Leadership and Decision-Making
by Andrew Cooke, Growth & Profit Solutions
Why are decisions and their outcomes separate? What can you do to have decisions that drive results? Read on here….
But what is the decision-making process? We too often look at whether decisions are ‘good’ or ‘bad’ for a given value of ‘good’ and ‘bad’ respectively without understanding what the actual decision-making process is. In essence decision-making is based in the present, with one foot in the future. Sure, we all know that – so what is my point?
The point is this – decisions and their outcomes are decoupled. They are decoupled for two reasons. Firstly, they are different concepts and secondly, they occur at different times.
Andrew’s 5 Step Decision-Making Process
So let’s look at the five steps involved in the decision-making process
Decision-making is about effective and structured communication. As such:
- Decision-making is not a random collection of ideas, opinions and facts. If it were random there would be chaos.
- Decision-making is a moment in time – it exists only Now.
- Decision-making is inspired by the question: “What shall we do?”
- Decision-making is forward looking and anchored in the present. As such we need to understand uncertainty and risk.
A key outcome of the decision-making process is the creation of a shared understanding of what the problem is that the team is facing. Developing a shared understanding facilitates the development of a common approach and, though not always effectively, alignment.
If people have different ideas to you on the decision to be made you need to get everyone to be explicit using a common approach. The best way to do this is to start the process yourself and share it with your colleagues. A good way is to use the decision-making model below.
Step 1. Determine the information you need to make the decision
The information needed depends on the decision under consideration and the associated scope of information required. There is a balance to be maintained here, have too much information and you suffer from analysis paralysis– the inability to make a decision because you are so focused on the raw data and information; have too little suitable information then you will not able to optimise your decision-making process.
As such, the quality of a decision is determined at the moment it is made.
Step 2. Generate alternatives for the decision and evaluate them
In doing this your experience, expertise and insights provide the foundation for decision-making. You need to not only capture your experience, expertise and insights but that of your team and the others involved in the decision-making process. To do this we need to make it explicit.As a group you want to encourage the generation of alternatives for the decision to be made. Often this is done well by brainstorming in a creative and positive manner, enabling people to build on each other’s ideas and thoughts. This can reveal some ideas that otherwise would not be uncovered.
Once you have generated your alternatives you need to be able to prioritise them. Establishing the criteria, as a group, by which you will evaluate your alternatives is critical to doing this. It enables you to “compare apples with apples”. When doing this you need to do several things:
- Only use relevant criteria that can be applied to all alternatives under consideration;
- Criteria are both personal and business-focused, as such criteria have aspects that are both logical and emotional;
- Don’t have too many criteria – this weakens the process and the choices made are more likely to be made on outlying factors;
- Not all criteria are equal – identify their relevant by giving them a weighting.
This can be captured in a simple Decision Matrix – a useful tool that allows you to evaluate alternatives in a more objective way than otherwise would be possible
Step 4. Assess the Consequences, Implications & Risks
This step is frequently neglected by decision-makers. This is important as the benefits of a preferred alternative may be outweighed by other factors. Most people only look at the benefits and upside of an alternative and forget to consider, or ignore, the potential risks and downside. Doing this provides a more balanced consideration of the alternative, and enables the decision-maker(s) to develop strategies and actions by which to mitigate potential or anticipated risks.
When looking at risks be explicit. By naming them you can frame them, and in framing them you can determine how to ‘shame’ them – how to deal with them proactively and positively. Risk uses the language of probability – if there is a risk then how likely is it going to be that it happens? 20%? 50%? 80%? This helps to allow you to quantify the risk and assess how important it is and how it needs to be dealt with.
Different probabilities provide different values, and the different probabilities come from experts – so value comes from experience. So you need to access the broadest range of experience which can be used to evaluate this. You need to ask the question “How bad can it get? – what is the downside? The worst case?” As a business leader you need to know the boundaries and limits of risks in your business which are relevant and realistic
Step 5. Making the Decision
Once the group has discussed all the alternatives, applied the criteria, and identified the relevant consequences, implications and risks, a decision has to be made. The decision can be made in several ways:
- By the senior person based on the information supplied (or not if he has not sought out further information or input, or not decided to use it);
- By consensus of the group – the group comes to and agrees to the decision;
- Majority rule – the decision is made by the majority of people involved in it.
Whichever way is used there has to be an underlying joint commitment to action – there must be no passive resistance and sabotaging (saying “Yes” and then doing nothing or actively undermining the decision), continually revisiting the decision in an attempt by individuals or groups to affect the result post-event, or switching the decision immediately afterwards.
Decisions & Results
As we discussed at the beginning of this article decisions and their outcomes are decoupled, and are separated by time.
A good decision does not mean a good outcome and vice-versa. A poor decision can lead to a good outcome, and a good decision can lead to a poor outcome. We always make decisions with incomplete information, we never control all the variables, and decisions are never taken in isolation – nor are their results.
There are 4 possibilities for the outcome of a decision. These are shown below:
This illustrates how the outcome is decoupled to the decision.
However, leaders usually get paid on decisions not results. But many companies, when promoting, promote on results and not decisions, and if you use just results to measure people you will create inertia. This can put your company at risk in that good decisions are not made. To create success and results requires trial and error.
So what do we need to do to get results? There are several things, as a leader, that you need to do to get the results you want and need, these include:
- Mitigate risk
- Develop partnerships – share the risk
- Diversification – i.e. have a portfolio of projects which are separate and not correlated, thus reducing the risk.
My question to you is this – are you focusing on making the decision, or on the decision and the results? Do you have a good decision process? What are the outcomes you are achieving? What can you do to drive better results and greater success? To read more on decision-making and how the Decision Matrix tool look out for a future post!