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Addressing Common Leadership Issues - Pt6: Making Effective Decisions

This is the sixth in a series of blogs in which we will look at some of the common issues faced by modern leaders and how they can be addressed. Today, we will consider the vital topic of effective decision-making.



There is little that is more poisonous to effective leadership than a failure to be decisive. Have you ever worked for someone who seemed incapable of making a clear and timely decision when it was required? Not only does such conduct often leave teams working at cross purposes (and frequently to the wrong end!), it puts an unfair burden on the poor under-director/-manager who has to guess what to do and to make a decision that he/she should not be responsible for. The demotivating effects on everyone, and the resultant impact on business outcomes, are obvious. Even a wrong decision is better than no decision! In fact, a survey some years ago by the HBR noted that the majority of decisions made by the best CEOs were in fact wrong! They were still successful because they did 3 things very well:

  1. They were unafraid to make decisions.

  2. They rapidly corrected wrong decisions (including ruthlessly cancelling programmes and projects when it became clear they would not deliver the anticipated business benefits).

  3. They maximised the benefits of the right decisions.

It is important to note that there is a world of difference between being decisive and acting rashly: the former is an intelligent application of judgment, the latter a knee-jerk reaction that is akin to playing Russian Roulette!

Decision-making in the modern, VUCA (volatile, uncertain, complex and ambiguous) world is fraught with difficulty. Often there is too much information to consider, sometimes there are gaps and frequently information sources will conflict with each other.


So how can leaders make effective decisions? There is no 'silver bullet' solution that will result in a 100% success rate for any of us. However, the tips below will significantly improve the odds of getting it right. The results of doing so will include better business outcomes, higher engagement and saved time (less frequent requirement to go back and revisit/correct mistakes).


Here are the tips:


1. Learn from the past - what have you and others seen happen in similar situations before? A great way to avoid making the same mistakes across an organisation is to have a debrief after a major event, e.g., programme/project delivery.

Questions to ask include: What went well? What did we do wrong? How could we do something like this better next time? Capturing the highlights and having them available in a central repository, and making it a requirement for people to read the file before commencing on a similar event, will help inform decision-making and promote success.


2. Learn from others - do you have a coach/mentor, colleague or friend who has faced a similar situation? What about discussing the decision with your team? If you have read previous blogs from this series you will recall that one of the traits of outstanding boards and teams is the ability to have healthy, open conflict about issues and courses of action.

Steve Jobs insisted on this approach during strategy planning days with his executive team. If there was not a sufficient level of disagreement and debate, he would insist the topic be revisited again later when those present had read more deeply into the complex issue and generated more options.


Incidentally, this is why it is important to have a team with diverse experiences and characters: you already know what you and people like you think; being open to different ways of thinking will open up new options to consider. It is for this reason that I believe it is helpful to have a couple of 'wildcards' on the board, i.e., people with different qualifications from different sectors and cultures.


Horizon scanning and case studies can also be helpful. What are your competitors doing? What are your customers telling you that they really want? etc.


3. Use the time you have - if an immediate decision is required, make it quickly and clearly. However, if you have time, use it. Gather more information, generate more options and bring others in. This also has the advantage of utilising more of the brain in the process.

Have you ever written an important report in haste, sent it off, and later thought 'Oh, I could have included that and it would have been much better?' What happened is that the subconscious part of your brain continued to work on the report after you had stopped consciously thinking about it. When the subconscious part came up with an idea, it 'pushed it' across the boundary (called the critical faculty) into the conscious part giving you a 'Eureka' moment.


4. Use the information you have - for most complex decisions, there will always be additional information that could be factored into the equation. Think about the information you really need, which will be in part influenced by the importance of the decision and the time available, and know when you have enough to make the decision. For most businesses, waiting for ever more information will result in opportunities being lost to more agile competitors. Know when good is good enough!


You may also want to consider using AI when the parameters are well known and the outcomes are generally predictable.


5. Decide when in the right frame of mind - it is dangerous to make important decisions when overly tired, angry or distracted. Many a leader has sent off a blistering email in the heat of the moment only to scramble for the recall button shortly after! The converse is also true: when on a high, take a moment to ensure over-optimism has not crept in.


6. Beware of biases - the question is not 'do we have biases?', but 'which ones do we have?'


Here are 8 main ones you can guard against -


a) Anchoring - what we see or hear first feels most important. Anchors can come in many guises: a comment from a colleague, a report, etc.


Solution - always remember that there are different perspectives. Also, think how you will ask the question of others if they are involved (take care not to anchor them!).


b) Status Quo - people are generally resistant to change: they prefer things the way they are. This is one reason why many M&As fail: the acquiring executives are afraid of rocking the boat at the acquired company by imposing a new management structure too soon. However, as time passes, the existing structure becomes more entrenched, and altering it becomes even more difficult.


Solution - ask if the current situation really does best serve your objectives and avoid exaggerating the costs of change.


c) Sunk Cost - we make decisions that will justify past costs. The thinking here is that 'we have put too much time and money into this to stop or change course now'.

There may also be a fear of being seen to have been wrong with the initial decision or perhaps there is an emotional attachment to the project.


Solution - accept that mistakes will happen and allow room for failures. So long as the failure is not caused by gross incompetence or laziness, be understanding and create a culture that rewards appropriate risk-taking.


d) Confirming Evidence - we lean towards and give more weight to information that supports our preferred decision.


Solution - examine all the evidence with equal rigour and ask someone to argue against the consensus. Tip: take care not to choose someone who is likely to agree without making a robust challenge.


e) Framing - the issue is phrased in such a way that it influences the decision.

Consider a plan to minimize the loss of income from 3 projects: only one can be saved and all 3 are valued at £200K.


The first option is presented or framed as ‘saving a project worth £200K’. The second option is presented as ‘resulting in the loss of 2 projects worth £400k in total’. Studies by HBR show that given these two options, most people would choose the first because it’s presented as a gain rather than a loss, even though the two plans are actually identical!


Solution - reframe the issue in different ways and/or put it in neutral language.


f) Overconfidence - too much trust is put in forecasting accuracy. The temptation here is to accept and stick with overly-bullish estimates.


Solution - challenge the assumptions, then consider both the lowest and highest estimates by looking objectively at the main factors that could affect.


g) Prudence - the opposite of overconfidence where estimates are adjusted to be 'on the safe side'.


Solution - as above, challenge the assumptions. Also, consider the person/team providing the information: do they have a history of over or underestimating figures?


h) Recallability - past (especially recent and traumatic) events we have witnessed are given disproportionate weight in making the decision, e.g., a large award from a publicised legal case may cause some to think such awards are more common than they are.


Solution - question what you think you know by checking your impressions against the facts and figures.

Each of the above biases can be antithetical to good decision-making in their own right. However, when they are combined, the negative effects can be multiplied. One of HBR's past case studies concerned a German utility company which invested around $10Bn in conventional power generation when the market was already moving to greener energy. Most of it had to be written off. During the investigation, it was discovered that the leadership had fallen foul of status quo, confirmation and over-confidence biases.


Investigators also found another, lethal, bias which is still regrettably too common: Hierarchical bias! It was discovered that some of the senior managers knew there would be problems with the programme long before it folded, but the top-down, command-and-control culture of the company meant that they kept their concerns to themselves. The Company in question now insists on having a dissenting voice when the board is making key decisions. It was an expensive lesson to learn!


7. Communicate effectively - there is little point in arriving at the right decision if it is not communicated properly to those affected.

For some, this is often one of the more tiresome aspects of leadership since it requires key messages to be communicated repeatedly, consistently and in a variety of formats. Whether you find it tiresome or not, it is of course vital to do so. Studies by Patrick Lencioni of the Table Group noted that, on average, employees need to hear a message repeated 7 times before they accept it's importance. This is not because of any deficiency on their part, but rather because they are flooded with information which often lacks clarity and direction or is contradictory. Repeating the message emphasises the importance of and commitment to the decision and keeps it in focus.


Summary


Effective decision-making is fundamental to good leadership. If a decision has to be made quickly, do so without equivocation. Indecisiveness is a serious hindrance to leadership! One of my favourite films for leadership studies is 'Master and Commander'. In it, a junior officer on a Royal Navy ship thinks he spots something in the fog which subsequently disappears. He cannot decide what to do and it is left to another officer to 'beat to quarters' (go to 'action stations'). The first officer's indecisiveness cost him the respect of the crew. Again, a wrong decision is better than no decision when one is required!


Be decisive, but do not be rash. A common error, especially for new senior leaders, is to think that they should immediately have all the answers (or be seen to!). Nobody does! Use the resources available, including time and your team, to inform the process.

Beware of biases! Intentionally consider which of those in the list above you or your organisation may be prone to and act accordingly. Having healthy conflict over options is a particularly powerful agent for making effective decisions.


Communicate the decision clearly and govern its execution. Maximise the good decisions and change the ones that prove wrong. Learn from both good and bad and ensure others in your organisation have access to the learning.

As with so many leadership traits, effective decision-making can be improved. I hope the above tips will help you to do so but the list is not exhaustive. if you have something to add that could help others, please put it in the comments below. Thank you.


As noted above, this is the sixth blog in a series addressing leadership issues. If there is a topic you would like Aspire to cover in subsequent releases, or if you would like a no-obligation consultation to discuss any of Aspire MCL's services, please comment or email enquiries@aspiremcl.co.uk. We will not spam you!


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