Sunday, July 4, 2010

How managers make good decisions...

What is termed a “good” decision?

Some of these elements go into a good decision:

Make sure you’re solving the right problem in the first place. It is important we understand the problem and not make any premature assumption. Jumping into conclusion will lead to failure in making what is right or wrong. Be clear about what you are looking at. For example, are you trying to maximize profit margin or just trying to stay alive and minimize loss? Gathering the right information, including information about uncertainty, which is essential if you want to choose the best option.  Reasoning out the right choice and includes what you know and what you don’t.  A commitment to make it happen, since a decision is no stronger than its weakest link.

Where do leaders fall down when making decisions?

They fall down on all these elements. In some organizations, managers don’t get the information they need to make a decision, so they end up having to make decisions based on experience and intuition or wrong feedback from subordinates. Sometimes distorted information were passed on to the management level thus leading to wrong decision made.

Does personality type determine decision making?

Yes, people become aware of their natural biases and habits, it becomes easier to avoid them. People may tend to procrastinate or focus on the big picture and the creative part. Your habits will get you in trouble if you don’t watch out and most people drag a problem into their comfort zone instead of solving it.

How do you evaluate the success of your framework?

Here’s how we figure out if it made a difference: We take a decision and try to document what people would have done otherwise, which is called the momentum strategy. Then we compare the best choice they make with us to the momentum strategy they would have used. We can now say pretty clearly that our approach avoids lots of downside errors. It avoids value destruction and creates a lot of value. Most people leave a lot of value on the table when they make intuitive decisions.

Managers basically make these types of decisions:

Strategic decisions- Managers have weeks or months to make these decisions, which have life-shaping effects on a organizational or management level. Strategic decisions are very important, involve significant uncertainty and complexity, and are hard to think through. Such decisions are costly and it may require various levels of brainstorming before the final "say" is made.

Typical decisions- These decisions often come from team meetings that last a few hours. They can have a big impact, but they are frequently tactical in nature and arrived at through a collaborative process. Usually these are made day-to-day so that the project or work process are not held up by delay in decision making.

In-the-moment decisions- For decisions made on the fly, managers use a different part of the brain that emphasizes rapid pattern recognition. Beginning with limited or incomplete information, they habitually look for similarities to experiences they’ve had in the past.

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