One of the most valuable things an effective leader can offer an organization is the ability to make decisions, hopefully the right ones.
However, it is the way the decision is made that separates outstanding leaders from ordinary ones.
Every person makes hundreds of decisions daily, most automatically and without reflection. Usually, these decisions involve no specific competencies, require no sacrifice, and incur no serious risks. The decisions made in organizations also are mostly routine, practically automatic. And yet, it would be difficult to find a leader who has never been forced to make a decision that would have a massive effect on their organization. Such pivotal moments test a leader’s ability to handle complex problems freighted with multiple critical factors. The most crucial decisions made by managers are affected by the stress they feel, their ability to control their emotions in response to that stress, their experience and competencies, their analytical skills, the ability to process information rapidly, and how far they can think ahead.
While each of these factors plays a role, it is impossible to measure their sum accurately, or say what is most important. Therefore, the way I think about it, making key decisions involves a balancing act between knowledge and ignorance, intuition and reason, certainty and uncertainty.
This point is well illustrated by Aaron Wildavsky, an American theoretician of management who did the bulk of his work in the 1980s. Wildavsky maintains that no leader of any organization will ever have all the information he needs to make a decision as some of it gets lost on entering the organization while other bits get filtered out once they circulate within it. If a leader seeks sources of information outside his organization, he can become overwhelmed. If he relies on what he’s fed, he can be misled. Either way, the error is endemic. This is the leadership pickle.
The decider’s dilemma
All theoretical models that describe decision-making (and there are scores of them) share many common elements. The most basic element describes a sequence of steps, starting with problem identification, followed by problem analysis, the development of viable solutions, and the selection of a solution that best matches one’s priorities and/or resources. Among such simple descriptive models, the ones that most appeal to me are based on the belief that decision-making boils down to choosing from among available options. It is always essential to weigh the costs and benefits of a given choice. Even this simple approach has a readily identifiable critical point. After all, the costs and benefits of the options being pondered may be roughly equal. That leaves one with intuition based on experience. But, as management philosopher Peter Drucker said, one cannot wait too long to decide: “On an important decision, one rarely has 100% of the information needed for a good decision no matter how much one spends or how long one waits. And, if one waits too long, he has a different problem and has to start all over. This is the terrible dilemma of the hesitant decision maker.”
In other words, delaying or evading a decision tops the list of leadership no-nos. My experience tells me that not making the decision is generally a leader’s worst option.
My decision-making steps
Even when I’ve been confronted with the knottiest problems, I know I am not operating in a vacuum or starting from scratch. If my leadership has been open and based on dialogue with people on a partnership basis, I can always count on feedback from those around me. Others can help me correct my misguided assumptions, warn me or support me. Provided my leadership model is not authoritarian, I am able to draw on the collective knowledge of colleagues to improve my chances of avoiding mistakes. Furthermore, in a modern organization, I can access all kinds of data, including historical studies that allow me to assess my decisions and the likelihood that their results will be positive.
It seems sensible to me that any leaders who face complex decisions draw up a handy list of rules that will guide them through critical moments. For example, when confronted by a decision that needs to be made, my first move is to choose an action that I expect to provide the best results – based on the knowledge I have at that moment. In this way, I keep myself from multiplying data ad infinitum and becoming overwhelmed.
Secondly, I remind myself not to confuse causes with effects. Thirdly, as a rule, I never stop broadening my perspectives and listening attentively to other people’s opinions. Fourthly, I try to make sure that I have all the relevant information and that I use all the analytical tools that I need. Importantly, I try to avoid making rash, in-the-heat-of-the-moment decisions driven by emotions, which should never influence the decisions when their consequences may be long-lasting. Most critically, I make decisions based on experience (my own, my associates or the organization as a whole). Finally, I muster the courage to admit my mistakes once I realize I have made them.
This list of behaviors is neither exhaustive nor universal and may not make sense to everyone. However, I think that every leader can and should make their own list of decision-making practices that work for them.
Any discussion of decision-making would not be complete without a reference to automation. The rise of artificial intelligence has added a new dimension to decision-making.
Today, tools that rely on machine learning and deep learning algorithms and technologies enable machines to make ever more key decisions. The immense data sets available to organizations now allow them to create many analytical and operational models that can be indispensable to managers in areas ranging from sales to marketing to logistics to production and finance. We live in a world of global digital ecosystems that consist of products, services and the constant exchange of information at the interface between man, organizations and algorithms. These ecosystems are central to the business environment of modern organizations, and their market success depends largely on effective information processing. The concept of real-time analytics rests on the assumption that modern leaders will have access to ever more algorithm-based tools to support their decisions. Traditional analytical methods required data to be grouped before it could be interpreted. Today’s tools enable one to collect and structure data simultaneously, providing experts and leaders with accurate real-time information on markets. Leaders should be aware of the power of modern technology and be able to leverage it to make decisions and solve problems.
Learning from your customer
One of the primary beneficiaries of today’s technological advances is the customer. As technologies provide customers with mobile devices that offer unlimited access to the internet, they can shop around, compare prices and delay purchasing decisions. Their decision-making process has become increasingly rational and less emotional. Knowing this, the modern leader must understand the importance of monitoring customer movements in the digital space. I think this information in-flow increasingly will influence executive decision-making.
Risky decisions today are those that do not account for all customer behaviors tracked via every possible source, including social networks, geolocation data, and the IoT devices in peoples’ homes. This data must be added to a leader’s experience and inform his decision-making style.
I can get instantaneous feedback from customers based on their purchase decisions and smartphone data, and I would be using a poor process if I didn’t leverage that data to improve the next decision I make.
Norbert’s blog: https://norbertbiedrzycki.pl/en/