rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Decision Making: The chassis that holds

Decision Making: The chassis that holds

October 25, 2007 09:13 IST

The Whole Together

A decision is a judgment. It is a choice between alternatives. It is rarely a choice between right and wrong. It is often a choice between two courses of action, neither of which is provably more nearly right than the other.

-- Peter F Drucker

It takes smart decisions and execution to traverse the new landscape, even with a strategy or map. And by that I mean the right colleagues, and the right collaborators, and strong customer connections -- everything that helps spur innovative thinking. When Peter and I spoke, we referred to this as the chassis -- the organization's ability to make well-informed decisions about what needs to be done and its resolve to get it done.

Peter was passionate about management effectiveness -- setting priorities, managing time, and making effective decisions. His internationally best-selling book The Effective Executive is very much about getting the right thing done. In the Lego world, with knowledge workers and a vast array of collaborators playing important roles in the enterprise, people cannot be loosely supervised. They can only be helped and supported in their ability as managers to make effective decisions. The days of the gray-suited micromanager hovering over his or her employees' desks are over.

Managing in this amorphous environment is a delicate balancing act between preserving what makes the enterprise strong and channeling innovation to go beyond past successes. Peter used a circus analogy: The company must constantly be on a strategic tightrope toward the future, finding this balance even as the safety net below is shrinking.

Logic suggests that decision making and decision execution, which define this narrow and demanding path, are made easier by today's vast amounts of information and knowledge. This is not true. Rather, the broad base of accessible information is rendered somewhat dense, difficult, and shifting by both the blurred boundaries between parties in the value chain and the speed of change in the market-these distinguish today from earlier periods in business history. As Peter put it, today's manager faces a fast-moving barrage of apparent knowledge, some relevant and reliable, some not. Because events shift so quickly, a decision can be obsolete before it even gets put in motion.

So, ironically, in the age of information, intuition and judgment play an even greater role in effective decision-making and well-placed strategic bets than ever before. Don't get me wrong. There is no substitute for fact-based decision making, and no excuse for managing from the gut. But with unprecedented rates of change everywhere, setting the right assortment of reliable facts can be impossible within the time window available to take action.

Sometimes we have to be able to see around the corners, and intuition and judgement play a valuable role in choosing which facts or feedback to trust. When store-based data began pouring in as Nivea for Men was introduced, the head of US marketing had a gut feel that the large discrepancies between stores had something to do with the surrounding demographics and Latino concentration. He asked that the facts be checked store by store. As it happened, the stores selling the most Nivea to men where in neighborhoods with very high Latino populations. From there the company began a targeted marketing campaign.

Although access to information was more limited in the past, the landscape was less volatile and managers could rely on certain assumptions or facts to inform decision-making in a reasonable period of time. Today, management's challenges are exacerbated by the increasingly bewildering transformation of the economic and social landscape. Forget predictability. Forest longevity. To make things happen, management has to step up and have the stomach to take risks. Beyond that, the culture of the organization has to support judicious risk taking.

Decision Making: The Right Risks

Certainly, risk taking has always been in the nature of business. Companies that took greater risks made it harder or riskier for their competitors to keep up with them. And they often have been the winners. Today's greater uncertainty along with the smaller room for error mean that decision makers confront even more risk. Managers need to move forward while taking the right risks, not necessarily the least risk. This involves making decisions at the right level of the organization, and having a disciplined, fact-based process for evaluating alternatives, making decisions, and acting upon those decisions.

Whether it has to do with customers, employees, corporate organization, innovation, or something else, decision making is uniquely and distinctly a management responsibility. Only management has the broad context needed to take into consideration factors inside the company and beyond such as market conditions or energy costs. However, as Peter liked to say, senior executives should not spend the bulk of their time making decisions - on the contrary, they should spend very little time doing so.

Their emphasis should be on making sure they have the time, information, and concentration to make the right decisions about the relatively few things that demand senior-level decision making and then making sure that the words are translated into action. That's not all. Management must stay on top of the results of the action, and know when to abandon a decision. Aside from this very focused decision-making, they should encourage appropriate levels of the organization to make decisions.

The amount of time spent in decision-making is a much less meaningful metric than the effectiveness and relevance of the decisions themselves - the results. In fact, as Peter said, the more time spent, the more likely that the decision maker is "too busy with the little to take the time to see the big."

The Linux Group is a twenty-first-century firm that keeps its "in-house" decision making focused on the big picture. Linux Torvalds established the group's purpose - to design and make a free operating system first for the PC and later on for powerful servers. At Linux, only a few people decide which of the many "outside-in" flows of suggested changes to include in new releases of the system.

All other decisions are the responsibility of volunteer programmers, who choose which takes to undertake, when and how to undertake them, and whether to work solo or in conjunction with someone else. Even this seemingly flexible and agile model is being challenged. Some long-term volunteers confide to me that Torvalds has become the bottleneck-too much is going on, and his control is limiting the ability of Linux to adapt as rapidly as users would like.

Decision Making: Four Drucker Questions

Management has a stark challenge: It must create a climate with the best chance that everyone in the organization is making the right decisions about the right issues at the right time. There is no prescription for doing that, but there are questions that will bring clarity, guidance, and focus to this amorphous area:

Have you built in time to focus on the critical decisions-have you lightened your load?

Does your culture and organization support making the right decision, with ready contingency plans?

Is the organization willing to commit to the decision once it is made?

As decisions are made, are resources allocated to "degenerate into work?"

Successful decision making begins with the recognition that making good decisions is one of management's most critical responsibilities. The organization and your management team can offer invaluable support, but you need to take the time and set aside the mental space to engage in study and problem solving, to try different alternatives, to think about the issue on the exercise bike, or to sleep on it.

Although the quality of your decision does not depend on the amount of time you spend arriving at it, it does require that decision making be a priority and a commitment to spending the time needed. To be bale to do this while running an organization, you need to lighten your load-to cut through the fog in order to see clearly what situations really demand action and to find the appropriate decision maker. You can then concentrate on the relatively few important decisions that are yours to make.

Is Action Required?

For reasons that go beyond the obvious waste of precious time and resources, unnecessary decisions bring unjustifiable risk and repercussion. As Peter put it, no matter how innocuous the decision may seem, "Every decision is like surgery. It is an intervention into a system and therefore carries with it the risk of shock. One does not make unnecessary decisions any more than a good surgeon does unnecessary surgery."

In judging whether a given situation or opportunity warrants action or not, several rules can be applied.

Applying these guidelines helps draw a distinction between the truly important and the seemingly important situations that are, in fact, simply nuisances. The latter can correct themselves -- they don't require major action. These rules will lighten the decision-making load by eliminating the situations that don't require intervention.

Excerpted from:

The Definitive Drucker by Elizabeth Haas Edersheim. Copyright 2007 by Elizabeth Haas Edersheim. Price: Rs 475. Reprinted by permission of Tata McGraw Hill Publishing Company Limited. All rights reserved.

Elizabeth Haas Edersheim is a strategic consultant who works both with Fortune 500 companies and private equity investors.

Elizabeth Haas Edersheim