a decision being approved, the fear of criticism from managers, and the lack of support of the company. Some of these companies even had programs in place for presenting ideas with a cash reward. The company culture has to support decision making at every level, and give employees the responsibility to make a difference, or else your employees’ values will not be fulfilled.
Prescription 3: Annual Check-up
A company has to complete a periodical checkup on the decision making process of the whole company. Resources have to be put aside to conduct employee surveys, interview managers, and review the organization’s overall innovation. Is your company ahead of its competitors? If not, has your company progressed? Are your employees starting their own initiatives? Are managers responsive? How long is the decision making process? All these metrics need to be analyzed, and improved upon if an area is found to be lacking. McKinsey Quarterly has an article on just that, How to test your decision making instincts, and this can be a start to developing tools for testing your organizational instincts.
Summary of Procedure
To review, we have looked at how organizations need to be able to make executing decisions a priority. Then we related back to my other posts about change, and how decisions can related to initializing change with the same logic. We then looked at the decision making processes of individuals, and organizations, and how the status quo decision making process is not longer applicable in the rapid changing world. And we found that instinct, and management trusting the instinct of the employees can make for more rapid, and efficient decision making. We then went over the Decisionitis Cure, and the three major steps a CEO can make to implement decision making to make a more innovative organization and be steps ahead of its competition. Multiple examples demonstrate the need for efficient decision making, and with these steps, companies can not only tackle their problems, but initiate more innovation in this ever changing, mass information driven economy.
