Decision-making: good, better, best

It means giving something up

Organisations survive or perish on the decisions leaders make. So, are leaders ensuring their decision-making processes lead to the best decision in the most timely manner? Unfortunately, no.

A recent McKinsey & Company report shows while leaders spend nearly 40 per cent of their time making decisions, they report the time as being of poor use and leading often to decision fatigue. McKinsey has quantified the effects of ineffective decision-making on a typical Fortune 500 company as being the equivalent of 530,000 days per year, or around $250 million in annual wages. That’s a significant cost.

So, how do you make better decisions? The report shows the solution for organisations seeking to streamline decision-making is agility. The advantages of being agile include:

• Putting decision-making in the right hands;
• Being quicker at reacting to or anticipating shifts in the business environment, and;
• Attracting top talent who prefer working with greater empowerment and fewer layers of management.

A strategy to develop agility is to categorise the types of decisions and adapt the approach accordingly. The three categories suggested by McKinsey are:

1. Big-bet decisions—infrequent but high risk and usually the responsibility of top leaders and the board. Improve these though productive debate by assigning people to argue the case for and against.
2. Cross-cutting decisions—frequent and high risk and usually the responsibility of business unit heads. Improve these by ensuring this process clarifies objectives, measures and targets.
3. Delegated decisions—frequent but low risk and usually the responsibility of an individual or a working team. Improve these by putting responsibility into the hands of those closest to the work.

Adding to this, McKinsey also suggests the following four actions for agile decision-making:

1. Focus on game-changing decisions;
2. Convene only necessary meetings and eliminate lengthy reports;
3. Clarify the roles of who has a vote and who has a voice, and;
4. Push decision-making to the frontline and tolerate mistakes.

Action four implies delegating decisions and, as noted in the report, effective delegation means empowering employees “by giving them the authority and confidence to act.” It also means giving employees “the tools they need to make high-quality decisions and the right level of guidance to do so.” To help achieve this, McKinsey suggests:

• Ensuring your organisation has a well-defined, universally understood strategy;
• Clearly defining roles and responsibilities;
• Investing in capability (and coaching) up front;
• Building an empowerment-oriented culture, and;
• Deciding when to get involved.

The report expands on all the points noted in this summary and includes many others. It is an excellent read that will challenge your decision-making processes and provide practical tips for you to consider.