Make better decisions, execute them more effectively and the profits will flow. That’s the message from Decide & Deliver, a new book based on research by three leading consultants at Bain & Company, Inc. Directorship’s Editor, Chris Gibbons, spoke to one of the trio, Paul Rogers, managing partner for Bain’s London office and previous leader of Bain’s Global Organisation practice.
Paul Rogers is very clear that the impact of bad decisions goes directly to the bottom line. “Our global research programme, which is based on about 1,000 large companies globally, shows a huge correlation between effective decisions and two desirable outcomes. Companies that do better at decisions make more money and have happier people,” he says.
Intuitively, his words feel right, so why doesn’t every company just get on and do it? Why do so many find themselves stuck in the bleak, frustrating place called ‘decision failure’? According to Rogers there is no simple answer. “Decisions get bogged down in complexity, which is, to some extent a fact of life these days. Organisations struggle to adapt to all the different pressures which tend to increase complexity: globalisation, the information explosion, the focus on different customer segments, the focus on process and functional excellence, etc.” he says, explaining that the traditional approach to providing guidance on how it should work is still, in many cases, the ‘Org Chart’ or Organogram. “By definition that only works in two dimensions. Most organisations need more dimensions than an ‘Org Chart’ is capable of handling.
They know they need to be more joined up and more collaborative but what they don’t have is a way of providing clarity to people about what kind of decisions they should be making, how they should be making them, ensuring that there is an element of speed and that there is reliable execution of decisions once they are made,” he says.
So where do you start? Can we make the right decisions if we don’t ask the right questions? Making a good decision definitely starts with being very clear about what you’re trying to decide, says Rogers. “If you’re not even debating or addressing the right issues, it’s very hard to come up with the right solutions.” He notes that the general characteristics of an effective decision start with defining the actual decision clearly. “It’s surprising how often you find that is not the case. Second, we believe in getting the relevant facts as far as possible. One can overdo that in some situations, but in general we do advocate objective, fact-based decisions. Third, we recommend identifying real choices, particularly for the bigger more strategic decisions, rather than going straight to an answer. And fourth is being clear once the decision is made and reaching closure so that you can proceed to execution,” he says.
Rogers emphasises his point about real choices, particularly at board level, by repeating a Henry Kissinger story. Kissinger relates that when he was US Secretary of State he was often given three choices. The first would result in complete surrender to the Russians, the third would cause thermonuclear war and the second one... well, that was the one his advisers expected him to take. “You can end up with the board simply receiving a yes/no presentation from management as opposed to being able to engage in a real debate. That can be a particular problem when it comes to setting strategy for the business - a flawed decision process can result in a strategy which the Board doesn’t really own, or in some cases understand,” warns Rogers.
This is also one of the reasons why some decisions taken at board level just don’t stick. “Sometimes it just isn’t clear which are the decisions that really matter. You find the board is spending a disproportionate amount of time on issues which are peripheral and not central to the future of the business, and conversely, not enough time on the issues which really are central.” He also cautions that “if the key decisions are clear, sometimes the roles are not.”
Non-stick decisions are also influenced by what he calls “second order effects which can sidetrack you, like misaligned measures and incentives. If you’ve got different individual stakeholders who are by dint of their incentives and measures looking at the world through fundamentally different lenses, then that can really get in the way of a good decision. Or if you just have people whose profile for some reason is not adapted to the job at hand. Human beings are complex animals and sometimes you find that either the individuals themselves or the way the team works together just isn’t set up for effective decisions no matter how clear the roles and processes. Or you have a culture - that wonderful word, culture! - where somehow it’s OK to make a decision in the boardroom, leave the meeting, and then ignore it, rather than adopt an approach of collective responsibility.”
Rogers says that Bain & Company’s research has revealed that an effective decision has four attributes:
- Quality - making the right decisions;
- Speed;
- What we call Yield, which is really just another word for execution; and
- Effort.
And I need to qualify two of those. On Speed, we don’t observe that success is about speed for its own sake. There are actually quite a lot of situations where the best decision is no decision, to defer, to get more information, whatever. However, we also observe that the high performers have a faster metabolism: they are able to process information, make a decision, and get it executed with a cycle time that is on average quicker than the competition, even though for any one decision they may not rush it.
“Similarly, Effort. There are a very small number of decisions which are, if you like, ‘Bet the Business’ decisions. These justify a huge amount of effort, although you can still have too much. Most decisions though are the everyday operational kind. The danger comes that because of this ambiguity you create an organisational context in which you have to put a huge amount of effort in to even get a trivial decision made and executed. That becomes a real drag on the organisation’s performance and a real drag on the morale of the people who are having to move mountains to get simple things done.”
Is there a tradeoff here? Do companies that take longer to make decisions make better ones? In specific situations, yes, says Rogers, but on average, no.
“Companies that are faster at decisions are four times more likely to be making good decisions and eight times more likely to be executing them well than the average company. So success is not really about optimising one or other of the four attributes. Rather, it’s about finding a way to do well across all of them. And the laws of compound maths apply: if a company or organisation is a little bit better at each, that will multiply through to make its overall decision effectiveness significantly better than a company that is average at each.”
Decisions, decisions! In a sizeable multinational tens of thousands of decisions are made at many different levels every single day. How do you identify which are the critical ones, the ones that will make or break the business? Bain & Company advocates a tool called Decision Architecture. Says Rogers, “This really means thinking of a company as nothing other than the sum of the decisions it makes and executes. We start by mapping the decision architecture - similar to a typical process architecture for a business. This allows you to look rapidly at the main areas of activity and decisions and to say some of these are absolutely critical to success, while others are necessary for the business to work, day in, day out, but they are less vital to success or failure. Then you can map down into the layers of the organisation, always asking which of these decisions really do make a difference between success and failure?”
Rogers is emphatic that when identifying critical decisions he means selecting not only “the big strategic decisions, where the board focuses its time” but also “the seemingly small everyday operating decisions which individually may have a small impact, but get made frequently and in many places across an organisation and so cumulatively have a very big impact.”
In this regard, he describes a curious phenomenon, which one of his clients calls ‘the hourglass approach’: “When we do decision mapping with companies, we very often find that the most critical decisions tend to be either very near the top - absolutely global decisions which top management needs to be involved in. Or - quite often, actually - they’re at the other end and quite close to the frontline, the customers, the market. Hence the hourglass description.”
Rogers offers the example of a large mining company that was very concerned about its bad safety record and high number of fatalities. “We found that, actually, the company’s safety policies and processes were pretty good. The decisions that were going wrong were the individual decisions that the miners themselves were making around whether or not to comply with policies. Because the miners were so focused on productivity for the shift, they would cut corners, which put their own personal safety at risk. And in the greater scheme of things, it wasn’t even good for productivity because, obviously, when there are accidents you have to shut the mine while you investigate the cause and fix it and so forth... But in order to get a handle on that and really make improvements, we literally had to go to the coalface and think about the decisions that the individual miners themselves were making.”
Rogers says that to embed changes in the decision making process in everyday practice, the first and most important thing required is leadership. “If the leadership of the organisation, or the unit within the organisation, is really committed to improving decision effectiveness then there’s every chance they’ll succeed. If they delegate to the HR function, or dare I say the consultants, then there’s much less chance that it will stick. Second is providing some focus on what the really critical decisions are and creating some momentum around a subset of those decisions. This also means working with the people in the organisation to show how addressing some of the root cause constraints produces better, faster outcomes and better executions. The people involved will feel better about coming to work every day. The third ultimately is about equipping people with the capabilities to recognise decision effectiveness when they see it and the toolkit to be able to apply the principles and the disciplines in their everyday life - to decide and deliver for themselves.”
Rogers and his colleagues make a compelling case. Their book is concise, lucid, informative and thought-provoking. There’s no doubt that they offer a different lens through which to view your organisation, yet once you’ve read Decide & Deliver you may well wonder why you haven’t thought about things in this manner long before. Read it. It’s one decision you won’t regret!