Decision making is critical to business success. Interestingly, I have found this skill varies widely between individuals and between companies. There are two critical aspects to decision making: quality of decision making, and volume of decision making. I will share some personal tips on decision quality this month, and deal with decision volume next time.
The first concept for quality decision making is framing the decision properly. If you dont frame the decision properly you can find that you made a good decision – but could have made a better one in hindsight. Consider applying the job to be done approach in framing your decision. This idea was originally discussed by Harvards Clayton Christensen in a 2007 Sloan Management Review article. He described an approach to marketing in which you seek to describe the overarching or higher level need that exists, rather than immediately trying to fit a product or service into what might be a smaller or partial need. Similarly I suggest you frame your decision in the highest possible way.
For example, here are three possible ways of framing a similar (but ultimately not the same) decision:
Decision framed at immediate level: Should my company invest in a new system to store customer information?
Decision framed at higher level: How should my company ensure customer information is accurate?
Decision framed at job-to-be-done level: How should my company cost-effectively ensure that all systems and authorized users can access and use accurate customer information at all times?
You can see that the job-to-be-done framing of the decision could result in better and more complete options than the narrower statements of need. Consider defining the metrics by which you will measure the success of the outcome. This will help others to clearly visualize what success means and to properly screen options against the success criteria and metrics.
Another tip: Ensure up front who is the final decision maker. If this isnt clear the decision process can become very messy and confusing. I suggest you also agree in advance what groups need to be consulted. Proper consultation will avoid having to revisit the decision later and will facilitate easier execution.
A key step in any decision making process is to lay out the options. (This is in my experience the step which is most skimped on!) I suggest commissioning a brainstorming team which includes creative and blue-sky thinkers. Often there are more options than one thinks, yet participants may avoid putting certain options on the table if they are unsure how to evaluate them, or fear being too radical or difficult, or if theyre worried as to the impact on jobs, morale or people. Some may have preconceived notions that certain options are just not good, or foresee conflicts with other priorities and projects.
All of these concerns are part of the screening process, and that is where they belong. Try to eliminate those fears early in the process and let the options flow. If you can eliminate the perceived constraints, you will see a lot more creativity and you may get useful new options on the table. In addition you will be better placed to deal with questions down the road as to why you chose the ultimate option and didnt choose others.
Put in place a good screening process for your options. If you want, you can rate the options against specified criteria such as economics, ease of implementation, sustainability and robustness against possible scenarios. I suggest you have a team from different parts of your organization do the ranking – varied perspectives are useful in this phase. It is possible that some options may be hard to evaluate against key criteria, so take some time to get data either internally or externally to support your screening process. Be sure though that this data is really necessary to the overall decision outcome.
Be sure to pressure test your chosen option. Test the economics for different sensitivities including:
Investment and/or implementation costs, +/- 20 percent.
Delays in implementation timing.
Changes in macroeconomic environment.
Changes in key variables such as product pricing, costs or volumes.
It is important to understand what is driving the economics for the chosen option, and what has to change to make the option unattractive on its own or relative to other options. For example, if you have chosen to invest in a new system for managing customer data, what is driving the economics? Is it the cost of inaccurate data and ensuing costs of product returns? Is it personnel costs, since the new system will allow you to reduce staffing? Is it the impact of inaccurate data on your company reputation and competitiveness in the marketplace?
The answers to such questions will help you better assess the risks and economics of the project. You should always understand for your chosen option the answer to this question: In what scenarios or circumstances will this decision turn out to be a bad one?
A special case in decision making involves what people call their instincts or gut feeling. In my reading on the topic of gut feelings it comes down to this: A gut feeling is when your brain instantly connects a current decision or situation to one which you have experienced in the past and makes a determination of what to do based on how that past experience worked out. This is of course useful and should not be ignored. However rather than going with your gut, consider carefully what is in fact similar and what is different from the past situation, and proceed accordingly.
Another special case is what I call a going against the tide decision. Occasionally you are in the decision maker position but find yourself disagreeing with the predominant input from your team or others. This is difficult and thankfully doesnt happen that often! However in such situations take your time and listen carefully to the rationales being given by those who disagree with you. Consider these points:
What are the key points of difference? If the points of difference are on analytical aspects such as economics then try improving the quality and objectivity of the analysis and/or doing a wider range of sensitivities.
Is the area of difference one of high uncertainty? If the issue is highly uncertain and highly important – such as impacting customers, safety or reputation – then dont proceed without reducing the level of uncertainty in some fashion such as test marketing, expert opinions, trial runs, etc.
What is the worst thing that could happen if you adopted the others view, or if they adopted yours? Really thinking about the answers here may help you move forward.
Finally, if you decide to move forward with your decision despite differences of opinion then be prepared to spend more time in the execution phase as it will be more difficult. Of course sometimes difficult decisions are worth it!
Sara Lefcourt of Lefcourt Consulting LLC specializes in helping companies to improve profits, reduce risk and step up their operations. Her experience includes many years in marketing, sales and procurement, first for Exxon and then at Infineum, where she was vice president, supply. E-mail her at saralefcourt@gmail.com or phone (908) 400-5210.