Decision-Making is a Serious and Growing Problem

Decision-making is an age old problem. Eve took advice from a snake. Julius Ceasar took advice from a council of advisors even though they later stabbed him in the back. Kings, presidents and leaders of all types struggle with making good decisions.

The 2004-2005 Teradata Report on Enterprise Decision-Making shows that over 70% of the respondents say that poor decision-making is a serious problem for business. The top casualties of poor decision-making are profits, company reputation, long-term growth, employee morale, productivity and revenue. If that weren¡¦t bad enough, 75% of the senior executives of top U.S. companies said that the number of daily decisions has increased over last year.

The August 30, 2005 edition of Business Week online features an article entitled, ¡§Why Decisions Need Design¡¨ by Roger L Martin. In Part 1 of this series, Martin points out that work forces over the last 50 years have changed substantially. Historically, direct labor used to dominate both the number of workers employed and the percentage of payroll. Today, however, white collar employees dominate the payroll cost, if not the absolute number of employees. Martin suggests that these people are not manufacturing products, but rather they are manufacturing decisions and the number and types of decisions being made are myriad.

If the number of decisions being made is increasing and the number of people needed to make these decisions is increasing, how successful are they at making good decisions?

Paul C. Nutt in his book, ¡§Why Decisions Fail¡¨ reports, ¡§For more than twenty years I have been studying how decisions are made, writing about what works, what doesn¡¦t and why. The key finding is startling - decisions fail half of the time.¡¨

It seems obvious that if decisions fail half of the time, that organizations would pay very close attention to the quality of their decisions, but to-date, that has not been the case. If, as the Teradata Report suggests, that profits, company reputation, long-term growth, employee morale, productivity and revenue are being affected, then it will not be long before decision-making becomes a very hot topic for leaders across the country and throughout the world.

Edward Russo and Paul Schoemaker in their book ¡§Winning Decisions¡¨ point out 10 reasons why decision-making, is even more challenging today.

1. TMI or Information Overload. A survey by Reuters of 1,200 managers worldwide found that 43 percent thought important decisions were delayed and their ability to make decisions was affected as a result of having too much information. There is plenty of information right at your fingertips, but much of it is conflicting and reliability is questionable.

2. Change. The rate of change in our world is ever increasing so we are forced to make decisions about moving targets.

3. Rising Uncertainty. The days of predict-plan-execute are gone. Discontinuities are the norm.

4. Few historical precedents. Virtual organizations and the digital revolution are so new that they leave us with little experience to guide us.

5. More frequent decisions. Decisions that used to be handled by standard operating procedures now need to be customized for each relationship.

6. Fewer experienced decision makers. Flatter organizations are forcing decisions that affect the entire organization to be made at lower levels.

7. Conflicting goals. The battle between short term and long term goals grows ever stronger.

8. More opportunities for miscommunication. Instant access with the Internet and continuous access with cell phones makes communication constantly available while cross functional and international endeavors provide more opportunities for misunderstanding.

9. Fewer opportunities to correct mistakes. Today¡¦s pace provides less time to correct mistakes and reestablish credibility.

10. Higher Stakes. Our winner-take-all society means there are fewer big winners which causes more players to be pushed to the sidelines.

Decision-making has been and continues to be a problem. The number of decisions is increasing and the percentage of good decisions is at an unacceptably low level. Given these facts, it is apparent that the approach we have used for decision-making probably was never adequate, but in today¡¦s world is totally unacceptable.

The books and reports referrenced above do an excellent job of defining the problem and increasing awareness of this growing dilemma. Successful books like Malcolm Gladwell¡¦s ¡§Blink¡¨ and James Surowiecki¡¦s ¡§The Wisdom of Crowds¡¨ are doing a lot to increase the awareness of the problem and offer some interesting insights in attacking the problem.

The time has come to recognize that our traditional method of decision-making is not adequate in today¡¦s world and begin the process of establishing a new approach that will produce better results and calm the growing crisis.
㦠Copyright Bob Cannon/The Cannon Advantage, 2005. All rights reserved.