Decision Making - Getting it Right - The First in our Series

Introduction - We simply have to do better!

Why do we humans as individuals, as couples, as families, as businesses or even as nations consistently make or continually allow obviously bad and sub-optimal decisions to be made? We are all complicit in these costly lapses of judgment to a greater or lesser degree. Some reflection to better understand what needs to change and with these insights the adoption of new habits is needed.

Recently, as I made my way down a winding wooded driveway, I marveled at the vision and foresight of whoever planned and then planted the avenue of trees before me, knowing that they would never see their splendor nor enjoy their shade. Jared Diamond in his book, “Collapse”, a collection of studies on the self-inflicted demise of various societies, asks us, in his chapter on Easter Island, to wonder just what conversations and exchanges took place when the last Imperial-Palm was cut down. (These are the largest and tallest of all palm species and once covered most of Easter Island. They were essential to the islander’s well-being and survival. ) How great must there despair have been when the last seaworthy vessel failed and sank leaving them stranded on land. It was all a steady decline from then on, the absence of fish from their diets overburdened the land, which steadily eroded in the relentless trade winds which blew away top soil once anchored by those majestic palm trees. Only buried, layered middens remain and these accurately document for archaeologists the progressive decline of the once vibrant Easter Island society. Where once their diet consisted of fish, dolphin and even whale meat over time the detritus of their meals is replaced by bones of pig, then chicken and finally only shellfish. The fate of the last few generations was grim; disease, wretchedness and slavery awaited them.

How this could happen to a society, once sophisticated enough to produce a surplus that allowed the redirection of manpower to the massive effort of erecting the statues which outlasted it? Their obvious grasp of engineering, impressive organizational skills, and an elevated aesthetic which embraced time-horizons stretching centuries ahead just wasn’t enough to see this society survive and thrive.

Generally such anthropomorphic catastrophes are the result of the concatenation of many apparently innocuous events, and which in hindsight remind us of a train wreck happening in slow motion. Everyone glued to the spot, fully conscious, yet mere observers of their own predictable demise

Well who wants to die in such a train wreck? So with the rational in mind, this series of blogs will explore those instances where organizations and businesses have managed to get decision making right. We’ll take time to think about cognitive dissonance and the myriad of ways we each display this throughout each day. Later we’ll empirically test and demonstrate the dangers of our own individual over confidence in providing answers. By the end I hope we’ll have established some awareness of our own modes of thinking, our blind spots that we should manage, and how we should apply these in our work and even family environments.

My final aim is to have Small & Medium sized Enterprises elevate their decision making capabilities so that it enhances their implicit advantage over larger ponderous and slow organizations which are unfairly protected by large balance sheets and the original oligopoly structure of our economy. Whilst every parent strives to provide their children with a set of mental tools and experiences that will enable them to make the right decisions later in life we should question why business leaders do not do more to encourage the same of their employees. SMEs should use enhanced decision making to further allow them to outmaneuver the behemoths impeding the South African economy.

Decision Making Style in an Organisation is a Critical Differentiator

What are the key differentiators between consistent performers and perennial disappointers? Jim Collins has shared valuable insights into some and yet in South Africa indolence, apathy, organizational design, and culture are all too often provided as answers and fail in getting to the heart of the matter.

In general, it can be argued that many businesses do not want their people to make decisions, to think. Instead, they require conformity to process and checklists, with quality management (and by implication thinking itself) abdicated to 2nd and 3rd line compliance and risk management functions or even more alarmingly to customers themselves. This process orientated approach to operational decision making reflects the failed attempts of service industries to replicate the sophistication of manufacturing. If done correctly, many benefits can indeed, be derived from the disciplines imposed by strict objectively based processing environments, where control can be maintained over the process inputs and variability is kept to a minimum. This however, is in stark contrast to the reality of most service businesses organized ostensibly around the subjective standards and needs of their unique customers.

As it was 30 years ago, the service industry remains the laggard in terms of either sensible or innovative business thinking. I will use various examples to illustrate this. The first reflects an understanding of the cost of delayed decisions making.

Decades ago it was a source of great consternation to US automakers that Japanese competitors were consistently as much as 30% more productive, especially when these factories were only miles apart, sharing the same labour pool, similar production line technology, and common supply chains. The key insight here was unplanned production line downtime costs and never running production at 100% of design capacity!. In US automakers, production lines were run with only the most senior management authorized to bring a production line to a halt, whereas with Japanese automakers ANY line worker had the authority to halt a production line, if they deemed it necessary.. On the US lines, mechanical failure and obstructions would lead to unnecessary and severe mechanical damage as machines continued to run as the reporting hierarchy was navigated, whilst such occurrences were avoided on the Japanese lines simply by enabling the right decision making to be made immediately. How are businesses, especially in banking and insurance, to re-establish trust with their customers, when their internal decision making reflects such dis-trust internally?

The second example reflects an understanding on where knowledge resides in an organisation and how to use it judiciously. Employees whom managers barely know often possess remarkably useful information. Take one manufacturer that realized production line mechanical failures were signaled prior to actual failure by subtle yet detectable changes in frequencies and new audible resonances. These are less obvious to those constrained within the immediate environment but remarkably obvious to those transiting. Thus sweepers and cleaners have a component of their remuneration linked to production uptime and preventative maintenance costs driven by their involvement. The service industry is full of suppressed and trapped knowledge and insight that should be used, at no additional cost but with huge benefit. For example, if you want to know how well a new piece of customer facing functionality has been deployed and whether it has been properly designed and tested, what is usually done. Instead of trusting the project documentation, which has never been properly read, IT gets an e-mail from the business sponsor wishing them luck on the go-live, with a favour asked to send an e-mail at close of business to report back on the success and failures of the go-live.

This is completely unnecessary! All that needs to be done is for a visit to be made to the Customer Call/Contact centre and for this business owner to observe and compare the volume and make-up of calls coming in. Within minutes there will be a clear indication from the customers (the ones that matter), on whether their expectations have been managed, whether the system does what it should and whether the resources available to them for problem solving are sufficient.

These examples also demonstrate how far too often decisions are not made at the appropriate levels of an organization. These failures in middle management decision making are rightfully the failings of senior leadership, who seem to forget that organizational seniority generally reflects complexity of role. Complexity has various components and is not merely the intellectual ability required, but also reflects the longer time horizons involved, the number of stakeholders impacted and requiring management, and the quantum of cost or benefit associated with decisions made (or not made).

Senior leadership should have mainly difficult decisions to make, requiring time and consideration, seldom easy ones. If senior manager find they are having to make too many easy decisions, then either they shouldn't be making them or perhaps they aren't thinking about them properly.

In our next edition we will have some fun examining our own cognitive biases as we play with a few optical illusions.

Keep well