Behind successful stories, be they acquisitions or product launches, there are a series of decisions that have been taken which proved to be right. These decisions could have turned out right by chance or by design, through the support of a robust decision making mechanism embedded within the organization. Given that we all are aware of the cost of making wrong decisions or the gains derived from making right decisions, we still don’t focus enough on improving Decision Making capabilities within the organization.
Decision Making Mechanisms and four Elements
Each of the four ‘Decision Making’ elements present two further options, thus providing theoretically sixteen Decision Making Mechanisms to choose from (Diagram above depicts combinations related to strategic choices).
Decision taken about an operational matter (say replacing a tyre) by an individual (driver) provoked by the dip in the reported performance (car mileage) is a decision making mechanism that is most prevalent in all enterprises and most easy to execute. It also provides limited differentiation potential.
Strategic Choices (say adding features to new product launch) made proactively by a group based on facts derived from analyzing nontraditional information sources (pattern recognition from text, speech, blogs news, taken from social media) is a decision making mechanism with immense differentiation potential, but not widely leveraged among organizations. Employing this relatively sophisticated decision making mechanism demands certain execution capabilities (say collaborative tools, web 2.0 technology, business intelligence tools, text analytics), transparent, creative and bold leadership and enabling culture (valueing experimentation, openeness and performance driven approach ). Not easy set of pre-conditions, but justifiable given the significant pay-offs!
Here is my hypothesis: Organization that has the ability to leverage more Decision Making Mechanisms, coupled with framework and discipline to choose right option to suit the context and derive desired outcomes, enjoys sustainable advantage in this uncertain, volatile, hyper-connected and demanding business environment.
Implication: Organisations should conciously work towards increasing its capability to leverage more decision making combinations.
So where does your organisation stand today? Let us do a quick check:
- Is there a preferred, predominant Decision Making mechanism promoted by your organization’s leadership, emboldened by culture that comes as a default choice?
- When was the last time your organization consciously changed or experimented with alternative Decision Making mechanism?
- Out of the potential Decision Making mechanisms, which combinations are not feasible within your organization that have potential to add value? (If only, we could..........)
- Have you consciously benchmarked differentiating Decision Making mechanisms employed by your competitor or leader in other industry?
- How many investment proposals are examined for their ability to enhance organization Decision Making Mechanisms? And tracked to its realization?
As leaders, it is time to take some tough decisions with regard to increasing the Decision Making Mechanism Choices we leverage.
Happy to hear about initiatives or programs your organisations have taken up to strengthen its Decision Making Mechanism, the core competence that matters most!
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Hi,
ReplyDeleteVery relevant points. The time has indeed come to make use of the new tools and techniques. Decision making mechanism indeed forms the core of any organization. However, the importance of the "process" is often underrated as the "results" usually take the limelight.
Two additional parameters that I feel impact the decision making :
Available "time to decide" : Sometimes, decisions have an upper limit on "time to decide" and organizations end up compromising because of that.
Organizations (driven by leaders) need to look carefully at the decision making process according to situation. In most cases, the organization takes a major step because of situational demands like external environmental factors. In that case, one needs to very carefully focus on all these four questions and work towards finding the ideal combination and formulating the best decision making process.
Risk Involved :Decisions and decision making processes needs to be unique for every situation with scope of experimentation. Probably one of the solutions for enhancing decision making is to allow leaders to be creative and experiment more. This will divert them from the trap of following standard decision making process and allow them to try new and innovative ways. Ofcourse, the scope of experimentation is conventionally thought as inversely proportional but the risk apetite has increased. So probably the time has come to take more risky decisions and as a result - increase the changes of getting higher returns.
Looking forward to your views.
Agreed, very insightful point of view on decision making and the mechanisms that enable it. I would like to stress on one perspective though...
ReplyDeleteAt the end of the day, there are two realities that we continually observe:
1. Decisions drive business performance *Universal Principle*
2. Higher the propensity of an organization to measure effectiveness of decision making and take action on it, the higher is organization's ability to continually improve its business performance (at a minimum on a linear scale)
It's this second reality that needs to be reflected and appropriately internalized within organizations than just be publicly acknowledged
To address it: I'd like to borrow a perspective from the Book: 'Decide & Deliver' which quite succinctly shares the equation to drive decision effectiveness.
Quality * Speed * Yield - Effort = Decision Effectiveness wherein
Quality = % of right decisions
Speed = Speed relative to competition
Yield = % of time execution of decision is strong
Effort = & of wrong amount of effort
Adoption of these decision effectiveness criteria can go a long way in further enhancing the organization's capabilities in executing its strategy
Look forward to hearing your perspectives on the above - Thanks
Thanks for such an insightful article.
ReplyDeleteSome thoughts from my side. Each decision making element has 2 options. So, is one option always better than the other? I think both the options are important. For e.g. we may prefer strategic over operational decisions but on day to day basis, operational decision making is done. Similarly, between provoked and proactive, we may perfer proactive but provocations can feed into your decision making system and make it more proactive for future.
So, i agree with the implication "Organisations should conciously work towards increasing its capability to 'leverage more decision making combinations'. "
2nd point, i think organisations will need to prepare some role based framework for decision making that will empower individuals to choose correct option at their level.
Thanks
Sanjay
It is becoming imperative for the businesses to document "decision rationale" i.e. "why" of the decision specially in the case of virtual, dynamic teams and communities where members are moving in and moving out. This helps in consistency and improves organisational memory.
ReplyDelete