How one client learned to make better decisions faster.
Decision-Making: choosing among options and determining the best course of action given the relative benefits and the relative risk.
My client called early Monday morning. “Len, I’m having trouble making decisions.”
It seemed his “gut” had lost its superpowers.
“Maybe it was the sushi you had for dinner the other night,” I said. So we scheduled a meeting. 9:00 am Friday at his office.
Mike was the CEO of The Acme Company (protecting the innocent).
I met with Mike and his general manager, Rob to help them resolve an issue with one of their managers.
Richie was elevated to a management position with hopes he could keep the department running while they trained him to manage his team.
For the first 20 minutes, I listened to Mike and Rob go back and forth on how to handle the situation.
Their discussion was all over the place.
“Keep Richie and give him one last chance to change his behavior. He’s got to dedicate himself to learning the Acme Company performance management system,” said Mike.
“Richie said he wanted this position so he can make more money to support his family. We can’t just fire him,” said Rob.
Why do we have trouble making decisions? Isn’t decision-making simply choosing among options and determining the best course of action?
Choosing a course of action can be difficult. The reason we have trouble making decisions is we don’t have a process to keep us organized.
As I listened to them bounce from one scenario to another, I finally said, “Gentlemen, let’s see if we can approach this issue from a different perspective.”
I stepped to the whiteboard and we began to flesh out an appropriate starting point: the decision statement.
The Decision Statement
Before we can make a decision we need to pick an appropriate starting point.
What are we trying to achieve? What is our goal?
Start with a decision statement.
A decision statement addresses the outcome you want to achieve. When you lose sight of your objective you look for alternatives that don’t make sense.
I had Mike and Rob work out a decision statement. After roughly 5 minutes of conversation, the duo agreed to keep the scope of the statement tight to streamline the process. This narrows the range of options available.
We were all satisfied this decision statement would keep us focused on the destination.
DECISIONS STATEMENT: Give Richie another chance at managing production or find his replacement.
Alternatives
Now we needed to come up with alternative actions. “What is the reasonable range of alternatives that you’re willing to consider?” I asked.
Knowing the objectives will help us limit the number of alternatives.
Decisions are like funnels. Once you have your decision statement, add alternatives, or routes, into the funnel to see which best suits your needs and reduce risk.
Separate goals from activities. Evaluate a variety of alternatives that make sense in the context of our decision statement.
With goals and objectives established, brainstorm alternatives to get us to the goal.
I returned to the whiteboard and started making notes.
They discussed several alternatives, then settled on these:
CEO Mike
- Promote Ken to production manager.
- Demote Richie back to production.
GM Rob
- Give Richie 90 days to get the department under control and move forward.
- Offer Richie a management position in the parts department.
Next, we applied various filters in the form of musts, wants, and risks to narrow our list of alternatives.
Musts & Wants
Think of musts as mandatory to success. They are measurable and they’ve got to be realistic.
Aim for decisions with as few musts as possible. Musts are important, but too many prevent us from getting things done.
Wants are desirable alternatives. We’d love to have it, but they aren’t mandatory to the success of the decision.
Keep in mind that a want can come out of a must.
Example
Must = No delivery commitments missed
Want = Sales to reschedule a few deliveries
You can negotiate wants but don’t negotiate away musts to save a want.
Musts
- Better overall performance from the production department in 90 days.
- Meet all delivery commitments
- No defective products leave the building
- Reduced waste and re-work
- Morale and teamwork remain high
Wants
- Promote a new manager from within (30 days)
- Richie accepts the results of our decision and chooses to stay with the company.
- Minimal disruption to delivery commitments
- Productivity improves 3-5% over the next 3-6 months after the new manager is in place.
Risk vs. Reward
Risks are any threats to alternatives that undermine our options.
Every alternative comes with a certain amount of risk. It could be large or it may be insignificant. But any risk needs to be evaluated in terms of the probability of it happening and the seriousness if it does happen.
Alternatives that present high risk don’t make sense.
As we put their alternatives into the funnel, some got thrown out because they didn’t meet the musts. Some got thrown out because they didn’t meet the wants. Some got thrown out because they presented too high a risk.
We agreed they would focus on the difference between alternatives (the routes) they were considering to get there and the objective or destination.
Next, we discussed the fact that risk is a function of the likelihood of an event occurring and the seriousness of the event if it does occur.
Back to the whiteboard.
I listed these three factors that can influence reactions to change and the risk this change may pose:
- How much risk can you personally accept?
- How much risk can the organization accept?
- What actions can we take to manage risk?
Mike and Rob knew from past experience they could take actions to deal with certain risks involved with this particular decision.
Example
The risk of production falling behind can be handled by requesting overtime. That takes care of seriousness.
Knowing how the production team has adjusted to meet customer delivery requests in the past, they can generally assume the team will step up if production gets behind. That covers probability.
So I posed these questions:
- What’s the worst that can happen?
- What can we do to lower the probability of the risk?
- How serious is the risk if it happens?
- What can we do to lessen the seriousness of the event happening?
We agreed the only risk they should be concerned with is the risk that remains after appropriate preventative actions, and actions to reduce the risk, have been taken.
Recap
Decision-making process review:
- Establish a goal (create a goal or decision statement).
- Establish the objectives to be achieved.
- Generate likely alternatives to meet the objective requirements.
- Evaluate the alternatives and select the most promising.
- Evaluate potential risks for each alternative and possible ways to control the risks.
- Select the best-balanced alternative (make a decision).
Conclusion
Successful teams use a decision funnel approach to make confident decisions. Decisions are made in less time and with less conflict and less hassle.
The funnel approach keeps things organized and focused.
The process guided them from broad alternatives down to a specific destination.
A gradually narrowing decision funnel demonstrates how to drill down to a specific recommendation or course of action quickly.
Outcome
By applying this process, The Acme Company CEO and the General Manager ended up with an alternative that met their musts, satisfied their wants, and provided acceptable and manageable risks.
We all agreed; this decision would result in maximum benefits with minimum risk to the customer, team, and the organization.
Institutionalize the decision-making in your organization.
At the end of our session, The CEO of ACME Company asked me how he could make this process a part of the culture of his organization.
I offered these four simple steps as an ideal place to start:
- Accept only recommendations that conform to this sequence.
- Analyze risk (don’t skip this step)
- Justify and communicate decisions within this context
- Insist meetings and group decisions adhere to this format
I was invited back to teach the process to their entire management team.
