Decision making in your organization: Cutting through the clutter

 

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At the root of any good decision is categorizing what kind of decision needs to be made, by whom, and how quickly.
Managing the decision-making process in a company is a crucial part of maintaining a well-functioning organization—which is why much more attention needs to be directed at how decisions are being made. In this episode of the McKinsey Podcast, senior partner Aaron De Smet and senior expert Leigh Weiss speak with McKinsey’s Simon London about how organizations can make better decisions and execute on them in a clearer, more efficient way.Simon London: Hello, and welcome to the McKinsey Podcast with me, Simon London. As the existential philosophers observed, you are the sum of all your choices. If this is true of individuals, it’s doubly true of organizations. The choices made by managers, the decisions they take, well, they pretty much determine the fate of companies.So, how do we improve the quality of decisions made by managers? How do we raise the overall quality of decision making? Joining me today to discuss all this are Aaron De Smet, a McKinsey partner based in Houston, and Leigh Weiss, a senior expert based in Boston. So, Leigh and Aaron, thanks very much for being here.Leigh Weiss: Happy to be here.Aaron De Smet: My pleasure. Glad to be here with you.

Simon London: Let’s start with when you’re working with clients, how do you know that this is a problem? How can you tell? What are some of the telltale signs that a company has a problem with its decision making?

Leigh Weiss: One of the things that I see most often is when you talk to employees about decisions you would expect them to make and they say, “I don’t actually make that decision.” And I’ll say, “Well, who’s your manager?” And they say, “Well, that person doesn’t make it either. It’s actually made by the CEO.” There is this real increased tendency for decisions to bubble way up to the top of the organization, either because employees don’t feel empowered to make decisions or because they are afraid to.

Aaron De Smet: The other telltale sign is when you have a meeting that’s meant to be a decision meeting, and they spend all their time just sharing information. Or you have a meeting that’s meant to be a decision meeting and they struggle to make the decision in the meeting, for various reasons. You start seeing the meeting before the meeting, and the meeting after the meeting, and the road shows to get everybody aligned because there’s a huge room of people and any one person seems to be able to grind the decision to a halt by asking a question or asking for more analysis.

A lot of these problems are not just problems of poor decision quality; they’re problems of slow decision making. In my experience, at least as big of a problem, and perhaps a much bigger problem, is decision velocity. The world’s moving fast, and you can’t afford to wait. Making a very great decision of high quality way too late in the game doesn’t help the company very much.

Leigh Weiss: We’re also talking about making the decision. I think there’s a really big problem we often see once the decision is made, which is that if people weren’t on the side of the decision that was made, they often don’t commit to it. So, you get a half-hearted execution of it.

Aaron De Smet: I sometimes tell my clients a joke: “Five frogs were on a log, and one decided to jump off; how many were left? The answer is five, because deciding to do something and actually doing it are two different things.” And this is true. Sometimes you think you’ve made the decision and you walk out of the room, but a month later, nothing’s happened.

This, again, is a telltale sign that something’s wrong in the decision-making process. The decision-making process should be a choice, where you have a level of commitment that drives action. If the commitment and action isn’t there, then something’s wrong in the decision process, itself.

Five frogs were on a log, and one decided to jump off; how many were left? The answer is five, because deciding to do something and actually doing it are two different things.

Simon London: What strikes me as interesting about this topic is that surely a lot of what managers do is make decisions. It’s certainly what executives do. We’ve had management and big organizations for well over one hundred years now. How is it that managers haven’t cracked this? It seems like such a core management discipline.

Leigh Weiss: I think that the context keeps changing. First of all, this is something that everybody needs to learn as they grow up through the ranks. On top of that, we have lots of things that are different from when managers were making decisions 20 years ago.

Our organizational structures are much more complex. I have a client that had a three-dimensional matrix: a function, a geography, and a product. It was enormously complex to make decisions. Some of the other issues are that we now have access to so much data and we do have increasingly good decision-making tools, but sometimes the discussion around the data is more important than the data itself. We also have a new generation of people, millennials, who are much less comfortable making decisions in hierarchies and want to grab the reins and move faster.

Aaron De Smet: The other thing that we’ve observed is some best practices around decision making are situational. For some types of decisions, those best practices work brilliantly, and for other types of decisions, they’re terrible. If you don’t apply the right best practices in the right way at the right time, you can get things that don’t work. It’s not enough to say, “I have experience, and I know what makes a good decision.” You have to say, “What am I optimizing for?” With decisions that can be quickly undone, you should take a lot more risk in making a wrong decision, because you can undo it. Decisions where the stakes are high and you can’t undo them need to be a lot more thoughtful and carefully planned.

Leigh Weiss: Another good example of that, Aaron, that I’ve seen is in some situations a decision can be made very effectively by one person. They may consult a few others, but they know enough to make a good decision quickly.

In other cases—often, cases where you’re making a major decision at the company, the kind of decision that might be about a merger, it might be about a new strategic direction—you want to have a lot more debate.

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Here is a direct link to the complete article.

Aaron De Smet is a senior partner in McKinsey’s Houston office. Leigh Weiss is a senior expert in the Boston office. Simon London is a member of McKinsey Publishing and is based in the Silicon Valley office.

 

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