These simple – but essential – guidelines can substantially improve decision-making processes and overall organisational performance, says Michelle Gibbings.
By Michelle Gibbings
Leaders make many decisions every day. When determining important strategic matters – such as where to invest, which product to launch and how to address falling margins – the effectiveness of the decision-making process is crucial.
The challenges of an increasingly complex and ambiguous world demand a new set of decision-making approaches that rely less on leaders’ accrued knowledge and experience and more on their ability to orchestrate data insights and the expertise of others – while ensuring they keep an open mind.
Evidence highlights a growing gap between the demands of the business environment and leaders’ ability to make effective decisions.
To make decisions that deliver outstanding organisational performance, five essentials should be kept top of mind.
1. Don’t have a hunch
For leaders facing uncharted territory, danger lurks in relying on what they have always done before and in using default thinking patterns to decide how to respond today and what should happen in future. Hunches and gut reactions are not sound bases for assumptions and tend to promote blind spots and biases.
The recently released Centre for Workplace Leadership’s Study of Australian Leadership found that organisations should be concerned about the state of leadership and management capability.
The study revealed many senior leaders do not call on strategic advice when making decisions about the future. Leaders who fail to draw on broader expertise risk a myopic perspective on “transformational” challenges.
2. Be deliberate about the process
Making a well-informed decision requires deliberate steps – and, strange as it may sound, smart decision-makers first decide how to decide. There is a decision-making spectrum based on the simplicity, complexity or adaptive nature of the challenge faced.
For example, adaptive challenges, such as the current epidemic of use of the drug known as ice, which involves multiple causal relationships, requires an insightful, experimental approach, whereas dealing with a problem of falling margins, where the root cause is easily identified, can take a more linear approach.
Leaders need to adopt a “fit for purpose” approach where the decision-making is open to discussion, consciously constructed and agreed upon.
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3. Structure out bias
Bias is pervasive – it needs to be recognised and labelled, and techniques to structure out or minimise biases should be deployed. These may involve testing multiple hypotheses and developing diverse scenarios that challenge dominant views and the status quo.
Each person involved in making the decision must have a questioning mindset and be open to their views and thought processes being challenged.
4. Widen the frame
Sometimes the best solutions come from unlikely sources. Widening the frame of reference to include people not involved in previous discussions and also using data from diverse sources are critical.
The process should involve not only seeking evidence to support ideas, but also actively looking for data that disproves them.
Leading strategy and innovation – CPA Australia has partnered with Harvard Business School Publishing to curate a collection of leadership development resources specifically for professionals looking to grow as strategic leaders in a world of constant innovation and change.
A comprehensive decision-making process considers multiple outcomes and, to do this effectively, will factor in the views of the minority and outlier opinions and data.
It brings the right stakeholders into the frame at the right time.
5. Ensure practical outcomes
Making a decision is pointless if you can’t see it through. Before applying valuable time and effort to making a major decision, consider if it can actually be implemented.
Leaders need to be explicit about the trade-offs that will arise. Typically, making a decision means something else may not happen or be done – and being clear about this will help to minimise confusion about outcomes and impacts later.
Ultimately, smart decisions drive organisational performance, but for optimal outcomes, the two key components are robust decision-making processes and leaders capable of implementing them.
Michelle Gibbings is the founder of Change Meridian and author of Step Up: How to Build Your Influence at Work.