The problem with how your org makes decisions

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As I’ve gotten older and worked with more people and at more places, I’ve become pretty interested in how different people set up their decision making model. This is fairly crucial to everything else you do. Usually, if you have a poor decision making model, you’re also going to have problems with priority management — so that if people work for you, they’re going to get confused by running in circles on various projects unclear what’s supposed to be important at that moment. (As we know by now, at most jobs task work means more than strategy and process means more than anything, so these are aspects you need to be thinking about.)

One common approach to a decision making model, at least at the corporate/enterprise level, is to allow executives most of the decision-making authority in an organization. Phrased another way: hierarchy. There are a lot of problems institutionally with how we construe and promote our decision-makers, but that’s not necessarily the topic here. (See also: Peter Principle, and/or Idiot-Genius Methodology.)

Now let’s turn our attention a famous author talking about how to craft a decision making model — and where most companies go off the rails.

Daniel Kanheman and the decision making model

Kahneman is now in his 80s, but back in the early 2000s, he wrote a pretty seminal book called Thinking, Fast and Slow. I’ll be transparent here: I tried to read it and didn’t get through it, but admittedly I’m (a) not that intelligent, (b) not a very good reader in the general sense, and © was tired a lot at the time I was trying to read it, so I kept falling asleep. Still, I’ve read other (shorter) stuff by him and he clearly knows what he’s talking about when it comes to decisions, priorities, and how the brain deals with both.

Here he is talking to Wharton at UPenn about all that and a bag of chips, and this aspect stands out. He’s talking about the decision making model common in most organizations, OK? Basically — float it up to the execs and they’ll decide, or, if they’re busy, it’ll go to one of their lieutenants. So there was a study done asking people “How much variation will there be in the decision between two professionals?”

If you’re not following, think of it like this: a CEO has two SVPs reporting to him. He gives the two SVPs the same business problem and asks for a solution. The SVPs are both ostensibly vetted, work for the same company, and report to the same guy. They probably understand that company’s business model, right? So there should be a limited amount of variation in their decision making model and overall solution. Indeed, most people guess the variation would be 5–10% when asked.

The reality:

“Many people give the same [guess]: somewhere between 5% and 10%,” said Kahneman. “But the answer is between 40% and 60%. It’s an order of magnitude more. It’s completely different from what everybody expects.” He noted that at the organization in question, there was “a huge noise problem” of which the leaders were completely unaware.

That’s absolutely comical, but it’s not surprising at all. Remember: this is the same problem with performance appraisals. The variability shouldn’t be that massive, but it is. And if the variability is that wide, how can it really be reliable?

Why the decision making model is often so flawed

Kahneman talks about this ‘noise problem’ above, and that’s certainly part of the issue. We operate in a business world where almost everyone thinks they have 14,596 things flying at them all day every day — and in that type of world, where simplicity has no true value and quantity of tasks done or targets hit is what matters, our decision making model is typically going to be flawed. “Flawed” here is a synonym for “rushed.”

Here are a few essential problems:

Logic vs. Emotion: We want work to be logical, hence we assign process to everything under the sun. Work is made up of human beings, though, so by definition it has to be emotional — or at the very least social. Think about it like this: a team of six works hard together and hits a goal and nails a big project. Only 1/6 of the team is promoted. The other five are a little confused and disgruntled. In a world that was utterly logical, you could go to the five and explain the metrics that advanced the one person and not them. But no senior leader would ever do that; they’d be more likely to cower under their desk or avoid the other five people for six months. Why? Because work isn’t really logical. It’s emotional. This plays into decision making model approaches too; we want to think all our decisions are logical, but they’re not. They’re a factor of who we are as people, how we relate to the work, how we relate to the company, and how we think through things. There’s no perfect answer, and that explains some of the variability.

Silos: In the example above with the SVPs, probably each one runs a different silo. The way most CEOs work is that they secretly tell each department leader/silo head that their shop runs the whole business, so you got an Ops guy bellowing “We’d be dead without my team!” Then, over here, you got a marketing lady screeching “We’re the revenue-pullers in this place!” It’s a horrible way to run a senior leadership team, but it’s probably the most common at most places I’ve worked or observed. As a result of this “My Department Is Why We Have Jobs” mentality, each silo leader — and silo members, really — contextualize their decision making model around what they know. This is the true problem with silos. Organizing a company around functional expertise on surface isn’t a bad thing; when silos become huge areas of group-think creating massive variability in what top executives are thinking about decisions, well, that’s a f’n problem now.

Workday Structure: Look, it’s fairly common that most people who make about $125,000 or above in a white-collar job sit down on Monday at 11am and realize their entire week until Friday at 3pm is meetings. It happens all the time. Very few people know how to actually structure their workday effectively, and this is a huge problem for business, productivity, and any decision making model that could be discovered. How do you even have time for decisions and decision-making if all you do is move from meeting to meeting and call to call? It’s worthless.

Why your decision making model is important

I’d say there’s two reasons at base:

Ideas vs. Action: In any company, there needs to be some concept of a decision making model, because otherwise ‘ideas’ and ‘actions’ both happen in an essential vacuum. Someone needs to be setting priorities or owning decisions. (Ideally both, but let’s not get too far ahead of ourselves for those who haven’t learned to crawl yet.)

Disruption and Empowerment: If you’re in a position where you might get disrupted by a funded competitor, you absolutely need a better decision making model. One of the big reasons companies get whacked by competitors is because their decision-making is from 1962. That means ‘float it up, wait for it to come back down.’ That’s not agile or whatever buzzword of the moment you’d like to use. The real point is this: you lose market share when your decision making model is molasses, because a company run by five guys at age 25 might lack experience, but they’re gonna move quickly. In the end, speed beats experience to capture consumer attention — because consumers don’t give a shit that your SVP has 30 years in consumer relationship-building, they give a shit about a good experience that they can use to solve a problem now. Got it? This is why issues like a decision making model matter.

My name’s Ted Bauer; I blog here regularly and you can learn about hiring me for freelance and contract gigs as well. You can also subscribe to my newsletter.

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