Knowledge ManagementRisk Management

An Organization-Wide Approach to Good Decision-Making

Real decision-making is a science. And as a science, it has been studied extensively by psychologists and management experts alike. Yet few have ever tried building a comprehensive framework for guiding leadership on the finer points of executive bias. In an article for Harvard Business Review, Larry Neal and Carl Spetzler discuss the benefits of an organization-wide approach to making decisions.

A Net with Many Holes

As it stands, the greatest bias of business is that it is already good at making decisions:

Without a proven, organization-wide approach, there may be, at best, isolated pockets of high-quality decision-making where individual leaders have elected to take a rigorous, transparent approach.

To use a completely made-up axiom, “A net with many holes catches no fish.” Neal and Spetzler cite transparency and “a common language” as two ways to patch the decision-making network. And quality decisions do keep money from slipping through the corporate net.

Decision Analysis

Chevron got serious about decision-making in the 1990s with its formulation of Decision Analysis (DA). Chevron took a simplistic status-quo-versus-alternative approach and turned it into a multifaceted analysis of potential outcomes and their associated risks. The six elements of Decision Quality (DQ) are summarized as follows:

  1. An appropriate frame (goals and variables)
  2. Creative, doable alternatives
  3. Meaningful Information
  4. Clarity about desired outcomes (with all tradeoffs)
  5. Sound logic
  6. Commitment to action

The DA process proved a great boon to Chevron over the years, creating a culture of quality decision-making that saved the company billions in expenditures. It even had the effect of uniting divergent views around a common set of methods. Of course, the DA is no remedy for groupthink or autocratic leaders, but it does give teams of decision-makers a uniquely unbiased method for formulating strategy and for seizing upon untouched value.

Read the original article at: https://hbr.org/2015/05/an-organization-wide-approach-to-good-decision-making

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