Searching forthe X–Factors

A Review of Decision-Making in Government and Business

Contents

Searching forthe X–Factors

A Review of Decision-Making in Government and Business

Foreword

1. Executive Summary

2 Terms of Reference and Methodology

3. Decisions and Decision-Making Theories

4. Decision-Making in Business

5. Decision-Making in Government

6. Decision-Making in a Crisis

7. Setting the Right Climate for Good Decisions

Appendix A: Acknowledgements

Appendix B: Highlights from Some Academic Research

Appendix C: Dilemmas and Wicked Issues

Appendix D: Insights from the Armed Services on Strategy and Delegation: The Mission Command Approach

Appendix E: Further Case Studies

Appendix F: Bibliography and Further Reading

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Foreword

The Whitehall & Industry Group was established in 1984 with a charitable purpose to improve understanding and co-operation between business and government, a topic explored in its fi rst research report Closing the Gap, published in October 2009. The Ashridge Business School Public Leadership Centre was set up in 2006 to help promote the sharing of the work that Ashridge has carried out with a number of public sector clients, and to draw together that work and leadership work across the private sector that has been a strength of Ashridge since its foundation.

The idea of a collaborative research project drawing on both organisations’ interests and skills was fi rst mooted in 2010, and the topic arose naturally from conversations between us and drew on some work already underway by David Laughrin, the author of this research. We would like to thank David for producing such a thoughtful and insightful report. We believe it addresses points of wide relevance and certainly all those contacted during the research expressed a lively interest in the topic and were very ready to give us their time and express some clear views. For this we are enormously grateful.

We would also like to thank warmly all those who contributed to the project and particularly to thank the Editorial Panel, chaired by Martin Donnelly, who came together at key times to give us the benefi t of their experience and wise counsel. The distinguished membership is shown opposite. The report which follows is an independent perspective, guided by them. It suggests that there is considerable further scope for mutual learning. The report is offered as one contribution to that learning and we hope that others will follow.

Mark Gibson Dr Mark PeggChief Executive Director

The Whitehall & Industry Group Ashridge

October 2011

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Editorial Panel

Catherine Bell

Non Executive Board Member, United Utilities, Department of Health and Civil Aviation Authority

Dame Sally Davies

Chief Medical Offi cer, Department of Health

Martin Donnelly

Permanent Secretary, Department for Business, Innovation and Skills (Panel Chair)

Mark Gibson

Chief Executive, The Whitehall & Industry Group

Ray King

Chief Executive, Bupa

David Laughrin

Former Senior Civil Servant, Ministry of Defence and Fellow of the Ashridge Public Leadership Centre (Research Author)

Stephen Lovegrove

Chief Executive, Shareholder Executive

Sir Richard Mottram

Non-Executive Chairman, Amey

Erica Zimmer

Head of Public Affairs,J Sainsbury plc

Sir John Parker

Chairman, National Grid and Anglo American plc

Dr Mark Pegg

Director, Ashridge

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1. Executive Summary

Top teams in both Government and business have more things in common than is sometimes supposed. Both are required by their roles to defi ne their strategy, make decisions within that strategy for the short, medium and longer term, and communicate what they are doing to satisfy, and where possible inspire, interested stakeholders. Good decision-making matters in all these roles. We all know that both Government and business make both good and less good decisions: the need for continual learning is plain.

We set out, therefore, to explore whether there are any processes, useful techniques or approaches that help explain why good and less good decisions are taken. In line with the common practice of both Ashridge Business School and the Whitehall & Industry Group, who jointly sponsored the research, we spent most time talking to people across the public and private sectors who had actually spent their time taking important decisions or who were supporting others who were. We also looked at relevant academic research. Our aim was to highlight practical helpful experience.

What we found was that good process and governance structures for decision-making can help, and the lack of them can cause problems if decisions are taken in an ad hoc way, or not recorded suffi ciently clearly or acted on effectively. We were also told that there are a whole variety of different interacting factors and approaches that taken together are necessary, though not always suffi cient, to make good decisions more likely.

These comments have helped us formulate an elaborated version of the models of good decision-making practice that feature in academic literature. Our version, set out in Figure 1, describes fourteen factors and approaches that these decision-makers say normally infl uence their decisions in a positive way.

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Figure 1

Key Factors and Approaches for Good Decision-Making

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Our top level decision-makers emphasised the importance of seven broad factors and approaches that are critical and sometimes undervalued or not given suffi cient attention – the X-factors of good decision-making:

X-Factors of Good Decision-Making

1. clarity of goals and a well articulated and communicated strategy, based on good analysis and evidence and framed in the right way, unconstrained by institutional boundaries;

2. a clear line of sight to implementation with practical options developed through early interaction and good communication with trusted stakeholders;

3. relentless focus on only a limited number of absolutely critical issues;

4. good team-working with the right mix of expertise, experience and trust;

5. the provision of sustained opportunity for really frank challenge, exposure of dissent and exploration of risks;

6. clear accountability, with incentives for long term success but without inappropriate sanctions for occasional mistakes; and

7. effective review and evaluation of delivery of desired outcomes, with willingness to make appropriate adjustments in the light of experience.

Alongside these, we found that the best decision-makers need to be aware of their own strengths and weaknesses, well-prepared in relation to the issues that they are dealing with and mindful of a variety of decision-making traps which can derail delivery. The academic research usefully highlighted these, as well as suggesting that decision-makers need to be alert to the different requirements of different situations, especially the demands of decision-making at times of crisis. We were particularly struck by the notion in one recent publication that, in the current more turbulent times, decision-makers need to have more of the qualities of foxes rather than those of hedgehogs: they need to be fl exible and adaptive more than doggedly wedded to a limited vision of the viable options.

Amongst the senior people in both Government and business to whom we spoke in the course of this research, ninety percent felt that decision-making in Government tends to be more complex and at times more demanding than in business. Some of the issues faced and their consequences are potentially more seismic in their consequences. Some are issues which have landed on Government because no one else can resolve them. Some cannot be solved without creating other equally challenging problems. Some of the characteristics of Government such as short-term Ministerial and civil service appointments, the public accountability of Ministers to Parliament and to the 24 hour media (as well as running a Department and being an MP), make it harder to apply good practices like prioritising, delegating, listening to and voicing dissent, allowing time for refl ection, engaging in early consultation with stakeholders or piloting innovative new ways of doing business.

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While there is some optimism that these challenges are being met, we believe it is particularly important that close attention is paid within Government to setting the best possible climate for good decisions.

Indeed, we believe it is valuable for all organisations from time to time to review whether those supporting decision-makers are alert to the key factors for good decision-making and the potential traps, and whether the climate in their organisations is as favourable as possible to good decision-making. This equally applies to both business and Government. In Government we believe that more needs to be done to help Ministers handle the exceptional demands that they face. We suggest that the relatively new departmental Boards, with experienced non-executive directors from outside Government on them, can and should play a key role in this.

Throughout the report which follows we set out what we believe are practical ways in which good practice can be taken forward. As one of our senior interviewees from business put it: “None of us is as smart as all of us, so we might just as well take advantage of that.”

To encourage this exchange of experience and learning and to develop more of the fox and less of the hedgehog tendency in decision-makers, we recommend that action is taken by both Government and business on the following:

For All

• Review how your organisation scores against the items in the model in Figure 1 and the X-factors of good decision-making.

• Check strategies and goals are well-defi ned and are clearly, consistently and constantly communicated.

• Check delegations are clear and responsibility and accountability are delegated to the lowest possible level, but with sensitive escalation procedures.

• Consider piloting all major changes in manageable stages so modifi cations can be made to deal with any teething problems.

• Check there is good awareness of decision-making traps.

• Check there are good systems for fast feedback and for evaluating past experience and capturing the knowledge gained accessibly.

• Review the areas where sharing experience across organisations, sectors and national boundaries might help.

For Business

• Maintain the right balance between Boards and Executive management.

• Be aware of the danger of focussing only on short term quantifi able results and underestimating qualitative and reputational issues.

None of us is as smart as all of us, so we might just as well take advantage of that.

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• Ensure suffi cient stress-testing of options and explore the possible intended and unintended consequences of a course of action.

• Encourage challenge within teams and work to avoid ‘group-think’.

• Clarify accountabilities and rights of veto over proposals in matrix organisations to avoid decision paralysis.

• Involve stakeholders at every stage. In particular, when working with Government, fi nd ways of building trust with offi cials and Ministers to encourage early consultation and reduce apprehension about premature disclosure.

• Make allowances for the additional complexity of Government decisions and where possible help resolve dilemmas.

For Government

• Use the experience of independent members of departmental Boards to help Ministers focus on key strategic issues and review how best to delegate more from Cabinet Ministers to other Ministers and offi cials.

• Encourage and, where appropriate, make specifi c provision for frank challenge, exposure of dissent and stress-testing of options up to the point of decision.

• Beware of being seen as reactive and piecemeal and take care to set with clarity, and constantly explain, overall aims and strategy.

• Make sure that framing of decisions is not constrained by artifi cial departmental boundaries.

• Direct more focus to implementation with early consultation with trusted stakeholders, opening clear and effective channels for comment, information and data between front line staff and policy makers.

• Demonstrate commitment to greater continuity for Ministers and senior offi cials, and review the value of the “four year rule” for senior civil service appointments.

• Put greater emphasis when making both Ministerial and senior civil service appointments on selection for top teams, not just individual appointments.

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2. Terms of Reference and Methodology

This report, jointly sponsored by the Whitehall & Industry Group (WIG) and Ashridge Business School’s Public Leadership Centre (APLC), was commissioned in response to concerns expressed by former Government Ministers and others about the challenges they face. One ex-Minister, looking back on the piles of paperwork for decision he used to receive each night, commented that “It is no way to run a life, let alone a country.”

The pace of change and the turbulent times experienced in the early years of the twenty-fi rst century, together with the effects of globalisation and the infl uence of pervasive 24 hour media coverage, have been widely seen to make the task of all decision-makers increasingly diffi cult. Formidable challenges have faced not only Ministers but those in many businesses, from oil company executives to, most recently, the Boards of banks.

Much has been written about the importance of effective leadership in such times, but less has been said about a key aspect of that leadership: what helps leaders make good decisions?

The primary source for this research is a series of structured interviews with around 60 people, from both the public and private sectors, conducted over the last three years. The interviews, which concentrated on processes and approaches used by the most senior decision-takers in organisations - the equivalent of Board level and the immediate tiers below - included past and present Ministers, senior civil servants, business leaders, local authority and charity executives, academics, business organisation and trade association leaders. They are listed in Appendix A.

The research was supported by a literature survey of relevant recent academic research reports (see Bibliography in Appendix F) and some exploration of illustrative case studies. It is possible that these could be supplemented by further international comparisons, but it has not been feasible to pursue these within the timeframe for this report.

At all stages, the research has helpfully been guided by the Editorial Panel listed in the Foreword. The views expressed in this report are, however, not necessarily their views but a consensus drawn from the research. The quotations throughout the report are individual comments taken from the interviews or identifi ed through the literature survey. The report is ultimately an independent assessment by the researcher commissioned by WIG and the APLC, drawing on his experience.

It is no way to run a life, let alone a country.

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3. Decisions and Decision-Making Theories

Most of the practitioners to whom we spoke made it clear to us at the outset that there were a huge variety of decisions that they faced, and not all were susceptible to the same approaches. There were decisions which were about strategies, about alternative courses of action, about investments, about acquisitions, about people and appointments, about priorities, decisions made in a crisis and so on.

They also stressed to us that there were as many different styles of decision-making as there were decision-makers and that there was no one way that seemed to be uniquely successful. They certainly did not suggest that the private or the public sectors had any particular monopoly of best practice, and they were clear that no particular approach seemed to guarantee a good decision. The only completely clear vision was hindsight, which is not a luxury afforded to decision-makers.

3.1 Decision Analysis

There is indeed a large body of academic literature on decision-making which recognises the challenges that all decision-makers face. The science of decision analysis, in particular, has a well-developed series of approaches and techniques designed to help decision-makers tackle the key characteristics of diffi cult decisions: multiple objectives, uncertainty, risk, complexity, sequencing, and potential disagreement among stakeholders, for example.

Decision theory has developed, as academic texts like Decision Analysis for Management Judgement explain, from a somewhat abstract mathematical discipline to a framework and a range of tools for helping decision-makers handle such complexity. These can include decision and value trees, cost benefi t analysis, simulations, probability assessments, and decision conferences. There is not space in this report to review the advantages and disadvantages of all these approaches, and it was interesting that few of those to whom we talked identifi ed any particular one as critical to their thinking.

Their main comment was that such techniques can be useful as part of the thorough analysis that nearly always contributes to good decision-making. They felt that decision-makers should be aware of the existence of these approaches and prepared to use them and consult appropriate experts when data was diffi cult to analyse easily.

3.2 Key Elements of Good Decision-Making

However, the consensus of those we spoke to was that there were some general features of good decision-making that could be applied to almost any situation, and these could be allied to the techniques that have been

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developed and applied in many sectors over the years. Decision-making theory, in particular, often picks out six elements of a good decision:

• meaningful reliable information;

• clear values and trade-offs;

• logically correct reasoning;

• commitment to follow through;

• an appropriate frame within which to make the decision; and

• creative, doable alternatives.

(see models set out in Advances in Decision Analysis, Cambridge University Press, (2007))

3.3 Suggested Model of Factors Infl uencing Good Decisions

Our practitioners generally endorsed the importance of these factors but added some additional factors and elaborated on what they felt was most relevant. This has enabled us to map out a more extended model as set out in our Figure 1 on page 7. It sets out eight key factors that all the evidence suggests are critical to good decision-making and draws out six key approaches that seem to enable these factors to be engaged most effectively.

We suggest that this model, a fusion of academic thinking and the practical experience of a wide range of decision-makers, should be of considerable help to anyone seeking to review whether there is anything signifi cant missing in the methods and approaches encouraged within any organisation.

3.4 X-Factors of Good Decision-Making

It was also clear from our discussions that, amongst all these factors, it is possible to describe seven which those we spoke to felt are particularly critical to good decision-making and yet which are often undervalued, crowded out or otherwise not given suffi cient attention. These are the X-Factors of good decision-making and are shown in Figure 2 overleaf.

The practitioners we spoke to recognised that good decision-making is linked to all the factors set out in the model in Figure 1, but suggested to us that when things are working out less well, it is often because one or more of the X-factors was not being properly applied. (We have explored this further in the illustrative Case Studies at the end of Chapters 4 and 5 and in Appendix E.)

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3.5 Decision Traps, Foxes and Hedgehogs

Our research also uncovered some very helpful insights from academic research about elements that can also derail or otherwise affect the decision-making process:

• decision-making traps that decision makers tend to fall into, such as:

– a bias in favour of the status quo;

– “framing” an issue in a too narrow or too optimistic or too pessimistic way;

– making a misleading pre-judgement based on earlier but not actuallycomparable experience; or

– paying too much attention to memory and not enough to research.

Figure 2

The X-Factors of Good Decision-Making

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• the importance of thinking about decision-making as a process, not an event because this leads to more challenge and testing of ideas;

• the existence of wicked issues and dilemmas that often beset decision-makers and are challenges because potential solutions often have other problematic consequences;

• the importance of using good quantitative and qualitative data alongside intuition in decision-making because the combination of data interpreted through experience often leads to better decisions; and

• the importance of adopting different ways of thinking because willingness to assimilate dissenting views and different ways of thinking about problems and whole systems can lead to better analyses and delivery of hoped for outcomes.

These insights from recent relevant research are summarised in more detail in Appendix B and more material on dilemmas and wicked issues is included in Appendix C.

Of particular interest was an analogy made originally by Sir Isaiah Berlin where he compared the attributes of foxes and hedgehogs. Hedgehogs have just one powerful response to a threat, and roll themselves into a ball. This can work but can often fail spectacularly. They know only one big thing. In comparison, foxes know many little things, and react to a challenge by trying lots of different things and learning from experience. This means that they sometimes make mistakes but learn and adjust course effectively.

Recent research on this aspect of thinking about decisions by Professor Philip Tetlock is especially thought-provoking, as Appendix C reveals. He suggests that while most decision-makers use combinations of both styles described by Berlin, those who are more inclined to favour the hedgehog style may be more inclined to undervalue others’ arguments and propositions. Those who prefer a fox style may be more inclined to adapt to take account of others’ valid opinions and to pilot changes to see if they actually work. Tetlock suggests that foxes’ predictions about the future accordingly tend to be more valid than hedgehogs’, and that in this century’s uncertain world, while both sets of attributes can be useful, we may particularly need to encourage more fox-like behaviour.

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4. Decision-Making in Business

Our interviewees, from a range of different types and size of business, were keen to stress that there are a variety of different categories of decision that their top teams need to take, but there are some helpful common factors. They suggested that, in most businesses, the top team’s focus is on overall strategy, planning, key projects, mergers and acquisitions and fi nancial indicators.

4.1 Governance Structures for Decision-Making

A number of aspects of decision-making at Board level, and immediately below, are governed by a range of formal processes. Some of these are required by legislation, corporate governance codes or the intervention of regulators. Many fl ow from best practice principles of good governance.

Corporate governance codes set out clear distinctions between the focus and role of the Chairs and Members of Company Boards and those of the senior executives who report to them. The Management formulates strategy and the implementation options. The Board reviews the strategy, leadership, stewardship, values and culture of its organisation but does not intervene in day to day management except in a crisis. Implementation is primarily the responsibility of the executives, who normally have their responsibilities formally delegated to them by the Board.

4.2 Board Expertise and Role

It is good practice in the private sector that Boards are constructed with the right skills round the Board table, an appropriate geographical and sector spread and the right degree of professional expertise. Chairs of Boards need to generate the right dynamics to allow for constructive debate of the critical strategic decisions which are referred to them. Without taking on the role that is properly that of the Chief Executive and his or her team, they need to strike the right balance between getting decisions and ensuring the right level of challenge.

Boards have a key role in stress-testing the balance sheet, ensuring that both short term and longer term challenges can be met, and for succession planning for senior posts.

One senior Director told us:

“Boards should clarify but should not tell, should not add to the fi re of anxieties, and should pay strong attention to communication to stakeholders, never over-promising and under-delivering.”

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4.3 Structured Approach

Good governance models dictate that the mechanism for decision-making at top levels should be quite formal and structured. There tends to be a pattern of formal Board meetings and fi nancial reporting points through the year, and this sets a rhythm for formal budgetary reviews, often three times a year. Normally Chief Executives meet with their direct reports formally at least twice a month, and there are frequent more informal contacts in between. Executives also often meet together for three or four days at a time to focus on business performance, trends, market size, updates on major projects, and strategic decisions on issues like mergers and acquisitions, product development, allocation of funds and cutbacks. The approach is systematic and collective.

4.4 Presentation of Analysis

There are usually set arrangements for presenting material to Board members and senior executives. Since strategic decisions often involve getting agreement to specifi c investments or acquisitions, there are often templates for presenting the required estimates of costs and benefi ts, return on capital and other fi nancial assessments.

The requirement for Board papers in business is relatively simple: they need to be pared down to the key issues and data, and present the options and recommendation in only two or three sides of paper, perhaps with an accompanying appendix. Normally most emphasis is placed on the discussion at the Board, led by the individual accountable for the decision.

4.5 Factors to Create the Right Climate for Decision-Making

Our business interviewees stressed the importance of a number of factors in creating a climate in which good decisions were more likely to be taken than bad across their organisations. We have taken these into account in the development of our model in Figure 1:

• Clear Goals: a sound overall short, medium and long term strategy for the business which is well-communicated and understood and is sustained but updated periodically;

• Sound Evidence: good fl ows of accurate information, with strong fi nancial control;

• Challenge and Stress-Testing: frank probing of risks with what was described as “stress-testing” of the case for action and the possible intended and unintended consequences. The respected academic and authority on leadership, Professor Warren Bennis, has written:

“Unlike top management at Enron, exemplary leaders reward dissent. They encourage it. They understand that whatever momentary discomfort they experience as a result of being told they might be wrong, it is more than offset by the fact that the information will help them make better decisions.”

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All the interviewees we spoke to in business made the same kind of point. A Chief Executive told us:

“It is particularly important to avoid the danger of group-think. There needs to be a culture in the organisation which positively encourages reasoned dissent and welcomes internal challenge. There was a lot to be learned from the approach often used in merger and acquisition activity where there was an attempt to have a kind of triangulation of advice from different perspectives before a fi nal decision was made.”

A senior Chairman added that he:

“liked to work with people who could kick the tyres and smell the sulphur in the air when something was going awry. Good decisions depend on a really rigorous stress-test of the potential unintended consequences of policies and programmes and on the energy that go into this and into delivery.”

• Risk Reward Balance: Another senior Director agreed, but emphasised that it is important to be clear that risk assessment does not mean dismissing options that are risky; they might be worth pursuing if the potential reward from the risk is substantial enough. In business it is possible and often desirable to be a calculated investor in risk, provided you are prepared to face the consequences. Another former senior executive from fi nancial services stressed that mistaken decisions about risk are not necessarily career limiting either. A colleague who had assumed a signifi cant loss was about to be followed by dismissal was told:“No way, you stay. I have just invested a quarter of a million in your training.”

• Focus: good time management by all the senior team (“if you cannot manage your time, you cannot manage anything” as one Chairman put it). This means rigorous delegation, with decisions being raised to senior Executive or Board level only when major impact, investment or potential sensitivity is involved;

• Team-working and Continuity: effective team-working, with senior executives and managers having the right blend of experience and expertise and suffi cient trust of each other to be fully open. As one Director put it:

“Frank exposure of dissent, which is really important, is greatly helped by continuity of personnel with the shortest current tenure at Board level being seven years. This contributes to a ready exchange of information and there is also perhaps a greater willingness to think longer term about potential returns...there is also a clear corporate memory of past successes and problem areas.”

• Clear Accountability: with personal responsibility both for a proposal and its implementation and with personal ownership of projects and their outcomes;

• Timing and Space: proper notice about proposals with, except at times of crisis, at least a week for Board members to consider papers before meetings;

• Flexibility and Sensitivity: swift escalation arrangements to ensure that unexpected issues which had suddenly become business critical are rapidly escalated to a higher level;

If you cannot manage your time, you cannot manage anything.

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• Implementation: most focus being on how a proposal is to be implemented and how practicable and likely the returns would be. As one experienced Director put it:

“the skill in lots of decisions is not in deciding what should be done but working out how something could be most cost-effectively delivered.”

Or as a Chief Executive told us:

“Good decisions depend 99% on perspiration and only 1% on inspiration.”

• Stakeholder Involvement: All our interviewees stressed the importance of good communication, with early and regular involvement with customers, shareholder representatives and other stakeholders. Some of this would be through formal mechanisms and some through surveys;

• Evaluation: Emphasis was placed on quick and effective feedback. One retail director stressed that many managers in the retail sector would be receiving product information and making decisions on it on a daily and weekly basis.One senior Board member commended to us, in this context, the practice of regular Board evaluation in which Boards give themselves the chance to stand back and review how well they are working together and what could be improved. Peer review can be a very helpful part of this process. FTSE 350 companies are now required to have an externally led Board evaluation every three years and this is seen as a valuable development in highlighting problems in effective decision-making.

4.6 Challenges to Good Decision Taking

Our interviewees also pointed out that there are a number of challenges within business to good decision-making:

• Inappropriate Incentives: short-term incentives for senior executives could skew the way in which issues are seen as important and the way that options are presented to Boards. Good Boards are alive to this;

• Unclear Accountability: in matrix organisations, especially those where people work across different geographical or country and head offi ce boundaries, there is sometimes a risk that accountability becomes too diffuse and it is not clear who has the right to comment on a proposal and who has the right to veto it. One large company told us this was leading to decision paralysis until the different roles of all those involved was made clear. They used one of a number of available methodologies (RASCI – responsible, accountable, supportive, consulted, informed) to address this;

• Governance Failures: blurring of the lines between informal discussions and formal decision-making could sometimes inadvertently reduce the amount of rigour applied to important decisions;

• Lack of Focus and Turbulence: distraction caused by acquisitions and restructuring could disrupt information fl ows, confuse accountabilities and add complexity;

Good decisions depend 99% on perspiration and only 1% on inspiration.

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• Rushed Analysis: just as in affairs of the heart, there is a danger, in the heat of the loss of a long-treasured project, of being seduced into taking decisions “on the rebound”. This could occur, for example, when another widely heralded project had proved unworkable, and before proper analysis had taken place of the reasons for the failure or the prospects of the alternative proposition.

4.7 Interaction with Government

It was also suggested to us that increasingly decisions within business are impacted by interaction with Government and regulators, and it is important that those in each sector fully appreciate the pressures and imperatives that impact on the other. This was explored fully in WIG’s fi rst research report Closing the Gap. Good liaison and regular contact at the right level can very helpfully increase the trust and understanding that is important for good stakeholder liaison at an early enough stage of decision-making processes in all sectors.

4.8 Success Criteria

The fi nal comment made to us was that in business, the bottom line is a wonderful discipline and aid to good decision-making. Businesses often have very complex issues to assess, diffi cult degrees of uncertainty to cope with, huge stresses and different interests and opinions to factor in. However, for nearly all decisions, there is a common measure that can be applied in coming to a view on decisions: the predicted effect on profi tability and return on capital over the relevant timescale. This provides a ready measure of whether a decision has delivered the planned result.

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Case Study:Terminal 5 at Heathrow

Terminal 5 at Heathrow is now generally regarded as a success story. However, the problems faced by British Airways (BA) and BAA Airports Limited (BAA) over the opening are well publicised. This was a case of a good project, being delivered on time and on budget, which foundered for a while because of the failure to take the right decisions about the opening.

The learning from this experience is usefully set out in a very detailed study of the diffi culties published by the House of Commons Transport Committee in November 2008, after BAA and BA gave detailed evidence to the Committee.

As they noted, both BAA and BA recognised that the opening of the terminal carried inherent risks and sought to plan for them. An extensive programme of familiarisation and training of staff was mapped out and attempts were made to ensure that new software being used was comprehensively tested.

Efforts were also made to learn the lessons from the openings of other new terminals around the world and, after such a risk assessment, the project was scaled back. Instead of a big bang move of all BA fl ights to the new terminal, it was decided to move about 70% of fl ights involving about 50% of passengers and their bags in the fi rst phase.

Why then, in the light of all this good decision-making practice, did the new terminal not function effectively on that opening day on 27 March 2008, with extensive loss of baggage and thousands of items only being reunited with their owners after heroic crisis management arrangements by BA and BAA staff?

The reasons were multiple, as explained frankly by then Chief Executive of BA, Willie Walsh. There were unexpected problems of the staff gaining access to the terminal, because of issues over car-parking and security clearance. There were software problems with the new IT, there were problems caused by inadequate communication between the two major organisations involved, and there were diffi culties caused because staff were unfamiliar with the new environment and systems. This latter and major issue was largely caused because the training time had been reduced and training degraded from the original plan because of some delays in completing the building work.

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The evidence from BA was that any one of these issues might have been coped with, but the combination of them happening together was crippling. The lessons learned were:

• • Risk assessment:Risk assessment: The risk analysis that BA and its Chief Executive endorsed when the go live date was agreed was over-optimistic;

• • Stress-testing:Stress-testing: The dummy pilot testing of the systems used, which had been carried out, was probably done on a basis too far removed from real life circumstances;

• • Analysis:Analysis: Truncating the training and familiarisation time for staff was done without suffi cient appreciation of the potential consequences;

• • Stakeholder involvement:Stakeholder involvement: The importance of frank and open and speedy communications between all the players across the two organisations was not recognised early enough;

• • Robustness:Robustness: The decision to go ahead with a very substantial rather than a smaller pilot, which would have broken the move into more manageable, smaller roll-outs, was higher risk than recognised, though BA argued that on fi nancial and operational grounds it had very little choice.

Nonetheless BA, with BAA, was able to work effectively and creatively to recover from the situation and from its perspective much of the project was very successful, and much more positive than the general public perception. In hindsight the problems seemed predictable; but at the time no one foresaw the actual problems that occurred in combination or brought them forcibly to decision-takers’ attention.

Some of the factors for good decision-making were neglected. What was done was not suffi cient to prevent the problems encountered because some of the decision-making traps - over-optimism about IT and training and insuffi ciently clearly expressed dissent and communication problems - derailed what had been up to then a successful project. In part, the success so far and the drive to deliver it as originally envisaged drove the decision-makers on: their hedgehog hearts overcame their fox brains.

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5. Decision-Making in Government

Our interviewees made clear to us that many of the kinds of decisions made within Government, and the processes and procedures used to take them, follow the same pattern as those in the private sector. There are projects to run, purchases to make, strategic plans to create, appointments to be made, and investments to assess. Many of the same techniques for ensuring that these kinds of decision are sound – project planning and investment appraisal procedures, for example – are very similar and organisations have borrowed from one another and had the same consultancy advice.

One former Permanent Secretary summed it up well:

“Good decision-making in Government as elsewhere depends on intelligent people getting together and talking frankly, in the context of a clear overall strategy, about: well summarised papers reviewing sound evidence; having a robust debate about the issues with a suffi ciently wide network; reaching, documenting and promulgating clear decisions; making sure that what was decided was doable and that someone was responsible for the implementation; ensuring reports were commissioned on the progress of implementation; and making space to ensure that these were systematically reviewed, action adjusted if necessary and lessons were learned for future decisions.”

This is very similar to the analysis we had had from senior leaders in business.

5.1 Governance Structures for Decision-Making

A key difference between the sectors comes from the rather different governance arrangements, where there are distinct differences between the Ministerial role and that of Directors on Company Boards. The three levels of Ministers – broadly Secretaries of State, Ministers of State, and Parliamentary Secretaries – have, by virtue of the responsibility bestowed on them by the electorate and Parliament, by convention about their offi ces of state and by a plethora of legislation, a broader and more detailed accountability, than Boards of Directors. How they exercise their authority too, is as susceptible to personal choice as their private sector counterparts. Some Secretaries of State feel, for example, that they need personally to get involved in a great degree of detail. Others delegate more to their Ministerial colleagues and to offi cials.

As in business, civil servants will provide advice, analysis, options and recommendations and will take on executive and implementation functions like company executives. There are the same kind of formal meetings, with regular patterns of departmental boards and reviews of balanced scorecards, for example. There will also be awaydays and strategy meetings, though the nature of government may mean there is less chance for top teams to get to know one another really closely in the same way as in business because of the range of issues being dealt with, the exceptional time pressures, the lack of

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continuity of individuals in their jobs and the focus on individual transactions rather than longer term collective goals.

Across departments there is also the complex of Cabinet Committees serviced by the Cabinet Offi ce, which provides for the formal consideration and decision-making on business that touches on the responsibility of more than one department or involves signifi cant expenditure or novelty of approach. Below these levels, senior civil servants within government departments will operate similar business management and progress chasing arrangements to Executive Boards.

However, it is probably fair to say that the distinctions about roles are more blurred in Government, as all Ministers may fi nd themselves regularly accounting to press and Parliament for quite detailed issues. There is also perhaps a greater risk that informal discussions can supplant the more formal mechanisms. There can be greater pressures arising from matters of political sensitivity and media interest. These can make the day to day agenda more signifi cant than formal set pieces through the year. As a result, government behaviour can appear more fragmented and driven by individual issues of current sensitivity than is perhaps often the case in business.

5.2 Presentation of Material for Decision

There is, however, a striking similarity between the way in which information and options are prepared for top level decision-makers across sectors. Senior offi cials and Ministers express exactly the same preference as senior leaders in business for succinct two or three page papers pared down to provide them just with what they need to know to decide between the options and the recommendations put to them.

There is also the same drive from decision-makers to have short presentations at which they can probe and stress-test propositions and evaluate the risks, though some Ministers commented that their experience of briefi ng in government was that it was often more focused on the paperwork than the face to face. On this, one former adviser to Ministers said:

“The public sector reading culture sometimes lacked discipline and put a great load on decision-makers to absorb bulky information, leaving them too little time to refl ect.”

A former Minister of State said:

“There could be a kind of risk averse approach to briefi ng which saw it as dangerous to leave anything out, when the skill was to know what to leave in.”

5.3 Tendency for Greater Complexity in Government

In any case, ninety percent of our interviewees, from both Government and business, suggested to us that there are many ways in which decision-making in Government tends to be more complex and at times even more demanding:

• Consequences: While business decisions often have serious consequences, Governments are sometimes dealing with issues which have even

There could be a kind of risk averse approach to briefi ng which saw it as dangerous to leave anything out, when the skill was to know what to leave in.

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more critical potential consequences on a wider range of stakeholders. They can involve decisions of major signifi cance to the whole country’s economy, the environment, social problems or foreign relations, including ultimately the waging of war;

• System Failure: Issues often become the concern of Governments because other systems have failed, and there is a demand from companies, voters and the media for the Government to step in;

• Politics and Values: Government decisions frequently have a political element to them, and the options available and their advantages and disadvantages are more likely to be perceived differently by those holding a different political philosophy and values. Moreover in Coalition Government there are even more formidable challenges because subtly or substantially different philosophies and values need to be synthesised and reconciled;

• Constant Spotlight: Government decisions are likely to be subject to political comment and hostile criticism, sometimes even before they are taken, from opposing political parties, in a way that few businesses experience. In effect, Governments have to defend decisions against opponents organising a hostile “take-over bid” almost every day of the year;

• Scale and Scope: the scale of Government activity is often massive with very large budgets and numbers of employees. In many cases, as our bar chart in Figure 3 overleaf illustrates, this involves leadership, control and management of a scale and diversity comparable with major private sector counterparts. It is much more diffi cult for Government to change the scope of its activity, and abandon a costly “product line“ for defence, counter-terrorism, the old, the sick, the unemployed or the inhabitants of a particular region, for example;

• Indirect Implementation: Governments are very often relying even more than businesses on other agencies to implement policies - local government, the police, doctors, hospitals, the armed forces, companies, the voluntary sector, even consumers for example – so for implementation of strategies they often need, more than businesses, to infl uence other stakeholders rather than control the outcome directly themselves;

• Elusive Success Criteria: the criteria for measuring success in achieving a goal are also not always as clear or available as quickly. Government policies might often have a more signifi cant differential impact on different stakeholders, so some might be satisfi ed and others disadvantaged, and the fi nal outputs can be more diffi cult to judge and measure. There is no clear bottom line for many aspects of social policy, and economic policies are often affected by a whole range of infl uences and external factors, for example.

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5.4 Ministers’ Own Testimony on the Challenges to Decision-Making

The current and former Ministers to whom we spoke highlighted a number of challenges for decision-making in Government compared to business, which link to the model we outlined in Figure 1:

• Depth of Expertise: Ministers found themselves quite frequently appointed to positions where they were dealing with subject matter with which they were unfamiliar. Ministers very often had not worked before in large organisations, nor had many had prior experience of signifi cant management and corporate leadership roles;

• Focus: the demands on Ministers’ working lives were often even more challenging than those in business. One Cabinet Minister we talked to with experience at Board level in the private sector said:

Figure 3

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27

“It is perhaps an odd thing in Government that some of my most important decisions are taken at one o’clock in the morning after reading a paper from a red box, because days are taken up with meetings, committees, Parliament and other business.”

Another said he did not think that people:

“always recognised the threat to good decision-making that comes from not giving senior people suffi cient time to absorb, think about and discuss strategic decisions.”

Most Ministers told us that they were absorbed in meetings, parliamentary activity and other business for much of the day, and they usually took one or two Ministerial despatch boxes home each evening and sometimes more at weekends. Analysis of one former Cabinet Minister’s box showed it contained over 100 documents to read with around half potentially needing decisions. Another former Cabinet Minister told us that they realised that something was not quite right when:

“people began to try to have meetings with me in the lift going out of the building.”

• Continuity: there was often turbulence in the appointments that Ministers and senior offi cials held. A former Minister reminded us that he was followed in his post by 6 colleagues who spent only between 7 months and 2 years in the job. Senior offi cials too, often have limited tenure, with a maximum “four year rule” set by the Cabinet Offi ce to encourage people to broaden experience and the recent practice of encouraging early retirement of senior offi cials to provide more opportunities for promotion;

• Team-working: a number of Ministers also commented that they had much less infl uence over the teams within which they were working than seemed to them to be the case in business. Ministerial appointments tended to be made by Prime Ministers, sometimes with little consultation with departmental Secretaries of State or consideration of team balance. While Ministers were normally consulted about senior appointments in their department, their room for infl uence was limited by provisions to prevent Ministerial patronage. Personal appointments were limited to a few special advisers;

• Learning Opportunities: preparation and continuing professional development for Ministers was often very limited (as the Institute for Government report, The Challenge of Being a Minister, has recently pointed out). A number of former Ministers told us that they strongly regretted this and would welcome many more opportunities to compare notes and review their options.

5.5 Other Challenges in Relation to Government Decision-Making

Most of our interviewees suggested that there is plenty of evidence of good decision-making in Government, with thorough analysis, good exposure of options, well-informed advisers, thorough procedures and effective implementation. It would be quite wrong to suggest otherwise, and that is not what we found. However, some of those we interviewed indicated that some of the realities of Government can on occasion inhibit decision-makers in

People began to try to have meetings with me in the lift going out of the building.

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Government from adopting some of the practices outlined in Figure 1 which appear to increase the chances of good decisions being made, such as:

• Link with Strategy: the pressure on Ministers’ time can mean that they are in situations where they fi nd themselves reacting to events, and taking decisions on an issue by issue basis, rather than being able to think longer term and proactively, with a thoughtful read across to overall strategy, to infl uence developments.

• Stakeholder Consultation: fears about premature disclosure and challenge in Parliament and the media sometimes inhibit both Ministers and civil servants from consulting stakeholders at an early stage about proposals. Our interviewees from business were particularly critical of this reluctance, and suggested that it should be possible to build relationships where there is suffi cient trust for early consultation to take place on a confi dential basis. They pointed to cases like the recent protests over proposed forestry sales as examples of where early consultation could have avoided subsequent problems;

• Focus and Delegation: Ministers’ fears about being exposed as insuffi ciently informed about detail, and civil servants’ nervousness about being blamed for keeping information from them, can mean that both Ministers and senior offi cials are bombarded with additional detailed briefi ng “just in case”. There is not the same separation between Boards and Executives in the private sector and roles can blur, so that Ministers can become heavily engaged in what in business would be seen as operational matters;

• Risk Assessment: fears about the risk of public criticism in Parliament and the media about mistakes, or reforms that appear not to be delivering what had been expected, can mean a very risk averse culture or sometimes one with an erratic approach to risk. One senior offi cial with experience of working in the private sector suggested to us that compared with the private sector:

“certainty was valued more than creativity and it was rare for the top team consciously to decide to take a risk because the potential benefi t was worth it.”

Another said that there seemed:

“perversely to be a refusal to take small risks over little things and yet sometimes a rush to take risks over very substantial matters.”

Another added that he agreed with this and:

“good decision-making processes should be used as a matter of course not a matter of convenience.”

• Challenge and Stress-testing: insecure relationships between offi cials and their frequently changing Ministers can mean that offi cials are nervous of expressing frank criticism of options favoured by Ministers or of exposing possible dissent within the team or between departments over options. One former senior offi cial with long experience at the centre of government referred to:

Good decision-making processes should be used as a matter of course not a matter of convenience.

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“a loss of confi dence in the civil service which seems collectively too frightened to provide the challenges of the kind offered in the past… A healthy decision-making system needs an institutional architecture that provides rigorous challenge and probing of ideas and potential consequences.”

A former Permanent Secretary also made an interesting distinction between:

“decision courtiers whose focus was on getting support for an idea favoured by a politician or Chief Executive and who sought out evidence to justify the preference and then moved on to the next proposition; and true decision analysts and decision stakeholders, who subjected ideas to rigorous testing and who took on shared ownership of the decisions and their successful implementation.”

He strongly favoured the latter, and indeed such an approach is supported by the evidence from academic studies (see Appendix B).

• Short-termism and Optimism: understandable concern to make an impact during a short tenure in an appointment, and the pressure of the electoral cycle, can lead to a focus on short-term rather than longer-term goals. It can also fuel a propensity to seek to be over-optimistic about fi nancial outcomes and occasionally put too much weight in decision-making on the need for instant reactions to media criticism or the imposition of very quick solutions for complex policy challenges.

5.6 Justifi able Optimism over Developments to Meet the Challenges

If these challenges seem formidable, there was amongst our interviewees a welcome and we think justifi able optimism that developments over the last few years are meeting these challenges. Our interviewees pointed to:

• Governance: considerable innovation and fl exibility within the Cabinet Committee system, including giving more opportunities for expert civil servants to make presentations to Ministerial Committees, and setting up committees with mixed membership of Ministers, outside experts and civil servants. A former senior offi cial told us that these kinds of groups were often more effective than the traditional meetings where Ministers met without expert advisers to make key decisions. The different patterns could work well if set up in the right way. However, he added:

“Ministers did not like speaking in front of large numbers of apparent spectators and some civil servants seemed strangely inhibited in speaking in front of groups of Ministers...The key element that brought good decisions from the Committee process was Ministers who did more than just read departmental briefs – who cared about the issues and gave colleagues constructive challenge.”

Another former senior offi cial said that both formal and more informal processes could work well provided all the right people were present and the decisions were properly recorded and communicated.

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• Focus: the initiatives by some departments – HM Revenue and Customs and the Department for Environment and Rural Affairs, for example – to strive to put less material up to Ministers (though both departments stressed that the message needed to be repeated regularly and Ministers had to be prepared to be robust and absorb fl ak if points to which they had not been privy were raised in the media or Parliament);

• Evidence and Analysis: the considerable stress in recent years on the need for “evidence based” policy with much more frequent use of impact assessments and development of quantitative and qualitative data in support of submissions to Ministers;

• Stress-Testing and Dissent: the readiness of many former and current Cabinet Ministers, including the current Prime Minister, to make clear that they wanted frank robust advice and not to be told what people thought they wanted to hear;

• Expertise: the Professional Skills for Government initiative which has sought to develop a greater degree of professional expertise in both depth and breadth amongst those advising Ministers;

• Team-working and Trust: the increasing trend (at least before recent budgetary constraints) for Ministers and senior offi cial teams to get to know one another better through more extended strategy meetings and awaydays, so business is less transactional and more based on trusted relationships and mutual understanding of overall strategy;

• Continuity: the commitment by the current Prime Minister and the Deputy Prime Minister to seek to keep Ministers in their posts for longer;

• Simulation: the increased use of opportunities to test potential responses to crises through simulation of possible scenarios;

• Learning Opportunities: the work of the Better Government Task Force, the Institute for Government and the National School of Government (soon to be succeeded by the new Civil Service Learning organisation) in providing more inputs, briefi ng, seminars and learning sets to help Ministers and senior offi cials share experiences and prepare for senior positions;

• Evaluation: the input of the departmental Capability Reviews in mirroring aspects of the Board evaluations carried out in business.

5.7 Helpful Role of Private Offi ces and Special Advisers

Our interviewees also pointed to the positive, invaluable and effective contribution of the role of Private Offi ces and Special Advisers in contributing to the decision-making processes within Government. One senior offi cial commented that Special Advisers could be very helpful in raising sensitivity to stakeholders and cross-departmental interests. But they also commented:

“They could either be blockers or facilitators. Blockers just got in the way. Real facilitators understood the issues and Ministers’ goals and could help shape options for decision.”

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5.8 Positive Role of Departmental Boards

It was especially emphasised that the continuing development of Departmental Management Boards, including the recent appointment of more non-executive directors from outside central Government, was a highly positive way of providing for review of departmental strategy and management. The non-executive directors could, in the view of a number of our interviewees, play a very positive role in helping Ministers focus more on their key strategic priorities and fi nd ways of more delegation to non-Cabinet Ministers and accountable senior offi cials.

5.9 Key Perspective

Refl ecting on all these factors, one senior Chairman summed up the views of most of our interviewees by saying:

“The context and nature of decision-making in Government is often different and on occasion even more challenging than that in the private sector”.

He added that, in his view, it was no surprise that successful top businessmen were not always successful in Government.

“But good governance, effective stress testing and risk assessment and fi erce concentration on implementation are key to good decisions in any sector.”

The context and nature of decision-making in Government is often different and on occasion even more challenging than that in the private sector.

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Case Study:Changes to junior hospital doctors’ training and assignment

Considerable problems over decision-making emerged in the Department of Health over arrangements for changing the way in which junior doctors applied for the next stage of their training in 2006/7.

Like the BA and BAA case, this too was part of a wider project with a clear and well defi ned aim: introducing a substantially different and more cost-effective way of designing and delivering post-graduate medical training. The fi rst phase was seen as having worked very well, with a revised 2 year foundation medical training programme agreed, that was seen as delivering a higher standard of care.

The diffi culties began when the Department attempted to drive forward the next stage, and introduced a radically new process for allocating junior doctors to the next stage of their training. The aim was to rationalise a system where people chose between 64 different specialisms, and which to the designers of the new system seemed to be ineffi cient. Many people appeared to try out a series of rather random choices and some stayed at the training grade for many more years than seemed rational.

The problems arose when the software for the new applications system for junior doctor posts did not work effectively, and many senior doctors and consultants expressed their dislike of the thinking behind the system and the way it had been imposed. They then withdrew their co-operation, which was necessary for the system to work, in a much publicised move. There was a lot of public criticism of the changes.

The analysis of those involved, assisted by the work of an outside reviewer Professor Sir John Tooke, identifi ed a number of lessons to be learned:

• • Goals:Goals: There was a general lack of clarity about the overall policy objectives for the Modernising Medical Careers project;

• • Governance:Governance: The project was not supervised and managed as well as it could have been;

• • Over-optimism:Over-optimism: Optimism over the progress of the fi rst stage of the project had clouded judgement over the chances of the next stage working. Optimism over a major IT change, a not uncommon phenomenon in Government and business, had under-estimated the risks;

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• • Stakeholder Involvement:Stakeholder Involvement: Those driving the project had inadvertently had inadequate contact with the key stakeholders in the medical profession and elsewhere and had not taken their ideas or comments on board, but were seeking to impose their own vision because they saw effi ciency gains. But this emphasis on effi ciency alone meant they did not properly consider effectiveness and practicability. Many junior doctors did not want a reduced choice of options or an earlier requirement to choose a specialism, however effi cient that might seem.

• • Challenge and Group-Think:Challenge and Group-Think: The project team also felt under great pressure to deliver results quickly, though in reality this pressure was largely self-imposed. There was a kind of group-think that suggested that there was a need to press ahead at almost any cost and it was not challenged.

From this experience, and some others, the Department of Health’s senior managers recognised the need to make fundamental changes in the way in which they both thought about change management and chose to work with other stakeholders within the NHS. They redoubled efforts to ensure that there was absolute clarity about the goals they were trying to achieve, while adopting the principle of “subsidiarity” espoused by the European Union, amongst others. This provides for decisions to be delegated down to the lowest possible level, provided that there is accountability for the results.

While it was allegedly Lenin (a good hedge-fox) who said “Trust is good, but control is better”, one former Permanent Secretary put to us a contrary view:

“There are actually very few decisions which are so sensitive or politically charged that they do not benefi t from early and effective consultation with those likely to be involved in implementation, who are likely to have direct knowledge of the likely effects, complications and risks. This is especially so when often Government is working through very long delivery chains over which it does not have direct control. It is often a mistake to want to confront the so-called forces of reaction. Finding acceptable ways of meeting their concerns by adapting approaches might well make for better policy which actually gets implemented.”

The story of the case study is again one where confi dence from early success tended to blind those involved to a number of decision-making factors that might have given the project a greater chance of overall success, and to decision traps that lurked for the unwary. The experience and the rigour with which the lessons learned were assessed and applied led to some valuable and important changes of approach. The assistance of an independent external reviewer of the lessons to be learned also paid clear dividends.

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6. Decision-Making in a Crisis

A number of those we interviewed referred to the special challenges of making decisions at a time of crisis, and suggested that there could be valuable lessons to learn from looking at what worked well in such situations. They believed that the approaches which proved effective in the most challenging situations might give useful insights on factors that would be relevant in everyday decision-making too.

6.1 Common Success Factors

Those who had had such experiences tended to refer to a number of common factors that made a difference:

• Clear Goals: Common shared mission to deal with the crisis;

• Teamwork: The trust that existed within the team dealing with the crisis. It was seen as essential that those in a crisis team could rely on each other;

• Continuity: The availability of the right people with the right amount of expertise, including people who had deep experience of the area which the crisis impacted upon, so that their intuitive feel could be relied upon if information and evidence was scarce;

• Focus and Delegation: The crisis team set the goals but left the detailed implementation to those on the ground who could respond to events. Where possible, confi dence in this was built up through scenario testing – working through likely situations before in some kind of simulation. A number of people said that they were strong believers in scenario planning and realistic role playing of the most challenging potential situations that could be envisaged;

• Communication: The ability to develop excellent communication with all stakeholders and keep channels working even at times of high work volumes, with strong attention to handling media interest and using available media to help get key messages across;

• Evaluation: The commitment to review regularly how implementation of agreed action was actually happening and willingness to change tack if there was clear evidence of ineffective results.

6.2 Good Practice in Government

There was considerable recognition from those we spoke to that effective crisis management techniques are often put into practice well in Government, with the well-publicised Cabinet Offi ce Briefi ng Room A (COBRA) procedures cited as a good model. Similarly, the mounting of simulation exercises, for example, to test responses to fl ooding dangers and potential human and animal virus threats was seen as valuable.

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6.3 Bird Table Briefi ng

It was also seen as useful to take on board the expertise that was available within the armed forces to contribute to effective decision-making at such times, since much of their training was simulating and testing the effectiveness of responses in crises. It was notable, for example, that one of the changes that made most difference to the handling of the last foot and mouth crisis had been the adoption of the armed forces practice of “bird table” briefi ng.

This is a systematic process used by forces on operations through which all those involved in leading the response across organisational boundaries come together at regular intervals during the day to assess reports on what is happening; to hear reports from those who had taken on a responsibility for an action previously, on what they had done and its effects; and to agree who was responsible for doing what next to deal with the latest situation. The clear accountability, the clarity and regularity of such communication and the concentration on implementation and review appeared to make a real difference to effectiveness.

6.4 Good Practice in Business

Our interviewees in business produced a number of similar examples. In the retail and health sectors there were regular simulations of potential challenges, and the systems developed were put into practice quickly at the fi rst sign of a problem. It was also suggested that the best systems involved a well understood drill to escalate problems to a higher level if something unexpected happened that could be critical to the business.

6.5 Delegation and “Mission Command”

There was strong support in such situations for delegation of as much decision-making as possible to those on the ground with direct contact with what was actually going on. Again, the Armed Services were cited as having good models to adopt, and the concept of “mission command” was highlighted here. This is quite the opposite of the command and control model often assumed by those outside the Services. In practice, it puts great stress on the fullest possible development of a shared understanding of strategy, goals and objectives – which are communicated with great thoroughness and constant repetition - but the maximum delegation of freedom to act, as the strategy is implemented. The origins and philosophy of “mission command” are set out more fully in Stephen Bungay’s recent book The Art of Action and in Appendix D.

6.6 Broader Relevance of Crisis Success Factors

The conclusion of those who related their experiences in crisis decision-making was that approaches and priorities which worked well in dealing with crises were also relevant to many everyday situations in both Government and business. The factors correspond well with the model and the X-factors that we have already identifi ed.

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7. Setting the Right Climate for Good Decisions

Both the academic studies and the testimony of our interviewees from Government and business have confi rmed that there is no easy way in which organisations can guarantee that their decision-making is infallible. Even where all or most of the factors we have identifi ed as important are present, something unexpected can derail the process, or those concerned can fall into a decision-making trap, or hit a wicked issue or an insoluble dilemma. Nor does any one sector have a monopoly of good practice.

However, our research has shown that what organisations and individuals can do is to work hard to set the right climate in which good decisions are more likely to emerge than bad. According to our interviewees, that comes from a combination of good governance, good processes and good awareness of what matters.

7.1 Governance

Good formal processes and governance seem to be necessary but not suffi cient to ensure good decisions. Without clarity on who needs to be involved, what their authority and accountability is, what the goal is, what options there are, what is recommended, what the risks are and a record of what has actually been decided, who is responsible for its implementation and what happened as a result, things can and will go wrong.

7.2 Factors for Good Decision-Making

However, even if the formal processes and governance are good, there is still plenty of scope for things to go amiss. That is where the factors set out in our model at Figure 1 come in and where the X-factors emphasised by our interviewees can make a real difference. These X-factors are the factors that are both critical to good decision-making and, on the evidence we were given, can also inadvertently be given insuffi cient attention or get crowded out by other pressing business or apparent priorities. They are neglected at a signifi cant cost.

7.3 Implications of Case Studies

The experience of those in our case studies is also powerful in this respect. The experience in both British Airways and the Department of Health, for example, was that even where projects were going well and lots of decisions were going right, there was scope almost to be lulled into a false sense of security. There was a temptation to succumb to pressures that some processes could be short-circuited, that “effi ciency” was more important than taking time to bring in stakeholders, that innovations could be brought in on a grand scale or that timescales could be compressed without high risk, and so on.

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The encouraging thing from these experiences was how much the organisations had learned from such challenges and from some searching evaluations of what had gone right and wrong, and how they had also made sure that the experience had been embodied in the organisations’ knowledge management and institutional memory. We heard of the value of this throughout our study.

7.4 Scope for Exchange of Experience

The interest that our interviewees expressed in others’ experience and learning suggests to us that there is plenty of scope for more exchange of experience and mutual learning in the future. There was a real openness for learning and an exchange of experience on such things as crisis management, pilot testing, scenario analysis, stress-testing and risk management.

7.5 Special Challenges for Government

We also believe that the evidence suggests that there is a particular challenge for those in Government to ensure that the climate is as favourable as possible for good decision-making. This is because most people acknowledge that decisions in Government are often more complicated and diffi cult to track and evaluate, and because the governance structures are often more volatile and subject to public accountability pressures.

In particular, the huge pressures on Ministers and on their time mean that those supporting them, and those wishing to infl uence their decisions, need to seek to ensure that their lives are not made intolerable and their decisions worsened by overload, poor opportunities for mutual refl ection and learning and inadequate delegation. As a very experienced former Cabinet Minister told us:

“Greater efforts should be made to delegate more decisions to non-Cabinet Ministers and to arrange business so that fewer decisions need to be put to Ministers. Civil servants needed to be cleverer at getting Ministerial agreement to criteria for decisions to be taken under delegated powers. Ministers needed to be cleverer at refusing to be seduced into believing that they needed to take every decision or know every policy detail. The culture for Ministers and offi cials needed to be changed.”

7.6 Recommendations

Our recommendations for business and for Government are therefore as follows:

For All

• Review how your organisation scores against the items in the model in Figure 1 and the X-factors of good decision-making.

• Check strategies and goals are well-defi ned and are clearly, consistently and constantly communicated.

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• Check delegations are clear and responsibility and accountability are delegated to the lowest possible level, but with sensitive escalation procedures.

• Consider piloting all major changes in manageable stages so modifi cations can be made to deal with any teething problems.

• Check there is good awareness of decision-making traps.

• Check there are good systems for fast feedback and for evaluating past experience and capturing the knowledge gained accessibly.

• Review the areas where sharing experience across organisations, sectors and national boundaries might help.

For Business

• Maintain the right balance between Boards and Executive management.

• Be aware of the danger of focussing only on short term quantifi able results and underestimating qualitative and reputational issues.

• Ensure suffi cient stress-testing of options and explore the possible intended and unintended consequences of a course of action.

• Encourage challenge within teams and work to avoid ‘group-think’.

• Clarify accountabilities and rights of veto over proposals in matrix organisations to avoid decision paralysis.

• Involve stakeholders at every stage. In particular, when working with Government, fi nd ways of building trust with offi cials and Ministers to encourage early consultation and reduce apprehension about premature disclosure.

• Make allowances for the additional complexity of Government decisions and where possible help resolve dilemmas.

For Government

• Use the experience of independent members of departmental Boards to help Ministers focus on key strategic issues and review how best to delegate more from Cabinet Ministers to other Ministers and offi cials.

• Encourage and where appropriate make specifi c provision for frank challenge, exposure of dissent and stress-testing of options up to the point of decision.

• Beware of being seen as reactive and piecemeal and take care to set with clarity, and constantly explain, overall aims and strategy.

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• Make sure that framing of decisions is not constrained by artifi cial departmental boundaries.

• Direct more focus to implementation with early consultation with trusted stakeholders, opening clear and effective channels for comment, information and data between front line staff and policy makers.

• Demonstrate commitment to greater continuity for Ministers and senior offi cials, and review the value of the “four year rule” for senior civil service appointments.

• Put greater emphasis when making both Ministerial and senior civil service appointments on selection for top teams, not just individual appointments.

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Appendix AAcknowledgements

The Whitehall & Industry Group and Ashridge Business School would like to thank the following for agreeing to be interviewed in the course of this research:

Ministers

Rt Hon Lord Kenneth Baker of Dorking

Norman Baker MP

Rt Hon Lord Des Browne of Ladyton

Rt Hon Dr Vincent Cable MP

Rt Hon Charles Clarke

Rt Hon Kenneth Clarke MP

Mr Paul Goggins MP

Rt Hon Peter Hain MP

Mr Nick Harvey MP

Rt Hon Patricia Hewitt

Rt Hon Lord Michael Heseltine CH

Rt Hon Lord Michael Howard of Lympne

Rt Hon Lady Estelle Morris of Yardley

Rt Hon Nick Raynsford MP

Rt Hon Lord Chris Smith of Finsbury

Rt Hon Lord Norman Warner of Brockley

Other interviewees from the civil service, business and local government

Stephen Aldridge Director of Analysis, Strategy and Innovation, Department for Communities and Local Government

Alex Allan Chairman, Joint Intelligence Committee, Cabinet Offi ce

Catherine Bell Non-Executive Board Member, United Utilities, Department of Health and Civil Aviation Authority

Lord Michael Bichard Former Director, Institute for Government

Jonathan Brearley Director of Energy Strategy and Futures, Department of Energy and Climate Change

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Sir Paul Britton Prime Minister’s Appointments Secretary, Cabinet Offi ce

Sir Andrew Cahn Vice Chairman, Public Policy, EMEA, Nomura Group

James Close Partner, Ernst & Young

Alex Cruttwell Managing Consultant, Defence Strategy & Solutions (formerly Ministry of Defence)

Dame Sally Davies Chief Medical Offi cer, Department of Health

Simon Edmonds Director, RDA Transition and Closure, Department of Business, Innovation and Skills

Andrew Fisk Director of External Relations UK & Eire, Procter & Gamble

Tony Ginty Head of Public Affairs, Marks and Spencer

Sir John Grant Executive Vice President, Policy and Corporate Affairs, BG Group

Lucy de Groot Chief Executive, Community Service Volunteers

Dave Hartnett Permanent Secretary, Tax, HM Revenue and Customs

Sir Tony Hawkhead Chief Executive, Groundwork UK

Baroness Sarah Hogg Chairman, Financial Reporting Council

David Hunt Assistant Head, Corporate Capability, Ministry of Defence

Christopher Jary Centre for Working with Ministers and Parliament, National School of Government

Sir Bill Jeffrey Former Permanent Secretary, Ministry of Defence

Bob Keen Head of Government Relations, BAE Systems

Ray King Chief Executive, BUPA

Matthew Kirk Group External Affairs Director, Vodafone

Angela Knight Chief Executive, British Bankers’ Association

Stephen Lovegrove Chief Executive, Shareholder Executive

Miller McLean Formerly Group General Counsel and Group Secretary, The Royal Bank of Scotland Group plc

Sue Middleton Vice President, Corporate and UK Government Relations, GlaxoSmithKline

Sir Richard Mottram Non-Executive Chairman, Amey

Sir John Parker Chairman, National Grid and Anglo American plc

Sonia Phippard Director, Water, Floods, Environmental Risk and Regulation, Department for Environment, Food and Rural Affairs

Alison Platt Divisional Managing Director, Europe, Bupa

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Paul Roberts Former Managing Director, Improvement and Development Agency for Local Government

Ian Rushby Non-Executive Director, Ministry of Defence

Paul Skinner Former Chairman, Rio Tinto

Clare Salters Deputy Secretary, Northern Ireland Offi ce

John Sills Director of Policy, Ministry of Justice

Dave Snowden Founder and Chief Scientifi c Offi cer, Cognitive Edge

Michael Stephenson Associate Partner, Strategy & Change, IBM

Martin Stanley Former Chief Executive of the Competition Commission

Sir Hugh Taylor Former Permanent Secretary, Department of Health

Dianne Thompson Chief Executive, Camelot

Priscilla Vaccassin Former Group Human Resources Director, Prudential

William Vineall Deputy Director, Policy & Innovation, Social Care, Department of Health

Erica Zimmer Head of Public Affairs, J Sainsbury plc

Without their generosity of time, their openness and their willingness to share their experience and insights this report would not have been possible.

The author would also particularly wish to thank the Chair and members of the Editorial Panel for their wise counsel and constructive suggestions on both content and potential contributors; Nic Greenfi eld and Sunjai Gupta of the Department of Health for their help with access to case studies; Group Captain Richard Powell of the Defence Academy for his help on material on Mission Command; Mark Gibson, Gill Riches, Kati Balazs and Sarah Gilgallon of The Whitehall & Industry Group for their willing help, insightful comments and good-humoured, unfl agging and invaluable support; Dr Mark Pegg of Ashridge for his sustained and enthusiastic guidance, and his colleagues in Ashridge’s Virtual Learning Resource Centre for their help in literature searches; Christopher Jary of the National School of Government and Martin Stanley, author of How to be a Civil Servant and convenor of the website www.civilservant.org.uk for their willingness to be a sounding board for early ideas; and his wife and family for their tolerance, helpful comments and constant encouragement.

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Appendix BHighlights from Some Academic Research

Our review of the academic research that seemed particularly relevant and useful in helping to increase the chance of good decisions covered a number of topics.

A brief digestible “taster” summary of the research is set out below and the full references to the articles and books cited are given in Appendix F.

Decision-Making Traps

One particularly helpful contribution to the debate was sketched out in the Harvard Business Review in 1998. It suggests that there are a range of decision-making traps that beset unwary decision-makers and that decision-makers need to be alert to these and take precautionary action to avoid the traps. Common and key traps can be summarised as:

Anchoring: when considering a decision, the mind gives disproportionate weight to the fi rst information it receives, even where it may be wrong.

Status Quo: decision-makers display a strong bias towards the status quo.

Sunk Cost: decision-makers give weight to “sunk costs” – past irrecoverable investment of money or effort – even though these are irrelevant to future choices.

Framing: decision-makers react differently depending how a problem is framed and whether it is posed in a way which highlights gains or losses or sets out the scale of a risk in different ways.

Estimating and Forecasting: decision-makers often make errors because of too much reliance on uncertain forecasts of the future, which are either over-confi dent, too prudent, or are too infl uenced by memory and not enough by research.

The authors suggest that the antidotes to these traps are:

• View a problem from different perspectives;

• Seek information from a variety of sources;

• Don’t prejudice others with your own views before seeking theirs;

• Don’t be trapped by others’ initial analyses, but think yours out afresh;

• Remind yourself of the objectives and examine if the status quo really serves them;

• Don’t treat the status quo as the only option, but always identify others;

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• Avoid exaggerating the effect of change;

• Think of future situations as well as the present;

• Don’t settle on the status quo for the sake of avoiding other hard choices;

• Seek views from people not involved in earlier decisions;

• Admit mistakes without blame and if in a hole, stop digging;

• Watch out for sunk-cost biases in others’ submissions;

• Don’t accept at face value the way a problem is posed – think about it in different ways fi rst;

• Try thinking about problems in a way which spells out the full scale of risks in as neutral a way as possible, without focussing more on either gains or potential losses;

• At a decision point, try to question whether the answer would be the same if the question was posed in a different way;

• Start by looking at the range of possible outcomes;

• Make your estimates as honest as possible and don’t adjust them without discussion, taking a second look at the most sensitive variables; and

• Test the data rigorously and don’t accept anecdote where fact is available.

(Extracted from Hidden Traps in Decision-Making: Harvard Business Review, October 1998)

More recently, a book by Andrew Campbell and Jo Whitehead of Ashridge and Sydney Finkelstein of Dartmouth USA - called Think Again – Why Good Leaders Make Bad Decisions and How to Keep It from Happening to You - sets out a further set of red fl ag conditions that can lead to bad decisions. These are:

• Misleading experiences: when we think we can see a parallel with a situation we have dealt with before, but which is not the same;

• Misleading pre-judgements: when we suppose a decision we have made before can simply be applied to a new but different situation;

• Inappropriate self interest: when we bias our judgements even unconsciously because we know we have something to gain from a particular decision; and

• Inappropriate attachments: when we have an emotional attachment to some potential outcome because of something that has happened in the past.

The Ashridge team suggest four strategies to safeguard against these traps:

• Experience, data and analysis: gather as much data and as broad experience as possible, to ensure alleged parallels are soundly based on reliable evidence, and contrasting views are explored;

• Debate and challenge: ensure a favoured decision does not go without debate, if necessary by encouraging the use of a devil’s advocate;

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• Governance: ensure collective and agreed processes challenge individual self-interest;

• Monitoring: provide for progress of a proposed course of action to be monitored carefully through implementation with freedom to change course if the strategy is clearly awry.

Framing and Complexity

Another insight, the cynefi n framework - derived by Dave Snowden and named from a Welsh word, which is commonly translated into English as ‘habitat’ or ‘place’,- has been explored by, amongst others, IBM and the US Defence Department. The model suggests that one-size in decision-taking certainly does not fi t all and approaches used by decision-makers need to be applied fl exibly and tailored according to the complexity of the decision challenge, broadly as follows:

(Adapted from the cynefi n framework outlined in A Leader’s Framework for Decision-Making, Harvard Business Review, November 2007)

Complex Decision Challenges

• There is no real agreement on the goals

• There are a large number of interacting elements

• The results of any intervention are dynamic and infl uence each other greatly without clear cause and effect

• There are no clear experts

• Research and probably pilot experiments are needed to clarify what works

Chaotic Decision Challenges

• There is no real agreement on goals

• There are a large number of interacting elements

• New evidence causes confusion rather than offers clarifi cation

• Everyone is clear that urgent action is required but no one is certain what might work

• Emergency measures need to be put into effect to attempt to stabilize the situation and move the challenge into another domain

Complicated Decision Challenges

• There is agreement on the goals

• There is insuffi cient knowledge to establish without doubt cause and effect or the answer to questions about options

• But there is enough evidence to suggest that the issues are knowable and researchable

• Expert advice needs to be acquired and assessed by informed stakeholders

Straightforward Decision challenges

• There is agreement on the goals

• Cause and effect is known

• Best practice guidance can be issued

• Answers to questions about options are fairly clear cut

• Outcomes can be fairly accurately predicted

• Decisions can readily be taken after measured presentation of the analysis

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Decisions as Process, not Events

David Garvin and Michael Roberto, authors of What You Don’t Know about Making Decisions, argue from their research that the difference between leaders who make good decisions and those who don’t, is very often because they see decision-making as a process not an event and invest in it, promoting inquiry not advocacy in constructive confl ict and stress testing of ideas. They ensure that people stand back from pre-established positions, consider many alternatives, use well-defi ned criteria to judge options, and promote debate in line with Hume’s dictum: “truth springs from arguments among friends.”

Data and Intuition

Two other particular and potentially opposing strands of thinking have also emerged in the last few years:

• On the one hand writers like Ian Ayres in Supercrunchers have pointed to the importance of sophisticated analysis of appropriate data as important to reaching valid decisions. Ayres gives lots of examples where attention to in depth analysis of data can reveal patterns and links not obvious to the superfi cial observer. A related argument is mounted by Duncan Watts in his book Everything is Obvious (once you know the answer): How Commonsense Fails Us. Watts suggests that when people suggest that they can forego analysis because commonsense suggests an obvious answer, what is often described as commonsense is simply the wisdom of hindsight. Those relying on intuitive commonsense to look forward often fail to make correct predictions, and would have been helped by rigorous quantitative analysis, being suspicious of intuitions and looking for ways of testing them.

• On the other hand, contributions from experts on the functioning of the brain – like Jonah Lehrer in The Decisive Moment and Henry Minztberg and Frances Westley in Decision Making; It’s not What You Think - have stressed how experience and informed intuition can make a critical difference in reaching good decisions quickly enough, especially at a time of pressure and crisis. Professor Eugene Sadler-Smith in Intuition in Decision Making: Friend or Foe? has similarly suggested that intuitive judgement can be smart “when it is informed by learning and experience; used in complex loosely structured problems which cannot be solved by rational analysis alone; where it has been developed in an environment with good feedback and an open sharing of intuitions; and when intuitive judgements are treated as hypotheses to be tested.”

The message from the two strands is perhaps best viewed as complementary. As Ian Ayres in Supercrunchers puts it:

“Our intuitions, our experiences, and, yes, statistics should work together to produce better choices.”

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Foxes and Hedgehogs

This is taken further through the research carried out in the USA by Professor Philip Tetlock. In his book Expert Political Judgement he looks at the way in which judgements are framed and the personality types which are most prone to use them, and compares this with analysis of which styles are most likely to be effective in making accurate predictions about the future.

Professor Tetlock suggests that his study of predictions made by experts indicates that those who are most “hedgehog-like”, and prefer simplicity and fi nality rather than a balance of probabilities, and work hard to downplay evidence that challenges their prejudices, tend to be less successful in their predictions than “foxes”. The foxes, who are suspicious of one way of seeing an issue and expect uncertainty, are more prepared to adopt ideas from others with dissenting views and more inclined to pilot major changes and adjust and adapt when unexpected events cast doubt on their beliefs.

His analysis suggests that decision-makers are often hybrids of both styles, and that organisations can benefi t from both styles – the certainty and clarity of the hedgehogs and the adaptability of the foxes: hedge-foxes and fox-hogs perhaps. But he goes on to suggest that in the currently uncertain climate facing decision-makers, we need to encourage the fox style rather more.

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Appendix CDilemmas and Wicked Issues

Many of the issues that pose the greatest challenges for decision-makers are of great complexity, cross organisational boundaries, and appear to involve solutions which themselves create further problems because of their unintended consequences or the unavoidable side effects for other parties.

Wicked Issues

In 1973 Rittel and Webber, professors from Berkeley University, identifi ed ten properties that they thought identifi ed a category of problem so hard to deal with that they might be described as “wicked”. They defi ned these as:

1. There is no defi nitive formulation of a wicked problem.

It is not possible to write a well-defi ned statement of the problem, as can be done with an ordinary problem.

2. Wicked problems have a no stopping rule.

You can tell when you have reached a solution with an ordinary problem. With a wicked problem, the search for solutions never stops.

3. Solutions to wicked problems are not true or false, but good or bad.

Ordinary problems have solutions that can be objectively evaluated as right or wrong. Choosing a solution to a wicked problem is largely a matter of judgement.

4. There is no immediate and no ultimate test of a solution of a wicked problem.

It is possible to determine almost right away if a solution to an ordinary problem is working. But solutions to wicked problems generate unexpected consequences over time, making it diffi cult to measure their effectiveness.

5. Every solution to a wicked problem is a “one-shot” operation; because there is no opportunity to learn by trial and error, every attempt counts signifi cantly.

Solutions to ordinary problems can be easily tried and abandoned. With wicked problems, every implemented solution has consequences that cannot be undone.

6. Wicked problems do not have an exhaustively describable set of potential solutions, nor is there a well-described set of permissible operations that may be incorporated into the plan.

Ordinary problems come with a limited set of potential solutions. Wicked problems do not.

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7. Every wicked problem is essentially unique.

An ordinary problem belongs to a class of similar problems that are all solved in the same way. A wicked problem is substantially without precedent; experience does not much help you to address it.

8. Every wicked problem can be considered a symptom of another problem.

While an ordinary problem is self-contained, a wicked problem is entwined with other problems. However, those problems don’t have one root cause.

9. The existence of a discrepancy in describing a wicked problem can be explained in numerous ways.

A wicked problem involves many stakeholders, who all have different ideas about what the problem really is and what its causes are.

10. The planner has no right to be wrong.

Problem solvers dealing with a wicked issue are held liable for the consequences of any actions that they take, because these actions will have such a large impact and are hard to justify.

This analysis has been followed up by Professor Keith Grint of Warwick University who has suggested that such wicked problems form some of the most diffi cult problems that beset modern managers, especially in the public sector. This is partly because they involve problems over systems rather than problems over issues. In his words, the answers to such problems are not clear cut and are going to take a long time to construct. They are then only likely to be clumsy solutions - not the elegant solutions of the simple problem solver. They will lead to “more appropriate” outcomes rather than the best outcomes, and will require constant effort to maintain.

Decision-makers will need to start by accepting that imperfection and recognising that making do with what is available is not just the best way forward but the only way forward. Such ways forward must be devised through looking for actions that most people agree on. The assumption is that no one has the solution to the problem in isolation and the problem is a system not an individual problem.

As Grint describes it, a wicked approach implies that uncertainty remains at the heart of decision-making and cannot be eliminated by some scientifi c schema. In effect, the ability to make decisions in the face of ambiguity – and to not make decisions in the face of desperate but ill-advised calls for action by others - is one distinguishing feature of successful over unsuccessful leadership. Or, as Keats more eloquently put it, this Negative Capability, the ability to remain calm amidst a sea of ambiguity, and not to rush to decide what to do, remains a priceless asset and not something to be overcome or avoided at all costs.

Thus the leadership role with a Wicked Problem is to ask the right questions rather than provide the right answers because the answers may not be self-evident and will require a collaborative process to make any kind of progress.

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Dilemmas

Similarly, dilemmas are situations where the decision-maker is not likely to be able to meet the aspirations of stakeholders approaching a problem from quite different perspectives. The criteria against which the worth of outcomes will be judged will here often vary signifi cantly between different stakeholders, The former Shell executive, Fons Trompenaars, is one writer who explores many such dilemmas arising from different cultural expectations, such as whether following rules is more important than loyalty to individuals. Compromises are often not the answer, because they are unacceptable to all the stakeholders.

Handling

Sometimes it may be possible to deal with wicked issues and dilemmas by fox-like tactics – applying the X-factors and adopting elements from different sets of stakeholders’ analyses that meet a range of sets of expectations. But sometimes a frank admission of the complexity of the challenge, and that one group’s views can never be wholly satisfi ed, is the only available course and the approaches suggested by Professor Grint and outlined in the cynefi n model in Appendix B offer the best way forward.

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Appendix DInsights from the Armed Services on Strategy and Delegation: the Mission Command Approach

Mission Command is a style of leadership that seeks to convey understanding to subordinates about intentions of the higher commander and their place within his or her plan, enabling them to carry out missions with maximum freedom of action and appropriate resource.

The essence of Mission Command

In practical terms, Mission Command, as enshrined in British military doctrine, has fi ve essential elements:

a. Commanders ensure that their subordinates understand their Commander’s intentions, their own contribution, and the context within which they are to act.

b. Subordinates are told what effect they are to achieve and why.

c. Subordinates are allocated suffi cient resources to carry out their missions.

d. Commanders exercise a minimum of control over their subordinates, consistent with their experience and ability, while retaining responsibility for their actions.

e. Subordinates decide for themselves how best to achieve their superior’s intentions and objectives.

The Origins of Mission Command

The principles behind mission command draw on the ancient Chinese military thesis of Sun Tzu, who in his work The Art of War, emphasised the importance of positioning in military strategy.

He reasoned that the decision to position an army must be based on both objective conditions in the physical environment and the subjective beliefs of other competitive actors in that environment. He thought that strategy was not planning in the sense of working through an established list, but rather that it requires quick and appropriate responses to changing conditions.

Planning works in a controlled environment, but in a changing environment, competing plans collide, creating unexpected situations.

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As Chief of the Prussian and then German General Staff, Field Marshal Helmuth Von Moltke elaborated this thinking and promulgated the concept of Auftragstaktik (or mission tactics), which stressed the need for initiative and decentralised decision-making within an overall strategic design.

He famously understood that, as an operation progressed, its uncertainties diminished the value of initial planning and that commanders had to make decisions based on a fl uid, constantly evolving situation:

“no plan of operations extends with any degree of certainty beyond the fi rst encounter with the main enemy force.”

Auftragstaktik encouraged commanders to be agile and react immediately to changes in the situation as they developed. It replaced detailed planning with delegation of decision-making authority to subordinate commanders within the context of the higher commander’s intent.

He took great care to encourage initiative by commanders at all levels, only issuing the most essential orders, which provided the principal objective and specifi c missions: tactical details were left to subordinates.

For Von Moltke:

“The advantage which a commander thinks he can attain through continued personal intervention is largely illusory. By engaging in it he assumes a task that really belongs to others, whose effectiveness he thus destroys. He also multiplies his own tasks to a point where he can no longer fulfi l the whole of them.”

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Appendix EFurther Case Studies

Where things went wrong.........

Sir Cloudesley Shovell

The classic case study is a very longstanding one – that of Sir Cloudesley Shovell. In October 1707, as Admiral of the Mediterranean Fleet and one time MP for Rochester, Shovell set sail for England. But his fl agship and two companion ships were swept on to rocks off the Scilly Isles and wrecked. Of the 1315 men on board, only one survived.

It is said that a common sailor on his ship tried to warn the Admiral that they were off course, either because he was a native of the Scilly Isles and knew a distinct smell of the land or because he had been keeping his own log. Shovell ignored him and accused him of inciting mutiny. There can perhaps be no better illustration of the advantage of paying proper attention to front line knowledge and dissent and being prepared to alter course.

Boots The Chemist and Expansion into Healthcare Services

As revealed in the book by Ashridge colleagues Think again: Why good leaders make bad decisions and how to keep it from happening to you, the CEO of Boots, between 2000-2004, launched a new strategy that ultimately proved to be a failure. It ultimately led to his own resignation and the takeover of the company.

In his own words: “I had been formulating this ambition for Boots since I was merchandising director in the late 1980s. So, when I became CEO, I was determined to make it happen.” The company discontinued some product lines and expanded into services (for example dentistry, chiropody, and travel inoculations).

He thought that expanding the business to include healthcare services would set Boots apart from the competition. However, in practice, many of the markets did not offer much profi t potential. Nor was implementation a success. It had not been suffi ciently thought about or piloted and in practice the company did not have the right skills available to make the new services work effectively.

Other managers suggested that many of the markets Boots tried to enter were inherently low-margin businesses. But the CEO continued with this strategy anyway - he was resistant to new analysis or to suggestions for a rethink.

In this instance few of the decision-making factors were applied by the decision-makers and some of the decision-making traps kicked in too:

• the analysis was not good enough;

• the stress-testing was inadequate;

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• the implementation was not thought about in suffi cient depth; and

• the decision-maker made an optimistic pre-judgement based on past experience that was much less relevant than he thought.

Where things went right...........

Introducing the Minimum Wage

Decisions on the National Minimum Wage (NMW), taken by the Labour Government after it came to power in 1997, can be seen on refl ection to be successful and well-founded, despite some anxieties and scepticism expressed in the early days. Examination of the factors that led to this success suggests that the reasons were:

• Stakeholder involvement: When the Labour Party came into power in 1997, it chose not to legislate directly on the NMW. Instead it set up the independent Low Pay Commission (LPC) in July 1997. A key challenge facing the LPC was to set a level and defi nition of the NMW that was acceptable to employers, trade unions and also within the Government itself. To achieve this, the LPC had a carefully balanced make-up - three from a trade union background, three from an employer background, and three academics of which one was appointed Chair. It was supported by the CBI and TUC from the outset with strong representatives from both bodies.

• Good analysis: From 1994-6, the Labour Party undertook extensive preparation for the NMW introduction, both technically and politically, led by Sir Ian McCartney. There was an implementation group which deconstructed all the issues, a second group which looked at the mechanics (coverage, how to ensure compliance), and a political case was built (including the business case) to reposition the NMW into the wider economic context of welfare reform and making work pay.

The Low Pay Commission followed this lead. It was served by a substantial, full time and senior level secretariat drawn from relevant Whitehall departments and had the capacity to pursue a robust evidence-based approach. It was particularly concerned to assess the impact of the NMW on employment. In its nine months work it received written submissions from over 500 organisations, met 200 different interests across the UK, took formal oral evidence from nearly 50 representative bodies and funded a number of substantial research projects. Almost every adverse consequence of the NMW that was empirically accessible was investigated as rigorously as data and existing research permitted. The Commission’s conclusions were unanimous and emphasised that it had been cautiously prudent in making its recommendations.

• Implementation: The LPC also gave close attention to the practical issues of implementation from the start. The NMW was set at a cautious level which was acceptable to all parties.

• Evaluation: the LPC was established as a standing body, meaning it could solve issues over time, evaluate the effect of the NMW and be fl exible as necessary for a changing economic environment.

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In short, success was based on clear objectives, effi cient administration, authoritative evidence, avoidance of political bias and cautious implementation.

Reducing the Risk of Skin Cancer from the Use of Sunbeds

This area of policy needed to tread the fi ne line between being portrayed as either the unacceptable face of the nanny state, or the scandalous neglect of a serious health risk for the vulnerable. The key player was a civil servant who worked closely with colleagues, senior offi cials, ministers and others, all of whom became worried that the voluntary measures seeking to reduce use of sunbeds by children and young people did not seem to be effective.

The approach taken included:

• Evidence: extensive gathering of convincing evidence for this through studies involving reputable researchers, and independent and voluntary sector organisations, which showed conclusively that signifi cant numbers of children and young people were at risk;

• Analysis: commissioning and review of reports from authoritative scientifi c sources confi rming that there was evidence for a link between sunbed use and risk of skin cancer;

• Stakeholder Involvement: thorough consultation with an array of stakeholders including other departments promoting better regulation; other UK governments in Scotland (which already had legislation in place), Wales and Northern Ireland; the Health and Safety Executive; local authorities who would have to enforce any controls; and representatives from the private sector tanning industry;

• Flexibility and Creativity: The fi nal approach adopted was of a prohibition on allowing those under 18 years access to sunbeds in commercial premises, but one which did not require the issuing of licences to every sunbed operator, thus reducing potential bureaucracy. The legislation would bite only when there was evidence of the law having been fl outed. This won the support of the Better Regulation Executive and the local authorities who could use existing inspection regimes.

All this meant that there was widespread backing for the measure when it was put forward and – with a little bit of luck - it found a place as a private members bill (covering both England and Wales) in the crowded legislative programme before the 2010 dissolution of Parliament, and received cross-party support in both Houses. The promoters of the legislation had maintained a very clear objective and aim despite counter pressures, but had been fl exible over the means for their achievement and willing to meet the concerns of the stakeholders through extensive consultation.

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Appendix FBibliography and Further Reading

Articles

Hidden Traps in Decision Making, Ralph Keeney, Howard Raiffa and John Hammond (January 2006)

A Leader’s Framework for Decision Making, David Snowden and Mary Boone, Harvard Business Review (November 2007)

Intuition in Decision Making: Friend or Foe, Eugene Sadler-Smith, Training Journal (July 2007)

What You Don’t Know About Making Decisions, David Garvin and Michael Roberto, Harvard Business Review (September 2001)

Decision Making: It’s Not What You Think, Henry Mintzberg and Frances Westley, Sloan Management Review (Spring 2001)

Swimming for Their Lives – Waving or Drowning? David Laughrin, Political Quarterly (July-September 2009)

General Reading

The Challenge of Being a Minister, Peter Riddell, Zoe Gruhn, and Liz Carolan, Institute for Government (May 2011)

Working with Ministers, Christopher Jary, National School of Government (2004)

Think Again – Why Good Leaders Make Bad Decisions and How to Stop It Happening to You, Sydney Finkelstein, Jo Whitehead and Andrew Campbell, Harvard Business Press (2008)

Supercrunchers, Ian Ayres, John Murray (2007)

Everything is Obvious (Once You Know the Answer), Duncan Watts, Atlantic Books (2011)

The Decisive Moment, Jonah Lehrer, Canongate (2009)

The Art of Action: how Leaders Close the Gap between plans, actions and results, Stephen Bungay, Nicholas Brealey publishing (2010)

“Wicked Problems and Clumsy Solutions – The Role of Leadership” in The New Public Leadership Challenge, Stephen Brookes and Keith Grint, Palgrave Macmillan (2010)

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More Specialist Reading

Expert Political Judgement, Philip Tetlock, Princeton University Press (2005)

Did the Pedestrian Die? Fons Trompenaars, Capstone (2003)

Decision Analysis for Management Judgement, Paul Goodwin and George Wright, Wiley (2004)

Advances in Decision Analysis, Ward Edwards, Ralph Miles and Detlof von Winterfeldt, Cambridge University Press (2007)

Dilemmas in a General Theory of Planning, Horst Rittel and Melvin Webber, Policy Sciences (June 1973)

Case Study Sources

Institute for Government National Minimum Wage policy reunion, Rutter, Jill, Hallsworth Michael, Harris Tori, Institute for Government (2011)

The UK’s National Minimum Wage, Manning, Alan, CentrePiece (2009)

The Process of Fixing the British National Minimum Wage, 1997-2007 Brown, William (2009) British Journal of Industrial Relations 47: 429-43

The Ashridge Journal 360 degrees (Spring 2009)

The opening of Heathrow Terminal 5, Twelfth Report of Session 2007–08, House of Commons Transport Committee

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Registered Charity Number: 1061584Registered in England Number: 3340252

The Whitehall & Industry Group (WIG)80 Petty FranceLondon SW1H 9EX

Tel: +44 (0)20 7222 1166info@wig.co.ukwww.wig.co.uk

Ashridge Business SchoolBerkhamstedHertfordshire HP4 1NS

Tel: +44 (0)1442 843491info@ashridge.org.ukwww.ashridge.org.uk