The Decision-making Process, make it your competitive advantage

How to improve decision making quality,

speed and execution

Managing the

Decision Making

process

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Source: Decide & Deliver, Bain & Company, Inc.

Harvard Business Review Press, Copyright, 2010

Focusingon decision making

efficiency and effectiveness.

Ron McFarland, Tokyo, Japan

2

4-Organize Restructure the organization

to enable a better decision

making process.

2-Identify Learn what the most

critical decisions are

now.

5-Promote

Expand and

promote the ideal

decision making

process throughout

the organization

1-Assess Learn the current decision making

effectiveness (where strong,

where weak) and company health

3-Improve Redesign the decision

making process to get

the best results.

Steps to improve decision effectiveness

There are five steps to achieve successful decision making in quality,

speed and execution.

Better

decisions lead

to better

performance

How good

are our

decisions?


3

Effective decision making components

QualityHow good are our

decision? Are outcomes

successful?

SpeedHow fast are decisions

and execution?

ExecutionHow efficient is the

execution managed?

EffortWhat is the expense of time,

energy and assets to achieve

what is decided? Is it too

much or too little?

Decision management

How good is our

decision making

process?


4

Effective decision making components - Quality

Quality

Quality Decisions1. They are based on relevant

facts.2. They are based on good

risk analysis.3. They have been evaluated

against alternatives.4. They take into account the

ability to execute.


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Effective decision making components - Speed

SpeedDecision speed1. Speed is influenced by the speed of

information sharing and distribution.2. Speed is influenced by trust.3. Speed can save money.4. Speed can improve profit.5. Speed can add to customer satisfaction.6. Speed can improve employee moral.7. Speed can create a competitive

advantage over slower companies.8. If the decision can be modified later, it is

better to decide quickly now!


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Effective decision making components - Execution

ExecutionDecision execution1. It is often forgotten in the decision

making process.2. It is putting decision into action.3. Available ability, skills, capacities

and assets must be considered to execute a decision.

4. Excellent execution can be a huge competitive advantage against competitors that do not execute well.


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Effective decision making components - Effort

Effort

Decision effort1. It is the time and resources spent in

the decision and execution.2. It is the trouble caused to all.3. It is the emotional energy spent.4. It is necessary but must be less

than the benefits gained by the decision.

5. Effort can be too much or too little considering the value of the project.


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Research on decision making components

1. Decision making effectiveness equals higher company financial performance.

2. Decision quality, speed and execution reinforce one another.

3. Appropriate effort is needed.4. Process attention is very important.


Harvard Business Review Press, Copyright, 2010Ron McFarland, Tokyo, Japan

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Step 1 (Assess): Company decision making evaluation

Speed

Select “1”, “2”, “3”, or “4” below regarding your company’s decision making process.

Execution

Effort

Quality When making critical decisions, we choose the right course of action:1. Less than 25% of the time.2. 26 – 50% of the time.3. 51 – 75% of the time.4. Over 75% of the time.

We make critical decisions:1. Much slower than competitors.2. Somewhat slower than competitors.3. Somewhat faster than competitors.4. Much faster than competitors.

We execute critical decisions as intended:1. Less than 25% of the time.2. 26 – 50% of the time.3. 51 – 75% of the time.4. Over 75% of the time.

In making and executing critical decisions:1. We either put in far too much effort (assets) or not nearly enough.2. We put in too much or not quite enough effort than we should.3. We put in somewhat too much or too little effort than we should.4. We put in exactly the right amount of effort (assets) on critical decisions.

Source: Bain & Company, Inc.Ron McFarland, Tokyo, Japan

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Company decision making evaluation – result sample

Speed

Execution

Effort

Quality When making critical decisions, we choose the right course of action:1. Less than 25% of the time2. 26 – 50% of the time3. 51 – 75% of the time4. Over 75% of the time

We make critical decisions:1. Much slower than competitors2. Somewhat slower than competitors3. Somewhat faster than competitors4. Much faster than competitors

We execute critical decisions as intended:1. Less than 25% of the time2. 26 – 50% of the time3. 51 – 75% of the time4. Over 75% of the time

In making and executing critical decisions:1. We either put in far too much effort (assets) or not nearly enough2. We put in too much or not quite enough effort than we should3. We put in somewhat too much or too little effort than we should4. We put in exactly the right amount of effort (assets) on critical decisions.

3

4

2

3

Current decision making status:1. Over 25: You are doing great, keep it up.2. 21 – 25: Pretty good. Could be great.3. 16 – 20: Worse than 50% of companies. Put in decision making action plan.4. 15 or less: Major decision making process change required.

Total scoring method:Quality X Speed X Execution X (Effort/4)Therefore, sample score is 18 (eighteen)

18


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Organizational structure evaluation toward decision making

Decision style

Select 1-Strongly disagree, 2-Disagree more than agree, 3-Agree more than disagree, or 4-Strongly agree for the below regarding your company’s organizational structure and the decision making process.

People

Culture

Priorities

We make decisions in a style that is effective. They appropriately balance inclusiveness & momentum.

(1, 2, 3, 4)

Behaviors

We put our best people in the jobs where they can have the biggest decision impact.

(1, 2, 3, 4)

Our leaders at all levels consistently demonstrate effective decision behaviors.

(1, 2, 3, 4)

Our culture reinforces prompt, effective decisions and action throughout the organization.

(1, 2, 3, 4)

People understand their priorities clearly enough to be able to make and execute the decisions they face.

(1, 2, 3, 4)

Roles

Processes

Measures & incentives

Structure

Individuals are clear on their roles and accountabilities in our most critical decisions.

(1, 2, 3, 4)

Information

Our processes are designed to produce effective, timely decisions and action.

(1, 2, 3, 4)

The people in critical decision roles have the information they need when and how they need it.

(1, 2, 3, 4)

Our measures and incentives focus people on making and executing effective decisions.

(1, 2, 3, 4)

Our structure helps, rather than hinders, the decisions most critical to our success.

(1, 2, 3, 4)

Source: Bain & Company, Inc.


12

Organizational structure evaluation toward decision making - example

Decision style

People

Culture

Priorities

We make decisions in a style that is effective. They appropriately balance inclusiveness & momentum.

(1, 2, 3, 4)

Behaviors

We put our best people in the jobs where they can have the biggest decision impact.

(1, 2, 3, 4)

Our leaders at all levels consistently demonstrate effective decision behaviors.

(1, 2, 3, 4)

Our culture reinforces prompt, effective decisions and action throughout the organization.

(1, 2, 3, 4)

People understand their priorities clearly enough to be able to make and execute the decisions they face.

(1, 2, 3, 4)

Roles

Processes

Measures & incentives

Structure

Individuals are clear on their roles and accountabilities in our most critical decisions.

(1, 2, 3, 4)

Information

Our processes are designed to produce effective, timely decisions and action.

(1, 2, 3, 4)

The people in critical decision roles have the information they need when and how they need it.

(1, 2, 3, 4)

Our measures and incentives focus people on making and executing effective decisions.

(1, 2, 3, 4)

Our structure helps, rather than hinders, the decisions most critical to our success.

(1, 2, 3, 4)

Current decision making status:1. Over 35: You are doing great, keep it up.2. 31 – 35: Good but room for improvement.3. 26 – 30: There are major barriers to decisions.4. 10 – 25: Major organization transformation is required.

Total scoring method:Total score (add all the scores) 26


Step 2 (Identify): Identifying critical decisions

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List all major department project decisions and the value they create.

Use surveys, interviews, and workshops to assess the value and degree of attention required of each.

Determine the single decision with the greatest company value potential and risk.


Categories of critical decisions

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Small but critical decisions that is made and remade frequently and add up to value over time. These are made every day and none by themselves carry much value, but add up over time. An example would be how sales people meet customers on a daily basis.

Small, frequent decisionsLarge, one-time decisions

Big decision that carry enormous value and risk. Usually, onetime or infrequent organizational or operational decisions. If these decisions are not made and executed effectively, shareholder value could be lost. Once made, they usually can not be modified or undone.


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Finding major decisions along the value chain

Operations

&

processing

Outbound

items

&

services

Marketing

&

sales

After

sales

support

(Processing)

End Users

Technology Development

Direct Activities

Suppliers

Human Resource Management

Infrastructure

Procurement

Support

Activities

Inbound

items

&

services

(Shipping) (Marketing) (Service)(Receiving)

Value Chain Activities

Valued added, cost incurred over time and a profit margin


Analyzing the status of the most critical decision

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Once the most critical decision is determined, its status must be reviewed.

Is it getting the priority and attention required?


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Critical decision status review

Rating4-strongly agree;

3-agree; 2-disagree; 1-strongly disagree

Organization strengths and barriers to efficient decision making

Decision roles are clear and appropriate. (1, 2, 3, 4)

(1, 2, 3, 4)

(1, 2, 3, 4)

(1, 2, 3, 4)

(1, 2, 3, 4)

(1, 2, 3, 4)

(1, 2, 3, 4)

(1, 2, 3, 4)

(1, 2, 3, 4)

(1, 2, 3, 4)

We use a very effective decision making process.

We have the right information at the right time.

People’s objectives and incentives reinforce the right decision and action.

Participants have the right atmosphere and environment to make and execute decisions.

We use the appropriate decision style. (described below)

We have the right skills and talent in the right decision making roles.

Participants demonstrate good decision behavior.

Our overall culture reinforces making and executing the decision well.

Our structure facilitates making and executing the decision well and quickly with the right effort.

Were “1” or “2” selected?

Those are the concerns that

must change.

Source: Bain & Company, Inc.Ron McFarland, Tokyo, Japan

Four common decision making styles

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1. Directing – Management tells people what to do.

2. Participating – All related personnel are involved in the decision making process, but one person finally decides and is accountable.

3. Democratic - All related personnel vote on what is best. The most popular decision is selected.

4. Consensus - All related personnel must agree to move forward.


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Step 3 (Improve): Decision Clarification

What?Make sure everyone

knows exactly what is to

be done and why.

Who?The roles of decision

makers, recommenders,

experts and executers are

decided.

How?The approach and total

process are decided.

When?A timeline of each

process is decided,

including milestones

and progress reporting.

Making

decisions

work

The decision goals

must be specific and

understandable to all!


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Decision Clarification – What is it?

What?

Tips for success1. Start all discussion with reminder of what

goal is to be achieved.2. Explain the situation and reasons to make

the decision.3. Break down the decision into specific

tasks and confirm task dependences (one is finished first before another task starts).


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Decision Clarification – Who should do it?

Who?Use the RAPID system to assign roles1. R - RECOMMEND2. A - AGREE3. P - PERFORM4. I - INPUT5. D - DECIDE



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Who performs the decision process (Rapid)?

R - Recommend

A - Agree I - Input

P - Perform

D - Decide

1. R – Recommend: Who will be responsible for making the recommendation that

something should be done? What options or alternatives does he recommend? What is

his final recommendation? This person is usually close to the problem or opportunity.

2. A – Agree: Who are experts or specialists that know many of the concerns that may

arise with the recommendation(s) given?

3. P – Perform: Who will actually execute the decision until it is successfully

completed?

4. I – Input: Who will be responsible for gathering information, data and facts? This

includes resource/skill requirement facts. This is the gathering point of information.

5. D – Decide: Who will make the final decision and be responsible for its outcome?

For major decisions, several people for these tasks should be assigned.


Usual sequence

#1#2

#4

#3


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Decision Clarification – How should it be done?

How?

Use best practices to

determine each required task throughout the decision making and

execution process.


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Clear steps and sequences

- Logical steps and sequence for how decision roles and process will work in practice- Clear guidelines on how and when to escalate and when to slow down.


Best-practice decision process - How

How?

Closure and commitment

Structured decision approach

Feedback system

Meetings and committees

- Key meetings required for the decision are scheduled with purpose and participants clearly understood. Why is the meeting needed, who should attend and what is to be achieved?

- Meetings are reviewed and assignments confirmed afterward in writing.

- Final decision communicated to key personnel.- The resources allocated (people and money)- The execution plan in place (actions, accountable people, check-points).

- Ongoing review of execution progress for fast corrective action or expand on successes.

- Conscious approach to decision: sets goals to achieve, considers relevant facts, develops alternatives (at least two others) and makes a clear decision after analysis.


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Decision Clarification - How

Tips for success1. Handle (1) information gathering, (2)

alternative selection and (3) final decision at different times so they can be thought over (not at once).

2. Set a target of seven people to attend every meeting. More or less is usually counter-productive (information, perspectives opinions).

3. Track all bottlenecks and learn why.

How?

If there are too many people in

meetings, decision speed could suffer.

If there are too few people quality decision making could suffer.


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Decision Clarification – When should it be done?

When?

Best companies make

explicit schedules,

timetables, milestones,

and deadlines.


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Visualizing a decision process– Time (When)

A Gantt chart can track the progress of each task throughout

the decision process.

Note: Reasons for all 1-rework, 2-rediscussions and delays should be

recorded, reviewed and analyzed.


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Step 4 (Organize): Decision making & organization

Concerns1. Does the organization structure support decision

making?2. Does the organization support fast, accurate

information flow?3. Are the decision maker’s, researchers’, experts’

and executers’ roles and responsibilities defined?4. Are resources proper for the decision?


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Decision-centered organization

Does the information flow well between them?

Has the decision maker, recommender, expert(s), researcher(s) and

performer(s) been decided?

In any decision, how many interactions does this involved? Is that

number appropriate?

A traditional organization chart must be flexible for every decision-

making and executing situation.

One decision to purchase equipment could be made in three departments.


COMMON CONCERNS: Critical decision-making locations

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Should cover decisions that cross product lines,

regions and functions.

National level decisions

Local level decisions

Choosing the right people and locations for decisions to be made and executed is an important common concern.

Global level decisions

Should cover the local operations, but be

coordinated with other parts of the organization.

Should cover the national operation, but

be coordinated with other parts of the global operation.

Strong global-national-local communication link

Decisions made in the wrong

place is frustrating!


Where is the information

and how well and fast is it shared?

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If information is lacking,

people give up.

At the world HQ In an individual

Needed Information Concerns1. Is it shared at all?2. Is it understandable?3. Is it distributed fast?


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Step 5 (Promote): Multiply good decision making & execution

Action plan 1. Make good decision-making a priority in the

whole organization.2. Leaders actively use good decision making skills.3. Promote successful decisions.4. Train others on good decision making

techniques.5. Measure the impact on profit.


Managing the

Decision Making

process

33


Harvard Business Review Press, Copyright, 2010

Thank you

Putting your attention and focus on

decision-making could give you a strong competitive advantage.

Decision

making

focus


The Decision-making Process, make it your competitive advantage

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