Decision Failure in the Workplace - Business
"Forget the charisma and the polished speeches. Those may have been the qualities top executives were judged on this past year…but today, with everyone predicting a more volatile year ahead, business executives are going to be graded more heavily on whether the decisions they make on everything from strategy to talent help their companies grow. They have to stop becoming experts on giving a positive spin to economic warnings and start analyzing the data at hand." ― Wall Street Journal 12/17/07
Avoiding the Blunders That Impede Your Success
Why do half of all business decisions fail? Some fail right out of the box, others can't stand the test of time. Why Decisions Fail (Paul Nutt, Berrett-Koehler Publishers, 2002) reports on a study of nearly 400 business decisions made by senior managers in medium to large organizations. The decisions made were based on a mix of analytical and experimental information, expert opinion, and gut feel. In half of the decisions studied, either action was not taken, or the decision made had no discernable effect on the organization two years later. Of the decisions that failed, resources were expended – time, money, personnel, or equipment – without achieving anything. In other words, half the decisions made were not robust. They were not able to withstand the uncertainty, conflict, or change common in the work environment, or they could not elicit the buy-in necessary to make them stick.
The study found three main classes of "blunders":
- Decision makers use failure-prone practices in 2 out of 3 decisions made. Further, there seems to be little insight into the poor track record of these practices and failures are seldom studied.
- Decision makers base many decisions on premature commitments. In other words, many decisions are actually efforts to justify a premature conclusion, rather than using evidence to select the best action.
- Decision makers spend time and money on the wrong things – tasks that do not add value to making the best possible decision. Hence, they don't have a strategy to determine what to do next.
So, how can you make decisions that are right for your firm? How can you make robust decisions?
The most effective way to counteract these three blunders is to make sure you have a process you use to make decisions. This does not necessarily mean a rigid set of steps that you follow every time, but it does mean formal process that you can fall back on for difficult decisions and relax, as warranted, for easy ones. The process must, at a minimum, have:
- A method to ensure that everyone on the decision-making team understands the problem – they are working on the same issue, they have bought into the alternatives being considered and they have worked together to generate a set of discriminating criteria. It is imperative that there be more than one alternative to consider. If not, they are not making a decision, but only justifying a someone's pet idea (Blunder 2)
- A method to manage the evaluation of the alternatives using measures defined by the criteria.
- A method to combine or fuse the evaluations to develop a shared vision of the value of each alternative.
- A technique for basing what-to-do-next on the fused evaluation – choose an alternative, refine evaluations, develop consensus, etc. Having a strategy here can defuse paralysis by analysis, releave waiting for something to happen and counteract Blunder 3.
- Record the rationale behind the decision, not just the result of the decision (the usual practice). This and the previous four items counteract Blunder 1.
Avoid the blunders that plague many decisions in today's law firms through the development of some simple "decision habits". Our workshops on "Making Robust Decisions" (see below) present a simplified approach to helping individuals and law firms establish better decision processes.
