We explore and summarise interesting insights which could help to make better strategic decisions.
Interesting insights from McKinsey and Harvard Business Review
McKinsey & Company share interesting insights on strategic decision-making in interviews with Martin Sorrell, chief executive at advertising firm WPP, Randy Komisar, partner at investment firm Kleiner Perkins Caufield & Byers, and former Xerox chairman Anne Mulcahy.
Decision-making should be quick, flexible and informal, says Sorrell. “This is not to say the process shouldn’t be rigorous: run the analyses, suck up all the data, and include some formal processes as well”. “The only way to avoid making mistakes is to avoid making decisions”, adds Sorrell; “Instead, learn from mistakes and listen to feedback.”
Komisar suggests creating a balance sheet, “where everybody around the table is asked to list points on both sides”. Rather than giving judgements, contributors first outline the good and the bad points relating to a decision. Once done, participants share their opinions and discuss the decision based on objective insights and personal judgements. “By assembling everyone’s insights rather than their conclusions, the discussion can focus on the biases and assumptions that lead to the opinions.” Komisar adds: “Listen to the little voice… It’s great to see a leader who will echo the little voice in the back of the room that has a different point of view – and thereby change the complexion of the discussion”.
“You need internal critics”, says Mulcahy, “who have the courage to give you that feedback”. Timeliness is also important: “Decisions have shelf lives, so you really need to put tight timeframes on your process.”
In an article for Harvard Business Review, Tom Davenport explains that animation studio Pixar conduct a ‘postmortem’ on major aspects of a project, where team members are asked to present five things they would and would not do again. Postmortems weed out problems, says Davenport, providing crucial feedback which helps to learn from mistakes when making future decisions.
Instinct is important, “but only when four tests are met”, says McKinsey. The familiarity test asks whether we have experience in similar situations, because: “If we have plenty of appropriate memories to scan, our judgment is likely to be sound.” The feedback test questions the availability of reliable feedback in past situations, and whether the right lessons were learnt. The measured-emotions test asks if a decision evokes highly charged emotions which can unbalance judgement. And the independence test asks if we are “likely to be influenced by any inappropriate personal interests or attachments?”. “If a situation fails even one of these four tests, we need to strengthen the decision process”, argues McKinsey.
Turn insights into better decisions
According to these insights, decision-making should be quick, flexible and informal (to avoid missing opportunities), but also rigorous and process-driven. The process should include analysis of relevant data, pros and cons, personal opinions, judgements, instincts, and past experiences such as feedback and lessons learnt. Where no relevant experience exists, or where instincts or judgements are weakened by bias, charged emotions or personal interests, further analysis must be done to strengthen the process and avoid bad decisions. Listening to the ‘little voice’ and ‘internal critics’ could provide the necessary challenge which further tests the quality of decisions.
These insights could be used to create simple decision-making tools, such as Komisar’s balance sheet or McKinsey’s four tests. So why not take a few moments to jot down your own ideas for a quick-but-rigourous decision-making process to suit your business and management team?
