This Article was published in Bloomberg Businessweek!
One of the key factors Ben Horowitz uses in evaluating chief executives is their skill at making decisions. Horowitz should know. As a venture capitalist, he is in the business of hiring CEOs—lots of them.
Having worked with a number of CEOs and their direct reports, I can attest that decision making is an underappreciated skill, partly because it is often viewed as an art, not a science.
It is not that the CEOs and other senior executives are bad decision makers. They are where they are because they are good at using their intuition, judgment, experience, instincts, etc., to make successful choices. It’s just that none of them can tell you how they make those decisions, what process they follow, whether they are getting better at it, or what their strengths and weaknesses are. While advances in data analytics provide CEOs with much more information, that does not necessarily translate into quicker and better decisions. It’s the same as automating an inefficient process and expecting better results.
The problem is that decision making has never been identified as a critical competence, for CEOs or the rest of the organization. It does not exist in many curricula at either graduate or undergraduate university programs. It is most often in the dreaded “soft” skills category. You will find very little training offered at any level—including the board, where an organization’s most important decisions are made.
Let’s just take the recent United/Continental merger as an example and, more specifically, the decision concerning which coffee to serve customers. They followed the traditional supply chain/sourcing process and assembled cross-functional teams, invited multiple suppliers, ran multiple taste tests, and did everything their strategic sourcing consultants told them to do. It took two years to make a final selection.
Some might commend management for such attention to its customers. Now multiply that effort by a significantly larger number of merger decisions with far more strategic import than coffee, and you can imagine the chaos and the time and effort wasted, not to mention the collateral damage to shareholder value.
I am using this merger merely as an illustration, as I can point to many examples. Just imagine the number of “coffee” decisions being made in your organization in every business unit and every function. Assign some kind of value to them and multiply the number of decisions by their assigned value. You have barely started to scratch the surface of the true cost. Not to mention that competitive advantage is created by one organization making better decisions than others on a daily basis in every functional area.
We need to look at decision making differently. One powerful technique is to acknowledge that a large number of decisions in organizations (even mergers) share these three attributes: They are predictable, inevitable, and repetitive. CEOs can use this framework to determine how they would make decisions prior to making them, create some decision rules, and pass them along to the rest of the organization to follow. This would significantly reduce the decision-making traffic that causes all kinds of bottlenecks and also the friction. It would also let organization track and improve the process of making decisions better.
If you would like to know how bet-your-business decisions are made by an organization at a phenomenal success rate of more than 90 percent—year in, year out—see how the bees do it.
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