In many organizations, making decisions is like making sausage. There is little visibility of what goes into them and outcomes may surprise you – not always pleasantly.
Better decisions enable organizations to take advantage of market opportunities more quickly, respond to competitors more effectively, make course corrections earlier and react to changing economic conditions with greater agility.
Conversely, poor decisions are costly. In this fast-moving, knowledge-based global economy, more people in organizations are being asked to make decisions, and their decisions have a broader and more significant impact than ever before. Too much information with too little insight, an incomplete understanding of the full implications of our decisions and too little time for contingency planning adds to the pressure.
Not surprisingly, in a recent nationwide survey of 664 corporate representatives covering finance departments’ highest priorities, 85 percent selected “improve decision-making” as the first or second priority and 60 percent selected it as the top priority. These finance leaders make it clear that merely improving visibility into organizational health is no longer sufficient.
The good news is thanks to 50 years of scholarly research we now understand the limitations of using human judgment alone to make decisions. And through experience, we’ve learned that good decisions depend on delivering the right information to the right people soon enough to matter. With technology advances, we’ve never had better and more cost-effective tools for decision-making.
The optimal time to improve decision-making has arrived.
Anatomy of a Good Decision
Better decision-making starts with a question: What is a good decision? Simply put, a good decision is one that gives us the best chance of achieving our goals compared to other decisions we could make.
Three essential concepts in this definition stand out. First, the endgame of improving our decision-making is to increase our chances of achieving specific business goals. Second, we can’t make good decisions without considering alternatives and their full implications. And third, we should not confuse “best chance” with “guarantee,” because there is no such thing as certainty in decision-making.
This lack of certainty – and the risks associated with poor decisions – causes some organizations to fall into “analysis paralysis,” and they wait too long to make decisions. But as the military reminds its teams, “a good plan now is better than a perfect plan later.” And so there is one other essential concept to factor in as we strive for better decision-making. In the course of making every decision, there is a right time to make it, and that time depends on the right balance of thoroughness and speed.
Owning the Go/No-Go Moment
You know your goals. You’ve assembled the right team of decision-makers. You’ve armed them with accurate, timely information to look at all relevant facts. You have a clear view of your options and how you’d implement each one. You’ve considered the implications – risk and rewards – of each and you’ve dealt with the inevitable last minute additions and changes.
It’s time to make a decision and act on it. It’s time to own the go/no-go moment. Here’s how to take control of that moment – with confidence.
Set Clear, Attainable and Balanced Goals
Historically, organizations have used financial metrics to set goals. These are important, but increasingly organizations are supplementing them with metrics that also predict operational performance. One example is combining customer satisfaction and employee morale with profitability and market share. Blending financial and operational perspectives is essential to making good decisions. And in all cases, the goals of each decision must tie directly to the organization’s overarching vision, mission and goals.
Gather Together the Right People and Arm Them with the Information They Need
In most decisions, stakeholders reside in all corners of an organization – from finance to lines of business, from marketing and sales to manufacturing, from senior management to frontline workers. And while all of them are committed to rapid and fact-based decision-making, not all of them have the same access to the same “facts” in a timely way. This is because different data systems are designed to serve different goals. For example, financial systems often are organized for reporting, not for operating and real-time decision-making, and vice versa. A single system for financial reporting and real-time operational decision-making is a tall request, but the data is there.
What’s needed is a system capable of using available data to support key decisions, with flexible drill down and scenario analysis capabilities that allow decision-makers to forecast the full implications of options. Only then can you be sure you are making a sound decision both operationally and financially. A good decision is a well-informed decision.
Make and Communicate Your Decisions, Act On Them and Monitor Progress
Some organizations harbor the misconception that making decisions and acting on them are two different things. They’re not! A decision is only as good as the system that exists to implement it; and it is only good if people understand it and their role in execution. Therefore, a critical part of making a decision is developing an action plan, a contingency plan, a monitoring process and a commitment to course corrections to improve results over time. A plan for communicating the decision throughout your organization is also important to gain buy-in from stakeholders and others who will implement it.
Recipe for Success
To end where we began, if you knew what went into a sausage, you might not eat it. Similarly, if you knew what went into a decision, you might not bet your company on it … though people do every day.
But just as with sausages, the key to better decisions is a better recipe. With facts, a rigorous process and transparency in equal measure, you can own the go/no-go moment with confidence.
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