Good decision-making is hard work

by Tom Davenport 

How is it that managers facing high-stakes decisions, despite all the resources and knowledge available to them, often make them so poorly?  In large part, it’s because their whole perspective on decision-making is wrong. Managers think of major decisions as choices they must make in order for the work of the organization to proceed. The truth is that decision-making is work.  This simple shift in perspective – seeing big decisions as tasks to be managed – has huge implications. It means they should be approached with the same level of discipline and direction good managers bring to other areas.  It means everyone understands that decisions improve when the right people, tools, and processes are brought to bear on them.

A while back, Brook Manville and I published a book called Judgment Calls that focused on the challenges of high-stakes decisions through the lens of twelve actual cases. Rather than pouncing on spectacular failures in decision-making, we looked for organizations that had made good calls and studied how they got them right. Twelve stories allowed us to put a spotlight on twelve lessons we took away from the exercise.  But I’m not sure we underscored the “meta” lesson of the book strongly enough: that the first rule for anyone hoping for improved decision-making is to view decisions as work.

Looking back on the twelve great calls we studied, it’s clear that making them was hard work. I think of NASA, which has a big decision to make every time a launch date approaches. Its process for doing so changed after a couple of heartbreaking disasters reminded everyone how high the stakes really are. When momentum is established and people’s hopes are high for a blast off, it’s hard to round up all the interested parties (including the mission astronauts) in a room and stage a thorough debate over whether the mission is safe and should go ahead. But make it part of standard procedure, and the decision is made better.

View decision-making as work and you soon realize that many general principles about good work apply to it. Just to prime your own thinking in this direction, let me offer five basic pieces of management advice:

Don’t do all the decision work yourself. A major theme of Judgment Calls was to urge organizations to move beyond the “great man” school of decision-making. Work in the behavioral economics and decision bias domains suggests that every single decision-maker—no matter how senior—has flawed, less-than-rational decision processes. The unaided human brain is not that great a decision engine unless it has made the same decision many times and learned from its mistakes. This means that major decisions should rarely be made solely by the CEO or any other single individual. In the book we mostly focus on good decisions with positive outcomes, but we mention a few bad ones by CEOs like Gerry Levin of Time Warner (Even the sainted Steve Jobs of Apple made some clunkers.). A variety of individuals should be consulted in decisions, with a systematic process for sampling their perspective. Social media can even play a role, as EMC showed when it asked employees to weigh in on some important decisions about cost-cutting during the last recession.

Bring a big toolkit to your decision work. The authors of “Deciding How to Decide” in the November 2013 issue of HBR point out that most decision-makers default to using some single, favorite tool to aid their deliberations. No matter how powerful that one-trick pony is, having only one will lead to suboptimal results across the set of all decisions. Instead, people should bring a wide variety of decision tools to the task—analytical models, “wisdom of crowds” approaches, human experience and intuition, disciplined experimentation, and others. Indeed, in our Judgment Calls cases, we saw a variety of decision approaches in use, and no single approach taking over in a complex organization with complex decisions to make.

Measure before deciding. Just as carpenters admonish their apprentices to measure twice and cut once, decision-makers should know not to make a decision without careful measurement. Having just said that no single decision approach can suffice, I will admit the one I’d turn to if I had to choose would be reliance on data and analytics. Rigorous decisions depend on gathering some data and performing some analysis. We saw the power of data-driven decisions in organizations from Partners Healthcare in Boston to the Charlotte-Mecklenburg schools. Although no one should abandon human responsibility for good decisions to computerized analytics, they can provide a massive amount of help.

Systematically review your work. Here’s another tip decision-makers can borrow from the managers of “real” work: decisions will get better if you establish the habit of reviewing them after the fact. This requires “a culture of honesty and self-examination,” as a manager at Chevron told us when we visited there. If your organization can’t shine a light on past decisions to learn what went well and what didn’t, you are very likely to make bad ones. Our favorite example of this turned out to be a small business, WGB Homes, which has a process to reflect on decisions that didn’t work out as expected. Managers there systematically assess not only “why didn’t this house sell?” but “what made us decide to build it the way we did?”

Have a process for decision work. Decisions are sometimes viewed as an ad hoc activity with no need for process, but if they’re serious work, they need a process to guide them. The process flow dictates who gets involved when, what kind of data and analysis should be applied, and how quickly the decision needs to be made. If you’re worried about “analysis paralysis,” or excessive focus on analytics (rare in my experience), a process will address the issue. In Judgment Calls we talk about McKinsey & Co. and Media General, two organizations that employed well-defined processes for important decisions.

If you apply just this handful of ideas, I’m confident your organization can make high-stakes decisions as well as the twelve we wrote about did.

So don’t kid yourself. Good decision-making is hard work. If I seem to be overstating the case, well then possibly you are an especially gifted manager, and such proven management principles are just second nature to you. Or possibly you are clairvoyant, and can make the right calls without additional perspectives, analytical tools, or logical process.  But here’s another possibility about your decision-making: if it’s that easy for you, perhaps you’re actually not doing it very well.

Venitis could help you make the proper decisions.

The customized approach of consultant Basil Venitis combines deep insight into the dynamics of industries with close collaboration of the client, in order to achieve sustainable competitive advantage. Basil Venitis, venitis@gmail.com, http://themostsearched.blogspot.com, @Venitis