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How to improve decision making quality,
speed and execution
Managing the
Decision Making
process
1
Source: Decide & Deliver, Bain & Company, Inc.
Harvard Business Review Press, Copyright, 2010
Focusingon decision making
efficiency and effectiveness.
Ron McFarland, Tokyo, Japan
2
4-Organize Restructure the organization
to enable a better decision
making process.
2-Identify Learn what the most
critical decisions are
now.
5-Promote
Expand and
promote the ideal
decision making
process throughout
the organization
1-Assess Learn the current decision making
effectiveness (where strong,
where weak) and company health
3-Improve Redesign the decision
making process to get
the best results.
Steps to improve decision effectiveness
There are five steps to achieve successful decision making in quality,
speed and execution.
Better
decisions lead
to better
performance
How good
are our
decisions?
Ron McFarland, Tokyo, Japan
3
Effective decision making components
QualityHow good are our
decision? Are outcomes
successful?
SpeedHow fast are decisions
and execution?
ExecutionHow efficient is the
execution managed?
EffortWhat is the expense of time,
energy and assets to achieve
what is decided? Is it too
much or too little?
Decision management
How good is our
decision making
process?
Ron McFarland, Tokyo, Japan
4
Effective decision making components - Quality
Quality
Quality Decisions1. They are based on relevant
facts.2. They are based on good
risk analysis.3. They have been evaluated
against alternatives.4. They take into account the
ability to execute.
Ron McFarland, Tokyo, Japan
5
Effective decision making components - Speed
SpeedDecision speed1. Speed is influenced by the speed of
information sharing and distribution.2. Speed is influenced by trust.3. Speed can save money.4. Speed can improve profit.5. Speed can add to customer satisfaction.6. Speed can improve employee moral.7. Speed can create a competitive
advantage over slower companies.8. If the decision can be modified later, it is
better to decide quickly now!
Ron McFarland, Tokyo, Japan
6
Effective decision making components - Execution
ExecutionDecision execution1. It is often forgotten in the decision
making process.2. It is putting decision into action.3. Available ability, skills, capacities
and assets must be considered to execute a decision.
4. Excellent execution can be a huge competitive advantage against competitors that do not execute well.
Ron McFarland, Tokyo, Japan
7
Effective decision making components - Effort
Effort
Decision effort1. It is the time and resources spent in
the decision and execution.2. It is the trouble caused to all.3. It is the emotional energy spent.4. It is necessary but must be less
than the benefits gained by the decision.
5. Effort can be too much or too little considering the value of the project.
Ron McFarland, Tokyo, Japan
8
Research on decision making components
1. Decision making effectiveness equals higher company financial performance.
2. Decision quality, speed and execution reinforce one another.
3. Appropriate effort is needed.4. Process attention is very important.
Source: Decide & Deliver, Bain & Company, Inc.
Harvard Business Review Press, Copyright, 2010Ron McFarland, Tokyo, Japan
9
Step 1 (Assess): Company decision making evaluation
Speed
Select “1”, “2”, “3”, or “4” below regarding your company’s decision making process.
Execution
Effort
Quality When making critical decisions, we choose the right course of action:1. Less than 25% of the time.2. 26 – 50% of the time.3. 51 – 75% of the time.4. Over 75% of the time.
We make critical decisions:1. Much slower than competitors.2. Somewhat slower than competitors.3. Somewhat faster than competitors.4. Much faster than competitors.
We execute critical decisions as intended:1. Less than 25% of the time.2. 26 – 50% of the time.3. 51 – 75% of the time.4. Over 75% of the time.
In making and executing critical decisions:1. We either put in far too much effort (assets) or not nearly enough.2. We put in too much or not quite enough effort than we should.3. We put in somewhat too much or too little effort than we should.4. We put in exactly the right amount of effort (assets) on critical decisions.
Source: Bain & Company, Inc.Ron McFarland, Tokyo, Japan
10
Company decision making evaluation – result sample
Speed
Execution
Effort
Quality When making critical decisions, we choose the right course of action:1. Less than 25% of the time2. 26 – 50% of the time3. 51 – 75% of the time4. Over 75% of the time
We make critical decisions:1. Much slower than competitors2. Somewhat slower than competitors3. Somewhat faster than competitors4. Much faster than competitors
We execute critical decisions as intended:1. Less than 25% of the time2. 26 – 50% of the time3. 51 – 75% of the time4. Over 75% of the time
In making and executing critical decisions:1. We either put in far too much effort (assets) or not nearly enough2. We put in too much or not quite enough effort than we should3. We put in somewhat too much or too little effort than we should4. We put in exactly the right amount of effort (assets) on critical decisions.
3
4
2
3
Current decision making status:1. Over 25: You are doing great, keep it up.2. 21 – 25: Pretty good. Could be great.3. 16 – 20: Worse than 50% of companies. Put in decision making action plan.4. 15 or less: Major decision making process change required.
Total scoring method:Quality X Speed X Execution X (Effort/4)Therefore, sample score is 18 (eighteen)
18
Ron McFarland, Tokyo, Japan
11
Organizational structure evaluation toward decision making
Decision style
Select 1-Strongly disagree, 2-Disagree more than agree, 3-Agree more than disagree, or 4-Strongly agree for the below regarding your company’s organizational structure and the decision making process.
People
Culture
Priorities
We make decisions in a style that is effective. They appropriately balance inclusiveness & momentum.
(1, 2, 3, 4)
Behaviors
We put our best people in the jobs where they can have the biggest decision impact.
(1, 2, 3, 4)
Our leaders at all levels consistently demonstrate effective decision behaviors.
(1, 2, 3, 4)
Our culture reinforces prompt, effective decisions and action throughout the organization.
(1, 2, 3, 4)
People understand their priorities clearly enough to be able to make and execute the decisions they face.
(1, 2, 3, 4)
Roles
Processes
Measures & incentives
Structure
Individuals are clear on their roles and accountabilities in our most critical decisions.
(1, 2, 3, 4)
Information
Our processes are designed to produce effective, timely decisions and action.
(1, 2, 3, 4)
The people in critical decision roles have the information they need when and how they need it.
(1, 2, 3, 4)
Our measures and incentives focus people on making and executing effective decisions.
(1, 2, 3, 4)
Our structure helps, rather than hinders, the decisions most critical to our success.
(1, 2, 3, 4)
Source: Bain & Company, Inc.
Ron McFarland, Tokyo, Japan
12
Organizational structure evaluation toward decision making - example
Decision style
People
Culture
Priorities
We make decisions in a style that is effective. They appropriately balance inclusiveness & momentum.
(1, 2, 3, 4)
Behaviors
We put our best people in the jobs where they can have the biggest decision impact.
(1, 2, 3, 4)
Our leaders at all levels consistently demonstrate effective decision behaviors.
(1, 2, 3, 4)
Our culture reinforces prompt, effective decisions and action throughout the organization.
(1, 2, 3, 4)
People understand their priorities clearly enough to be able to make and execute the decisions they face.
(1, 2, 3, 4)
Roles
Processes
Measures & incentives
Structure
Individuals are clear on their roles and accountabilities in our most critical decisions.
(1, 2, 3, 4)
Information
Our processes are designed to produce effective, timely decisions and action.
(1, 2, 3, 4)
The people in critical decision roles have the information they need when and how they need it.
(1, 2, 3, 4)
Our measures and incentives focus people on making and executing effective decisions.
(1, 2, 3, 4)
Our structure helps, rather than hinders, the decisions most critical to our success.
(1, 2, 3, 4)
Current decision making status:1. Over 35: You are doing great, keep it up.2. 31 – 35: Good but room for improvement.3. 26 – 30: There are major barriers to decisions.4. 10 – 25: Major organization transformation is required.
Total scoring method:Total score (add all the scores) 26
Ron McFarland, Tokyo, Japan
Step 2 (Identify): Identifying critical decisions
13
List all major department project decisions and the value they create.
Use surveys, interviews, and workshops to assess the value and degree of attention required of each.
Determine the single decision with the greatest company value potential and risk.
Ron McFarland, Tokyo, Japan
Categories of critical decisions
14
Small but critical decisions that is made and remade frequently and add up to value over time. These are made every day and none by themselves carry much value, but add up over time. An example would be how sales people meet customers on a daily basis.
Small, frequent decisionsLarge, one-time decisions
Big decision that carry enormous value and risk. Usually, onetime or infrequent organizational or operational decisions. If these decisions are not made and executed effectively, shareholder value could be lost. Once made, they usually can not be modified or undone.
Ron McFarland, Tokyo, Japan
15
Finding major decisions along the value chain
Operations
&
processing
Outbound
items
&
services
Marketing
&
sales
After
sales
support
(Processing)
End Users
Technology Development
Direct Activities
Suppliers
Human Resource Management
Infrastructure
Procurement
Support
Activities
Inbound
items
&
services
(Shipping) (Marketing) (Service)(Receiving)
Value Chain Activities
Valued added, cost incurred over time and a profit margin
Ron McFarland, Tokyo, Japan
Analyzing the status of the most critical decision
16
Once the most critical decision is determined, its status must be reviewed.
Is it getting the priority and attention required?
Ron McFarland, Tokyo, Japan
17
Critical decision status review
Rating4-strongly agree;
3-agree; 2-disagree; 1-strongly disagree
Organization strengths and barriers to efficient decision making
Decision roles are clear and appropriate. (1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
We use a very effective decision making process.
We have the right information at the right time.
People’s objectives and incentives reinforce the right decision and action.
Participants have the right atmosphere and environment to make and execute decisions.
We use the appropriate decision style. (described below)
We have the right skills and talent in the right decision making roles.
Participants demonstrate good decision behavior.
Our overall culture reinforces making and executing the decision well.
Our structure facilitates making and executing the decision well and quickly with the right effort.
Were “1” or “2” selected?
Those are the concerns that
must change.
Source: Bain & Company, Inc.Ron McFarland, Tokyo, Japan
Four common decision making styles
18
1. Directing – Management tells people what to do.
2. Participating – All related personnel are involved in the decision making process, but one person finally decides and is accountable.
3. Democratic - All related personnel vote on what is best. The most popular decision is selected.
4. Consensus - All related personnel must agree to move forward.
Ron McFarland, Tokyo, Japan
19
Step 3 (Improve): Decision Clarification
What?Make sure everyone
knows exactly what is to
be done and why.
Who?The roles of decision
makers, recommenders,
experts and executers are
decided.
How?The approach and total
process are decided.
When?A timeline of each
process is decided,
including milestones
and progress reporting.
Making
decisions
work
The decision goals
must be specific and
understandable to all!
Ron McFarland, Tokyo, Japan
20
Decision Clarification – What is it?
What?
Tips for success1. Start all discussion with reminder of what
goal is to be achieved.2. Explain the situation and reasons to make
the decision.3. Break down the decision into specific
tasks and confirm task dependences (one is finished first before another task starts).
Ron McFarland, Tokyo, Japan
21
Decision Clarification – Who should do it?
Who?Use the RAPID system to assign roles1. R - RECOMMEND2. A - AGREE3. P - PERFORM4. I - INPUT5. D - DECIDE
Source: Bain & Company, Inc.
Ron McFarland, Tokyo, Japan
22
Who performs the decision process (Rapid)?
R - Recommend
A - Agree I - Input
P - Perform
D - Decide
1. R – Recommend: Who will be responsible for making the recommendation that
something should be done? What options or alternatives does he recommend? What is
his final recommendation? This person is usually close to the problem or opportunity.
2. A – Agree: Who are experts or specialists that know many of the concerns that may
arise with the recommendation(s) given?
3. P – Perform: Who will actually execute the decision until it is successfully
completed?
4. I – Input: Who will be responsible for gathering information, data and facts? This
includes resource/skill requirement facts. This is the gathering point of information.
5. D – Decide: Who will make the final decision and be responsible for its outcome?
For major decisions, several people for these tasks should be assigned.
Source: Bain & Company, Inc.
Usual sequence
#1#2
#4
#3
Ron McFarland, Tokyo, Japan
23
Decision Clarification – How should it be done?
How?
Use best practices to
determine each required task throughout the decision making and
execution process.
Ron McFarland, Tokyo, Japan
24
Clear steps and sequences
- Logical steps and sequence for how decision roles and process will work in practice- Clear guidelines on how and when to escalate and when to slow down.
Source: Bain & Company, Inc.
Best-practice decision process - How
How?
Closure and commitment
Structured decision approach
Feedback system
Meetings and committees
- Key meetings required for the decision are scheduled with purpose and participants clearly understood. Why is the meeting needed, who should attend and what is to be achieved?
- Meetings are reviewed and assignments confirmed afterward in writing.
- Final decision communicated to key personnel.- The resources allocated (people and money)- The execution plan in place (actions, accountable people, check-points).
- Ongoing review of execution progress for fast corrective action or expand on successes.
- Conscious approach to decision: sets goals to achieve, considers relevant facts, develops alternatives (at least two others) and makes a clear decision after analysis.
Ron McFarland, Tokyo, Japan
25
Decision Clarification - How
Tips for success1. Handle (1) information gathering, (2)
alternative selection and (3) final decision at different times so they can be thought over (not at once).
2. Set a target of seven people to attend every meeting. More or less is usually counter-productive (information, perspectives opinions).
3. Track all bottlenecks and learn why.
How?
If there are too many people in
meetings, decision speed could suffer.
If there are too few people quality decision making could suffer.
Ron McFarland, Tokyo, Japan
26
Decision Clarification – When should it be done?
When?
Best companies make
explicit schedules,
timetables, milestones,
and deadlines.
Ron McFarland, Tokyo, Japan
27
Visualizing a decision process– Time (When)
A Gantt chart can track the progress of each task throughout
the decision process.
Note: Reasons for all 1-rework, 2-rediscussions and delays should be
recorded, reviewed and analyzed.
Ron McFarland, Tokyo, Japan
28
Step 4 (Organize): Decision making & organization
Concerns1. Does the organization structure support decision
making?2. Does the organization support fast, accurate
information flow?3. Are the decision maker’s, researchers’, experts’
and executers’ roles and responsibilities defined?4. Are resources proper for the decision?
Ron McFarland, Tokyo, Japan
29
Decision-centered organization
Does the information flow well between them?
Has the decision maker, recommender, expert(s), researcher(s) and
performer(s) been decided?
In any decision, how many interactions does this involved? Is that
number appropriate?
A traditional organization chart must be flexible for every decision-
making and executing situation.
One decision to purchase equipment could be made in three departments.
Ron McFarland, Tokyo, Japan
COMMON CONCERNS: Critical decision-making locations
30
Should cover decisions that cross product lines,
regions and functions.
National level decisions
Local level decisions
Choosing the right people and locations for decisions to be made and executed is an important common concern.
Global level decisions
Should cover the local operations, but be
coordinated with other parts of the organization.
Should cover the national operation, but
be coordinated with other parts of the global operation.
Strong global-national-local communication link
Decisions made in the wrong
place is frustrating!
Ron McFarland, Tokyo, Japan
Where is the information
and how well and fast is it shared?
31
If information is lacking,
people give up.
At the world HQ In an individual
Needed Information Concerns1. Is it shared at all?2. Is it understandable?3. Is it distributed fast?
Ron McFarland, Tokyo, Japan
32
Step 5 (Promote): Multiply good decision making & execution
Action plan 1. Make good decision-making a priority in the
whole organization.2. Leaders actively use good decision making skills.3. Promote successful decisions.4. Train others on good decision making
techniques.5. Measure the impact on profit.
Ron McFarland, Tokyo, Japan
Managing the
Decision Making
process
33
Source: Decide & Deliver, Bain & Company, Inc.
Harvard Business Review Press, Copyright, 2010
Thank you
Putting your attention and focus on
decision-making could give you a strong competitive advantage.
Decision
making
focus
Ron McFarland, Tokyo, Japan