Avoiding Decision Debacles by Business Strategy Review

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When a leader decides to launch a major project that is sure to attract public scrutiny, such as opening a new amusement park or building a new international airport, the result is often far from what was promised in the original press release. The resulting debacle often draws a great deal of attention to the decision maker. Paul C. Nutt reveals why such debacles happen. The original article was written by Paul C. Nutt for Business Strategy Review, 2001 and was republished in Volume 24, Issue 21 - 2013. Subscribe today to receive your quarterly copy delivered to your home or work place. http://bit.ly/BSR-subscribe

Text of Avoiding Decision Debacles by Business Strategy Review

  • 1. AVOIDING DECISION DEBACLESThe pressure to act rapidly draws decision-makers to the conspicuous solution. If the rstidea that crops up in a search seems workable,why not use it? Copyright 2013 London Business School
  • 2. BUSINESS STRATEGY REVIEW 1When a leader decides to launch a major project thatis sure to attract public scrutiny such as opening anew amusement park or building a new internationalairport the result is too often far from what waspromised in the original press release. The resultingdebacle often draws a great deal of attention to thedecision-maker. Paul C. Nutt revealswhy such debacles happen.
  • 3. BUSINESS STRATEGY REVIEW 2Decision debacles decisions that go sowrong that they are reported in the media involve three mistakes: faulty decisionpractices, premature commitments andmisallocation of resources.
  • 4. BUSINESS STRATEGY REVIEW 3Relying on failure-prone practicesThere are several reasons why failure-pronepractices are used and better ones ignored. Somedecision-making practices with a good track recordare commonly known, but uncommonly practised.Telling people the desired outcome lower cost, forexample produces better results than nding theroot cause of the cost problem. Indicating what iswanted, such as lower cost, liberates subordinatesto look for answers. Yet, managers often default topractices that too often end in failure.
  • 5. BUSINESS STRATEGY REVIEW 4Making premature commitmentsPremature commitments are seductive and oftendeadly. Many of the decision-makers in my studiesjumped on the rst idea that came up and thenspent literally years trying to make it work. This rushto judgement is a prime cause of failure. This oftenleads to unanticipated delays as retrots are carriedout and attempts are made to convincestakeholders that the companys interests, not thedecision-makers, are being served.
  • 6. BUSINESS STRATEGY REVIEW 5Investing in the wrong thingsManagers often fail to use their resources wisely.Blunders are made, for example, when decision-makers use their time and money for analyticevaluations and little else. Expensive analyses areundertaken in a debacle to demonstrate that thedecision-makers idea was useful, feasible or both.The expenditure for evaluation grows as more andmore justication is called for.
  • 7. BUSINESS STRATEGY REVIEW 6Failure trapsThe chain of events in which mistakes create traps and traps bring about failure is found in all debacles.One or more of the blunders point the unsuspectingmanager toward seven traps that can ambush them:1. Not taking charge by reconciling claims2. Failing to appreciate barriers to action3. Ambiguous aims4. Limited search and no innovation5. Misusing evaluations6. Ignoring ethical questions7. Failing to learn
  • 8. BUSINESS STRATEGY REVIEW 7Not taking charge by reconciling claimsDisagreements about claims that never get resolved fashionthe rst trap. A decision can be hindered, if not derailed,when decision-makers assume that the concerns andconsiderations that motivated them are understood andagreed to by others.Decision-makers often react to criticism by acting in waysthat imply they will have no patience with any morequestions and interpret the silence that follows assignalling agreement.Many debacles had hidden concerns that could beuncovered with careful probing.
  • 9. BUSINESS STRATEGY REVIEW 8Failing to appreciate barriers to actionTaking steps to uncover the interests andcommitments of key people usually pays dividends.Despite a reputation for being savvy, many decision-makers spend little of their time managing the socialand political forces that can derail a decision. Dealingwith the interests and commitments of key playersincreases the chance of success. Savvy decision-makers use participation, because it increases theirchance of success.
  • 10. BUSINESS STRATEGY REVIEW 9Ambiguous aims To head off real or imagined critics, decision-makers feel compelled tohave a way to deal with a challenge claim soon after one isacknowledged. This triggers a rush to nd a remedy. The urge to startwith a concrete remedy sidetracks direction setting, and this rush tojudgement sets the ambiguous aims trap. Being clear about what is to be gained puts the best face on projects,which makes them potentially defensible. Overselling plans with bloatedand unrealistic expectations often characterises a debacle. Aims that are assumed by the decision-maker but never understood bykey players create difculties as well. Being clear about what is wanted by setting an objective clears awayambiguity and conict and helps the decision-maker nd an appropriatecourse of action.
  • 11. BUSINESS STRATEGY REVIEW 10Limited search and no innovationThe pressure to act rapidly draws decision-makers to theconspicuous solution. If the rst idea that crops up in asearch seems workable, why not use it? The quick x ishard to back away from. Business practices are copied toprovide a workable, if not ideal, solution. Adopting thebusiness practices of others is thought to reducedecision-making time, cost and risk. This can work outwhen the other companys circumstances are much likeyour own. When the companies lack compatibility, aretrot is needed and costs quickly escalate.
  • 12. BUSINESS STRATEGY REVIEW 11Misusing evaluationsOnce a conspicuous solution is found, evaluation soonfollows. Decision-makers take a defensive posture at thispoint, trying to justify their favoured course of action. Moretime and money are spent doing this type of analysis than allthe other decision-making activities combined.Making a comparison to a norm such as what other,successful, organisations do provides a way to assess thebenets of the single option. Such a comparison givesinsight into the merits of a possible action beforecommitments are made.
  • 13. BUSINESS STRATEGY REVIEW 12Ignoring ethical questionsTough decisions often pose ethical dilemmas. Concerns about ethicsarise in many ways. But, though ethical issues can be clear they areoften also ambiguous. Pushing a self-serving idea, opposing a goodidea that presents a personal threat or engaging in conicts ofinterest most would agree that such behaviours display questionableethics. Views of what is ethical seem to depend on who is beingdeceived. Deception is more likely to be tolerated or even encouragedwhen directed toward an outsider.At best, new insights can develop using such an approach. If not, onecan at least say that he has taken steps to show that the views ofcritics were considered.
  • 14. BUSINESS STRATEGY REVIEW 13Failing to learnWithout learning, decision-makers will go down the same failure-pronepath over and over again. But, learning about what went wrong andwhat can be prevented in the future is thwarted when leaders show notolerance for mistakes.People who can be held accountable for a failed decision ndthemselves caught in a no-win trap. Some failure is inevitable, butsuperiors and oversight bodies do not tolerate failure. Caught in such abind you have only two options: own up or cover up.An environment in which decisions can be discussed that avoids thisblame-nding mentality is essential if learning is to occur. After perverseincentives have been rooted out, managers can set learning in place bycreating win-win situations in which everyone can benet.
  • 15. BUSINESS STRATEGY REVIEW 14Reducing failureThe key to reducing failure is to use decision-making practices or tactics that have a goodtrack record and to avoid those that are failure-prone. Consider the seven traps that lead tofailure failing to take charge, ignoring barriersto making changes, ambiguous directions,limited search, defensive evaluations, ignoringethical questions, and failing to learn.
  • 16. BUSINESS STRATEGY REVIEW 15Without learning, deci