Decisions, Decisions

One of the key responsibilities for all of us in leadership roles is decision making.

Peter Drucker admonished, “Decision making is the specific executive [management] task.” Decision making is important, but often is not easy. Let’s explore some key concepts of decision making and look at an approach that may be helpful to us.

The first concept is the distinction between “programmed” versus “non-programmed” decisions. Programmed decisions are repetitive and well defined, and can be resolved by following existing procedures.

Non-programmed decisions are more challenging. No procedure exists. We need more than just intuition. We need to add rational decision making based on systematic analysis of the problem followed by choice and implementation in a logical sequence.

One simple rational approach that sometimes can help us is the “Pro” versus “Con” method, originally popularized by Benjamin Franklin. This approach involves writing down a list of reasons for or against a particular decision, then whittling down the list to the most salient points before making a decision. Many of our decisions will require a more elaborate approach.

Rational Decision Making Model

The following model follows an eight step approach, which has been modified from a model formulated by Dr. Richard Daft. The first four steps focus on problem identification. The last four steps center on problem solution.

1. Monitor the decision environment and identify a problem. A manager monitors information that indicates a deviation from acceptable behavior or results. For example, I had a team that I started managing that was not meeting its expected service level standard of same-day processing of transactions. The new supervisor recognized the deviation too, so we agreed we had a problem to resolve.
2. Define the decision problem. The manager responds to deviations by analyzing essential details of the problem. This can include looking at why current performance is not acceptable and a high-level analysis of potential causes. In my example, when the team does not meet the expectations of same-day processing of transactions, internal and external customers are adversely impacted. The cause appeared to be that the team was under staffed.
3. Specify decision objectives. The manager determines what performance outcomes should be achieved by a decision. The decision objective in my example was for the team to find a solution so that all transactions could be processed same day, and within targeted accuracy levels.
4. Diagnose the problem. In this step the manager digs below the surface to analyze the root cause of the problem. This might include gathering additional information to support the diagnosis. My team was not meeting expectations because it did not have adequate staffing. Inadequate staffing also did not allow for more extensive cross training and pursuit of process improvements that could help meet the desired objectives.
5. Develop alternative solutions. Before a manager can move with a decisive action plan, she must have a clear understanding of the various options available to achieve the desired objectives. The supervisor and I came up with three alternatives to meet the need for increased staffing: 1) Have the staff work ongoing overtime; 2) Hire regular employees; 3) Add temporary contingent workers (i.e. contractors).
6. Evaluate alternatives. This step may include the use of statistical techniques, personal experience and advice of others. The merits of each alternative are evaluated, as well as the probability it will achieve the desired objective. In the example, alternative No. 1 (working overtime) could help in the short-run but would not be sustainable longer term and could lead to staff burn out. Alternative No. 2 (hiring regular staff) would help with the objective but would be hard to get approved, and would lead to a long-term labor cost increase, which may not be needed. Alternative No. 3 (adding contingent staff) would help meet the objective and give us future flexibility.
7. Choose the best alternative. This is when the manager chooses the single alternative that has the best chance for success. In the example we choose alternative No. 3. This provided the additional staffing needed to help meet the same-day processing goal, and also enabled cross training among tasks and some time to look at process improvements. We also maintain future staffing flexibility and can reduce staffing in the future without layoffs or paying severance.
8. Implement the chosen alternative. This is the core of the decision making process because any decision that isn’t successfully implemented is a failed decision, no matter how good the chosen alternative looks on paper. In the example case we brought on contingent staff, and now we have completed additional cross training, process improvements and are consistently meeting the same-day processing objective and with exceptional accuracy rates.

I suggest a ninth step, which is to evaluate the implementation and take corrective actions as necessary. Often our rationally based decisions work out well — but when they don’t we need to learn from our mistake and make things right.

Look Out for Biases

The reality is that we are all susceptible to biases. Biases can distort our decisions, so it’s important to be aware and avoid them. Here are some biases to be aware of:

1. Being unduly influenced by initial impressions. We need to be careful to not allow initial impressions, statistics or estimates act as an anchor to our subsequent thoughts and judgments.
2. Seeing what you want to see. We frequently look for information that supports our existing instinct or point of view and avoid information that contradicts it.
3. Being overly influenced by emotion. Our emotions can cloud our thinking and negatively influence our decisions — we need to be rational and consider relevant information.
4. Escalating commitment. This is the temptation to “throw good money after bad” — our temptation is to continue to invest time and money in a solution despite evidence that it is not working.
5. Too loss adverse. Many managers have a tendency to analyze problems in terms of what they fear losing rather then what they might gain. We need to avoid overweighting the value of potential losses and underweighting the value of potential gains.
6. Groupthink. Many decisions are made by groups, and the desire to go along with the group can bias decisions. Groupthink refers to the tendency of people in groups to suppress contrary opinions.

One antidote to the above biases is to pursue evidence-based management, which means a commitment to make more informed and intelligent decisions based on the best available facts and evidence.

Another antidote is to encourage dissent and diversity. Welcoming diversity in a group can help avoid personal biases and groupthink. Sometimes it’s helpful to assign a devil’s advocate or have a group time of “black hat” thinking (i.e., asking what’s bad or can go wrong with the proposed idea). The purpose is to challenge the assumptions and assertions of the group and ensure decisions have been thoroughly vetted.

Making decisions is not always easy, but it’s a big reason why we have management roles. As General George Patton said: “When a decision has to be made, make it. There is no totally right time for anything.” I wish you the best in making quality decisions that benefit you and your team and the stakeholders you serve.