Companies that have an effective decision making process are more successful financially, whether this is measured in revenue growth, return on investment or total shareholder returns. So say the authors of the book Decide and Deliver.
They have studied 750 companies worldwide of various sizes and in various sectors, and there was a high correlation between effective decision making and success in the marketplace. There was also a correlation between being able to make effective decisions and employee involvement. People are generally happier work in a place where it's easy to make decisions and get things done.
In terms of quality, it's obviously important to be making good decisions on a regular basis. This is a given.
Speed is the second important aspect in effective decision making. Is there time wasted within the organization making decisions and how quickly does the company make decisions in relation to the competition?
Yield measures how the decisions are executed relative to how they were intended to be executed.
And how much effort is expended in decision making? What is the cost and the angst and the energy expended by the organization?
Improving one of these four areas allows a company to improve its performance in effective decision making, but having all four together has a multiplier effect.
Some companies may be good in one area or another and putting attention on the weaker areas will typically allow for a significant improvement in performance.
Nowadays companies may be very complex because they are trying to leverage their resources in different ways, they are trying to access different market sectors in a global marketplace and so on.
This often means that people don't actually know who specifically is making the decision! And this in turn can mean that the decision maker is not actually given all the relevant information.
In many organizations there is a problem with communications where there is little open communication before the decision and the proper open exchange of information only occurs 'after' the decision has supposedly been made..
And occasionally the talent is not available to make the decision.
The authors offer 5 steps to develop an effective decision making process within an organization, or more specifically to develop the company around the foundation of an effective decision strategy.
Firstly, companies can measure themselves against their database of companies to know how they measure up in the four areas of quality, speed, yield and effort. This gives them an idea of where they need to put their attention to develop an effective decision process. For example, do they have quality issues, or do they need to make decisions more rapidly?
The second step is to establish decision priorities. Successful companies are very clear about which decisions are more important than others. They know where to put attention for maximum effect. So what are the critical decisions in the organization?
It's usually easy to recognise when a major one-off decision is important. But what about the day-to-day stuff? The cumulative effect of operational decisions such as pricing, or merchandizing or customer service can be very significant.
What are the 20-30 strategic and operational decisions that have improvement potential that are having or will have the most impact?
If one of them goes wrong, 'fire-fighting' may be tempting but is insufficient. An X-ray approach is necessary to make sure it continues as an effective decision.
This step can really target a company's attention on the particular aspects that make a significant difference to the overall performance.
The third step is the what, who, how and when to set the decisions up to be successful.
The fourth step is to ensure that the rest of your organization supports the decisions. The talent available, the culture in the organization, these things need to be aligned with the decisions.
The fifth step is to make sure that this effective decision making process is embedded within the organization
They say that this approach to companies by looking at an effective decision strategy can have a profound effect on the performance and success of companies of any size, where the company stands out and people want to come to work because they know their efforts translate into prompt decisive action.
Read more about the business decision making process