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How is your Business Agility restrained by your approach to decision making?

“Most of us build our identity around our knowledge and competence in employing certain known techniques or abilities. Making a deep change involves abandoning both and “walking naked into the land of uncertainty””[1]

Why do successful organisations pursue established strategies for too long?

  • Is it that the organisations’ executives do not sense a need for change?
  • Does the organisation’s approach to decision making strangle proposals for doing new things or existing things in new ways?
  • Are the wrong people in the room when decisions are made?

With ever more data, increasingly sophisticated analytics tools and new insights from forecasting research, the way enterprises make decisions can be a critical factor in raising agility.  Moreover, a decision-making approach that promotes momentum can create a flywheel effect that maintains progress past the inevitable bumps that are encountered in the competitive environment. On the other hand, the momentum of the flywheel can be another source of resistance to change.  In this Blog I consider the impact that the decision-making process can have on the business agility of an organisation.

I use the term, Executive Lust, to describe the attraction that can wed management to enhancing previous organisational commitments, even after changes in the business environment negate the original assumptions that underpinned a decision. Research[2], has identified that our judgement can be swayed by investments we have previously agreed, the likelihood of short-term losses and the fear that we alone can see new threats to our current direction. Most of us also have too much confidence in our capability to control the future. This is a greater risk when a particular strategy or tactic has previously been successful. The following example illustrates these prejudices in practice. Your organisation currently manages all its Enterprise Information Systems internally with hardware in your own server rooms and the information systems department responsible for software updates etc. Following six months of analysis the Executive Team have concluded that the inconsistent management of your customer relationships is damaging growth prospects. The data used, such as customer names and addresses, contact and order details etcetera, is spread across numerous spreadsheets, company databases and individuals’ personal note books. A decision is made to invest in a new Customer Relationships Management (CRM) System. Based on previous practice, the information systems department obtains quotes for the extra server capacity and the software module needed to expand the existing Enterprise System to cover CRM. The Chief Information Officer (CIO) is very aware of the Cloud services that could provide the new customer relationship management capabilities needed on a subscription basis but thinks that the Executive Team will think such a change in Information Systems Strategy too risky. Previous conversations had highlighted the Executive Team’s belief in the organisation’s ability to control the inherent risks involved in Information Systems on the bases that the equipment was on the premises. The CIO is also aware that using a Cloud Service for one element of the Company Systems, may raise questions about the rationale for continuing to operate other systems internally. That said, the CIO is conscious that a proposal involving the increased short-term costs of righting off early the existing investments in IT infrastructure would be unwelcome. The result is a further investment in the existing strategy without any consideration of options.

Vermeulen[3], suggests that there are several practices that organisations can use to avoid adhering to once successful strategies for too long. The following includes both Vermeulen’s practices and my thoughts on considerations that I would keep in mind as embracing each of the practices.

Set decision rules.

Establish rules, and moreover, rules that optimise autonomy[4]. These should ensure that the right people are involved.  Using this matrix may help think this through quickly:

 

          Issue  Responsible     Accountable   Consulted    Informed  
 Issue / Consideration 1
 Issue/ Consideration 2
Issue / Consideration 3

 

 

 

Pay attention to voting rules.

Recognise the impact that internal politics will have when considering recommendations that involve any decisions that are not absolutely objective.  Establishing the voting rules before options are evaluated is prudent. The impact of internal politics can be then minimised particularly if, to use John Kotter’s term[5], a guiding coalition is established to inform these rules. If 4 criteria for a decision have been agreed and a recommendation to a CEO is going to be made by the Chief Operating Officer, Chief Financial Officer and Chief Information Officer, it would be helpful to agree whether the recommendations will be based on the total of each individual’s evaluation of the criteria or whether the recommendation will be based on the total count of criteria met.

Protect Dissenters.

Promoting dialogue where people explore the issue rather than discussion (where opposing views are presented and defended)[6] can provide a foundation for protecting dissenters by legitimising their objections. Placing an emphasis on learning rather than win – lose arguments can be an effective first step.

“I never lose. I either win or I learn.” Nelson Mandela

We need dissenters not least to minimise the risk of groupthink i.e. to avoid a specific approach, tactic or strategy becoming so embedded that unintended consequences are not considered. It is therefore essential that leaders create an environment of Psychological Safety where people are comfortable with expressing contrarian views.  One tactic is to avoid small teams of 3 or 4 because in such teams a single dissenter will feel uncomfortable if they are in a minority of one. If the team size rises to about 10 it is more likely that at least a couple of people will have contrary opinions.

Expressly Consider Alternatives

Increasing availability of data and analytical tools makes it possible to give more substance to alternative options, more quickly and economically, than in the days of traditional corporate planning processes. That said, using a scenario approach that evaluates alternatives against perhaps 3 alternative visions for the future can help more robust consideration of alternatives.

Separate Advocacy and Decision Making

Separating advocacy – for example examining and interrogating competing ideas, perspectives or arguments, from the actual decision can help facilitate better understanding of the issues involved. Using techniques such as Debono’s Parallel Thinking[7] can help groups explore the positive and negative aspects of particular options as well as identifying needs for more information to inform debates.

Decrease change inertia.

Freek Vermeulen[8] suggests asking teams the following question as it can unfreeze their thinking by the anticipating the regret that may be felt in due course for not taking a different decision.

“It is January 2025, and the unexpected has occurred: Our strategy has failed to deliver even a respectable market share. Think about the reasons why.”

The following example applies these practices to the previous customer relationship management system initiative.  Following the decision to introduce a new CRM System, the Chief Executive (CEO) asks the Executive Team to provide the Chief Operating Officer (COO) with nominations of senior individuals (or themselves) for a committee to develop options for the CRM implementation. The CEO reminds the team that in accordance with established practice, an investment appraisal should be developed. This will need to articulate clearly the essential and desirable criteria for the system and show costs and benefits of each option that meets the essential criteria. This will be considered by the Executive Team and, due to the likely costs, the Board. This restatement of established decision rules establishes a foundation for more objective decision making.  Moreover, the focus on meeting essential criteria establishes voting rules that should promote a focus on data rather than personal opinions. The process outlined also addresses point five above, by separating advocacy from decision making. After the meeting, the CEO and COO discuss governance arrangements for the CRM Committee. The COO points out that this project has potentially broader systems implementations. If the criteria the committee develop suggest a broader project is needed, a further Executive Team discussion will be needed. They agree that the COO will be the Project Sponsor and that the committee needs to include representatives from across the business as well as from the Information Systems, Marketing and Sales Departments. The CEO asks that a couple of the staff from the Next Generation Leaders Program are also included. The COO, a former Air Force Pilot, emphasised that he will provide the individuals with, top cover, so that the committee feels a sense of psychological safety.  These measures should both provide participants with protection if they dissent from any emerging group think and also legitimise the consideration of alternative options. Finally, the COO suggested that at the Next Generation Leaders the group is asked to imagine that the CRM system implementation has failed and develop a paper outlining the reasons for the failure. This process can help implement Vermeulen’s final practice and legitimise discussion of the need to consider new options for the information systems strategy.

What tactics can you use to reduce the risk of becoming “trapped” for too long in strategies that are passed their sell by date?

  1. Seek to understand your own personal biases. For example:
    • Do you have a preference for completing tasks rather than starting new ones? If you do, then please consider the Steven Covey[9] approach of considering the urgency and importance of each task. Then allocate your time so that you devote time to important considers about future direction as well as the urgent matters of the day.
    • If you have a bias for maintaining stability, then consider how you could make better use of data to help you understand how this stability is endangered by changes in the market and amongst your people.
  2. Strive to “seeing your environment through the lens of data rather than prejudices, preconceptions and perceived wisdom that they were teaching in Business schools fifty years ago”[10]
  3. Seek to understand your people, at least as well as you understand your customers. This should both improve the engagement of your staff and the opportunity to focus resources on new stuff without losing sight of implementation risk.
  4. As an organisation, allocate time to considering future direction as well as evaluating current results. Establish who has the authority and responsibility to invest in considering future options for the organisation and most importantly who has the rights to make consequent decisions. Starting at the top, a key question for Directors should be “How to generate forecasts” most effectively. In my experience, a good start point can be a well facilitated workshop provided that it includes:
    • a concise explanation of the current strategic direction of the enterprise,
    • current enterprise performance data showing trends,
    • your own internal experts’ views on anticipated developments in each current product / service segment and developed using the tools and techniques introduced earlier in this chapter,
    • an authoritative external view of the evolution of your industry. Philip Tetlock[11], a recognized global forecasting expert and a professor at the Wharton School in the United States of America, believes that

foxes – people who know a lot but do not believe in a single world view – predict the future better than specialists. In my experience, employees with diverse networks are likely to be foxes.” 

  1. Get out of the way of your people as much as possible – give staff as much autonomy as corporate board considerations allow.

Next Steps

Please contact me if you think that any of the actions in this blog would improve the agility of your business.  I will be delighted to talk to you.

[1] Quinn,R. 1996. Deep Change: Discovering the Leader Within, San Fransisco: Jossy-Bass

[2] For example Vermeulen, F., and Sivanathan, N. November–December 2017, “Stop Doubling Down on Your Failing Strategy”, Harvard Business Review, pp. 111–7.

[3] Vermeulen, F., and Sivanathan, N. November–December 2017, “Stop Doubling Down on Your Failing Strategy”, Harvard Business Review, pp. 111–7.

[4] Dan Pink argues for a new operating system for businesses that comprises autonomy, mastery and purpose. “Autonomy: the urge to direct our own lives. Mastery: the desire to get better and better at something that matters. Purpose: the yearning to do what we do in the service of something larger than ourselves.” In this TED Talk Dan argues that these should be the foundation stones for a new operating system for organisations.

[5] https://www.kotterinc.com/8-steps-process-for-leading-change/

[6] Peter Senge differentiates these two processes in his book  The Fifth Discipline: The Art and Practice of the Learning Organization,

[7] http://www.debonogroup.com/parallel_thinking.php

[8] Vermeulen, F., and Sivanathan, N. November–December 2017, “Stop Doubling Down on Your Failing Strategy”, Harvard Business Review, pp. 111–7.

[9] Covey, S.R., The 7 Habits of Effective People®, Simon & Schuster UK Ltd.,1989

[10] Segal,L., Goldstein, A., Goldman, J., and Harfoush, R. 2014. The Decoded Company – Know Your Talent Better than You Know Your Customers, New York: Portfolio / Penguin

[11] Tetlock, P., Gardner, D., “Superforecasting – The Art and Science of Prediction”, Random House Books, 2015.

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