One of the benefits of being a TJ subscriber is full access to our decades-long archive of content – here we look back to another great piece on decision making from June 2013.
Mike Robinson and Tessa Sharp examine the “complex tapestry” surrounding how executives really make decisions.
It may interest you to know that most of the decisions that we make, that we think are logical and rational, are in fact heavily influenced by other factors that are quite irrational, sometimes unconscious and have consequences that are often unpredictable.
It is only in consideration of the complex tapestry that surrounds decision-making that we can truly be cognisant of exactly what we are deciding and why we are deciding it.
If you consider a range of executive- and strategic-level decisions, you will see that many are motivated by high levels of self-interest and are often influenced by unseen forces out of the sight of stakeholders. It also seems a factor that many of these decisions, although well founded, often fail, largely because of a lack of insight into the dimensions that have an impact on and that influence ‘rational’ decision-making. Here is a typical example brought to us recently:
The client is a large financial services provider and an inexperienced acquirer with an inward focus; it has a valuable brand and significant available capital. It is contemplating a large acquisition, which is also likely to require substantial follow-on investment given the high-growth potential of the acquisition. This opportunity is transformational with significant transaction risk.
The CEO is challenged to win the hearts and minds of the senior management group, who are perceived as risk-averse and more concerned about the loss of their own compensation, perks and low-key working lifestyle.
What decisions need to made, and by whom, for the senior management group to feel inspired and motivated to rise beyond their own personal concerns in order to do what is bold and right for the organisation?
So, given this, how is it possible to make really good decisions? Is it actually possible to make good decisions when operating in such a fast-moving volatile market? Or should we consider one final question: does our understanding of executive decision-making need to radically change?
What is executive decision-making?
Executive decision-making is the process by which individuals and teams within an organisation generate value for stakeholders and enhance their performance (be that in commercial or quality of service terms).
Several studies on decision-making within organisations have revealed that decision-makers often make bad decisions1, solve the wrong problem2 and cannot cope with uncertainty3. Such delayed or bad decisions cost organisations millions every year4 and can make the difference between survival and closure.
What training does your organisation currently offer to your managers and leaders to equip them for the difficult decision-making tasks ahead? Here is an example of an experience recounted by one of our clients: “The most difficult decision I ever had to make in my commercial career was many years ago when I was head of marketing for a large national retailer. The MD had resigned and a new MD was joining in six to eight weeks’ time. I had yet to meet him as he had been appointed by the global corporate board. Footfall numbers of customers were consistently falling and my task was to increase the number of people entering the stores over the busy Christmas period. A range of in-store promotions had been designed to encourage purchase once potential customers were through the doors.
“I had been allocated a significant budget to develop a promotion to increase footfall and now was the time when a decision had to be made or we would lose the window of opportunity. A number of external, specialist marketing agencies were briefed to pitch for this work, but I found their ideas uninspiring and providing very little evidence that they would actually achieve the results we needed.
“So my decision was a) do I do nothing and look potentially ineffective to my new boss?, or b) do I go ahead with one of the promotions despite no real evidence of likely success and stand the chance of looking either courageous and effective, or ineffective with no real concern for the company’s money? I had no mentor, no one who could advise me, so I had to make a decision. I had never had any training in how to do anything like this, or how to go about making such a decision. I had a very real need to increase footfall, and £200k sitting in my budget to be spent.”
This example parallels some very real themes present in today’s world of executive decision-making, namely making decisions in unfamiliar territory, with uncertain outcomes, a personal and/or organisational reputation on the line, no or few point(s) of reference or advice, potential negative consequences if a ‘no go’ decision is taken – and all despite having the very best of intentions. This is apart from today’s incredibly challenging commercial, competitive and financial environment.
Why is executive decision-making so important right now?
The environment in which leaders find themselves today is more challenging and complex than ever before. There are:
- fewer face-to-face interactions (out of the office, at different sites, or in different countries)
- more cross cultural, cross gender, cross generational biases and perceptions
- less resource, together with hiring and retention challenges
- more virtual working
- greater demands and expectations
- greater use of, and pressure from, technology
- risk of public shame if things go wrong.
All of this creates greater potential for misunderstanding, different perceptions and biases, and, ultimately, conflicting views, styles and opinions. In such a fast moving and commercially-critical environment, effective executive decision-making is more important now than ever before. And while it is increasingly common practice for managers and executives to receive individual coaching, it is much less common for executive teams to be coached in their group processes and group effectiveness.
Now is the time to take steps to prevent the common ‘public scapegoating’ of executives that we are seeing in the media every day. With a rare exception, these people are hard-working, well-intentioned individuals who have been working tirelessly to do their best for their families and their organisations. The public humiliation and expectation that they will fall on their sword has questionable long-term benefits for us all. [pullquote]Let’s stop the witch hunt and take preventative steps to educate and protect our valuable executive resource[/pullquote].
The benefits of effective decision-making
As you will see from the following content, the tapestry of elements surrounding executive decision-making is complex and unpredictable. For those of you who are courageous enough to read on and stick with us through the detail, a world of potential is offered.
Imagine if you will an organisation in which the well-oiled machine of executive and managerial decision-making operates in open, free and robust discussion; with teams who share an appetite for tackling even the most complex of dilemmas, to resolve issues that have held the organisation or the sector back for years. What could be the commercial potential for such an organisation?
In this new world, leadership and management teams are supported in gaining the confidence to navigate with greater agility through change and uncertainty, the competence and capability to make clear, focused and collegiate decisions begins to permeate the organisation and effective decision-making methodologies become an everyday part of the talent development landscape.
Before long, confidence and motivation levels begin to climb; the leadership becomes focused on clear, strategic horizons; stress through uncertainty begins to subside; a greater wellbeing begins to develop, and the seeds of excitement about the future begin to germinate.
So brace yourself and read on…
How do we support effective decision-making right now?
There are a number of critical dimensions that help support effective decision-making: process, organisational mind set, interpersonal dynamics, information, timing, communication and motivation.
Create a clearly defined ‘road-map’ to decision-making in your organisation:
- follow any variant of Kolb’s learning cycle5 – plan, do, review, conclude – to provide a route to continuous learning and improvement. So often we see budget, time or people constraints get in the way of completing the review and conclude stages of learning. These are the key stages that inform and improve the effectiveness and quality of future decision-making
- define a focused process of decision-making appropriate for your organisation, its goals and the current climate
- to make better decisions, keep accurate records, carefully estimate risks and choose your actions based on carefully considered and agreed probable outcomes
- explicitly identify the current environmental factors that will be significant to each decision. [pullquote]Differing situational needs may necessitate a different approach for each decision[/pullquote] (eg survival vs growth, fast with higher risk vs slow with lower risk, collaborative vs directed). This requires considerable individual and executive team flexibility in terms of both personal style preference and established, historic ways of working. It is perilous to assume that decision-making processes that have worked in the past will be appropriate for each case in the future, without first taking stock to consider thecurrent environment
- are the individual, team and organisational outcomes clearly and overtly defined and understood by each member of the team? We consistently see executives assuming they have the same shared understanding of a goal when it becomes apparent through exploration that each member has a different view of what the desired outcome is
- are the people with the most appropriate skills and experience involved in the discussions, irrespective of level and role?
- consider, and explicitly work to reduce, the factors that compromise or ‘contaminate’ people’s ability to make clean and open decisions.
Organisational mind set
Decision-making is a core competency to be incorporated within both individual and team capabilities. Is this skill-set explicitly offered as part of your leadership L&D curriculum? Are competency and capability in this area regularly reviewed and assessed as part of performance management both at an individual and a team level? Is the outcome of an executive decision the only factor considered, or is the efficiency and effectiveness of the process considered too?
Most organisations will have developed an established attitude to risk and possibility. In these competitive and commercially challenging times, is the balance right? Should the focus be on becoming more innovative and taking more (considered) risks, or should we batten down the hatches and focus on minimising risk? The answers to these questions will be heavily influenced by the present-day environment and pressures under which your organisation is operating.
- What is the executive team interpersonal dynamic?
- How do power and politics influence the true ability of people within the team to offer their honest views and ideas, and to what extent are they genuinely heard and their ideas considered?
- What is the quality of listening and reflection? How often we witness executive meetings in which people are lined up waiting to speak, rather than attentively hearing and considering what is currently being said by others.
- How explicitly do you plan to ensure you have the optimum data and information available to make the best decision possible?
- To what degree do executives really consider all possibilities and the pros and cons of each one before committing to, or avoiding, a decision?
- How courageous and focused is your organisation to ensure it makes decisions on time?
- To what degree does the day-to-day ‘noise’ of ‘business-as-usual’ activity get in the way of investing in, and focusing on, what’s really important for the long-term security and development of the organisation? These distractions often result in delays and/or decisions being avoided, or in decisions having to be made in a hurry with very little quality thought about all the possible options and their consequences.
Some executive teams are great at making clear and focused decisions, but fall down in not effectively communicating and cascading them throughout the organisation, checking understanding and emotional engagement and laying the full foundations for effective implementation.
Clarity in the communication process – communication style, medium, message, audience, timing and agreement of roles and responsibilities – is as much part of the effective decision as the decision itself.
Motivation and engagement
Statistics show us that a very high proportion of change initiatives fail due to lack of emotional buy-in. Employees will often be left with thoughts and feelings such as what exactly is it that you want me to do differently?, I don’t see the point, it won’t make any difference to me, why should I put myself out and add to my workload to do this?, things are fine as they are – I don’t understand what all the fuss is about, it’ll blow over – we’ll just sit tight carrying on as usual and wait for the next big change initiative to hit.
For people to feel motivated, they need to identify for themselves, and in collaboration with their leadership, what they can actively do to make a difference and to feel appreciated and recognised for that change of effort. Role-modelling, acknowledgement and celebration are essential to making executive decisions stick.
What else gets in the way of effective decision-making?
The psychological factors that can compromise effective decision-making are set out in the box above.
Yes, this is complex stuff. At a glance, here is a summary of the factors influencing executive decision-making:
So what next?
Our challenge to you is to consider decision-making through a different set of lenses: to embrace the complexity of unconscious bias, political self-interest, political non-interest, the desire for safety and security, and to couple this with a more positive frame: the desire to make a difference, to genuinely increase value and to show that sustainability, agility and the right types of conversations really can make a difference.
A fully referenced version of that article is available on request.