Getting business decisions right

Eight principles to steer by

By Christopher J Tipler

 

The intense and strongly felt debates about the future of the Murray Darling river system, uranium exports, and gay marriage remind us how difficult it can be to make high quality decisions. Politicians are often required to steer a hazardous course between competing certainties but making good decisions in business can be just as difficult.

 

Business managers face tough choices every day of the week – our major shareholders want a return of surplus capital but the management team wants to use the funds in the business; our employee unions want a 10% pay rise when the company can’t afford any increase; a loyal senior manager who has been with us for 20 years is not performing and there is board pressure to retrench him. And so on.

 

The difficulty is compounded by the reality that the truth does not always lie somewhere in the middle. There are right and wrong responses to many situations and trying to achieve consensus, whilst fashionable, does not necessarily result in high quality decisions.

 

So, at this time of such uncertainty in so many arenas, it is pertinent to ask ‘how do I, or we, acquire a firm persuasion in relation to this decision (whatever it is?) How can we get to a point of conviction where we are sure that our decision is the right one?’ Very good managers make this task look effortless, but their mastery normally reflects years of experience. Fred Astaire and Ginger Rogers made dancing look ridiculously easy but they rehearsed until their feet bled. You get my point.

 

As a management advisor I have observed many great CEO’s making decisions over more than 30 years, and I have often been required to make big decisions on behalf of my clients. The following principles are distilled from this experience and may help you and you colleagues to navigate troubled waters in 2012.

 

1. Start with good evidence. It seems almost axiomatic to say that good decisions should be evidence-based, but often they are not. This can be due to haste or arrogance, but it can also result from a mistaken view of what constitutes evidence. Not all facts have equal weight; not all views or opinions are of equal quality and some are often invalid. Thus facts and opinions must be carefully weighed.

 

In relation to the Murray Darling, for example, the scientific evidence and advice should almost certainly carry more weight than the facts and opinions put forward by businesses and communities. Why? Because it is, in the first instance, a problem of natural systems, and we understand the natural world through the lens of science.

 

In the ‘return of capital’ example, it would normally make sense for the board to give more weight to the views of senior management than to institutional shareholders, because management is better placed to see how the capital can be used.

 

1. Make sure you have the whole story. Good decisions depend on understanding all of the important factors that bear on an issue, not some of them. The analytical net must therefore be cast widely to ensure you are seeing the whole picture. The American General and former Secretary of State, Colin Powell, has an often-quoted technique for doing this. He says ‘tell me what you know, and then tell me what you don’t know. Only after that should you tell me what you think.’ Powell is trying to get the whole picture – not just what is obvious, known or believed.
2. Trust your instincts (in assessing the evidence). Some people are very clever at presenting information (particularly consultants!) and tools such as PowerPoint can lend believability to incomplete information, immature premises and shabby logic. Good decisions depend on seeing through this. The best starting point is always to assume that what is being presented to you is wrong, irrespective of the source.

 

If your instincts are not talking to you (when you are receiving information), or if they are talking very strongly (perhaps revealing a predisposition), then you need to be particularly careful. Slow down. Take a break. Ask, ‘what am I not seeing or hearing?’ Or, ‘why do I feel so strongly about this?’

1. Look beyond the likely immediate result. Good decisions are durable. They will only be so if you have thought about second and third round effects, and beyond. Trying to see beyond the immediate and the obvious is hard work, but that is what you are paid for
2. Find reliable sounding boards. If we want good decisions we must be careful not to stew in our own juice. Good decision makers bounce ideas, hypotheses and proposals off people around them; people with intelligence and good judgement. The objective is not to gain consensus but to explore and test the options by presenting them to others. So often, this provides a perspective that would not be available through introspection alone.
3. Decide slowly. The old adage ‘act in haste, repent at leisure’ is right, particularly when it comes to the bigger things. Something that is entirely obvious at 4pm today may not be at all obvious at 10am tomorrow. Even small intervals of time – hours or days – seem to create new perspectives. Only when your perspective has settled and there is a sense of quiet assurance, should you act
4. Listen for the ‘female’ view. The female perspective, whether it is embodied in a woman or in the feminine side of a man, is the view that often encompasses feelings and intuition rather than logic. These qualities are often in better touch with reality than our logic, perhaps because they are less combative and more inclusive. We get in touch with the feminine by listening in both our inner and outer worlds, not by looking. The question would be ‘what am I not hearing?’ rather than ‘what am I not seeing?’
5. Look for the middle ground. Although the truth does not necessarily lie in the middle, looking for the middle ground position is a useful thing to do. Why? Because the middle is the space of reconciliation, of ‘both/and’ rather than ‘either/or’. Reconciliation often requires some new dimension if it is to work; something creative that wasn’t in the mix before. In the simple equation 1+1=2, it is the plus sign that does all the work, that makes two a possibility (since one is always one). Looking for the middle ground is like finding the plus sign. You may conclude for good reason that the right decision cannot be found in consensus, but it is always a useful reference point.

 

So, there you have it; eight principles that may guide you to better decisions. I have summarised them again below. Why don’t you keep this summary handy and try working with it.

Eight steps to a better decision

1. Start with good evidence
2. Make sure you have the whole story
3. Trust your instincts (in assessing the evidence)
4. Look beyond the likely immediate result
5. Find reliable sounding boards
6. Decide slowly
7. Listen for the ‘female’ view
8. Look for the middle ground

 

 

Christopher Tipler is a Melbourne-based management advisor and author of Corpus RIOS – The how and what of business strategy. His web site corpusrios.com contains more material on this and related topics.