The Decision-making Process, make it your competitive advantage

How to improve decision making quality,
speed and execution
Managing the
Decision Making
process
1
Source: Decide & Deliver, Bain & Company, Inc.
Harvard Business Review Press, Copyright, 2010
Focusing
on decision making
efficiency and
effectiveness.
Ron McFarland, Tokyo, Japan

2
4-Organize
Restructure the organization
to enable a better decision
making process.
2-Identify
Learn what the most
critical decisions are
now.
5-Promote
Expand and
promote the ideal
decision making
process throughout
the organization
1-Assess
Learn the current decision making
effectiveness (where strong,
where weak) and company health
3-Improve
Redesign the decision
making process to get
the best results.
Steps to improve decision effectiveness
There are five steps to achieve successful decision making in quality,
speed and execution.
Better
decisions lead
to better
performance
How good
are our
decisions?

3
Effective decision making components
Quality
How good are our
decision? Are outcomes
successful?
Speed
How fast are decisions
and execution?
Execution
How efficient is the
execution managed?
Effort
What is the expense of time,
energy and assets to achieve
what is decided? Is it too
much or too little?
Decision
management
How good is our
decision making
process?

4
Effective decision making components - Quality
Quality
Quality Decisions
1. They are based on relevant
facts.
2. They are based on good
risk analysis.
3. They have been evaluated
against alternatives.
4. They take into account the
ability to execute.

5
Effective decision making components - Speed
Speed
Decision speed
1. Speed is influenced by the speed of
information sharing and distribution.
2. Speed is influenced by trust.
3. Speed can save money.
4. Speed can improve profit.
5. Speed can add to customer satisfaction.
6. Speed can improve employee moral.
7. Speed can create a competitive
advantage over slower companies.
8. If the decision can be modified later, it is
better to decide quickly now!

6
Effective decision making components - Execution
Execution
Decision execution
1. It is often forgotten in the decision
making process.
2. It is putting decision into action.
3. Available ability, skills, capacities
and assets must be considered to
execute a decision.
4. Excellent execution can be a huge
competitive advantage against
competitors that do not execute
well.

7
Effective decision making components - Effort
Effort
Decision effort
1. It is the time and resources spent in
the decision and execution.
2. It is the trouble caused to all.
3. It is the emotional energy spent.
4. It is necessary but must be less
than the benefits gained by the
decision.
5. Effort can be too much or too little
considering the value of the project.

8
Research on decision making components
1. Decision making effectiveness equals
higher company financial
performance.
2. Decision quality, speed and
execution reinforce one another.
3. Appropriate effort is needed.
4. Process attention is very important.
Harvard Business Review Press, Copyright, 2010Ron McFarland, Tokyo, Japan

9
Step 1 (Assess): Company decision making evaluation
Speed
Select “1”, “2”, “3”, or “4” below regarding your company’s decision making
process.
Execution
Effort
Quality When making critical decisions, we choose the right course of action:
1. Less than 25% of the time.
2. 26 – 50% of the time.
3. 51 – 75% of the time.
4. Over 75% of the time.
We make critical decisions:
1. Much slower than competitors.
2. Somewhat slower than competitors.
3. Somewhat faster than competitors.
4. Much faster than competitors.
We execute critical decisions as intended:
1. Less than 25% of the time.
2. 26 – 50% of the time.
3. 51 – 75% of the time.
4. Over 75% of the time.
In making and executing critical decisions:
1. We either put in far too much effort (assets) or not nearly enough.
2. We put in too much or not quite enough effort than we should.
3. We put in somewhat too much or too little effort than we should.
4. We put in exactly the right amount of effort (assets) on critical decisions.
Source: Bain & Company, Inc.

10
Company decision making evaluation – result sample
Speed
Execution
Effort
Quality When making critical decisions, we choose the right course of action:
1. Less than 25% of the time
2. 26 – 50% of the time
3. 51 – 75% of the time
4. Over 75% of the time
We make critical decisions:
1. Much slower than competitors
2. Somewhat slower than competitors
3. Somewhat faster than competitors
4. Much faster than competitors
We execute critical decisions as intended:
1. Less than 25% of the time
2. 26 – 50% of the time
3. 51 – 75% of the time
4. Over 75% of the time
In making and executing critical decisions:
1. We either put in far too much effort (assets) or not nearly enough
2. We put in too much or not quite enough effort than we should
3. We put in somewhat too much or too little effort than we should
4. We put in exactly the right amount of effort (assets) on critical decisions.
3
4
2
3
Current decision making status:
1. Over 25: You are doing great, keep it up.
2. 21 – 25: Pretty good. Could be great.
3. 16 – 20: Worse than 50% of companies. Put in decision making action plan.
4. 15 or less: Major decision making process change required.
Total scoring method:
Quality X Speed X
Execution X (Effort/4)
Therefore, sample score is
18 (eighteen)
18

11
Organizational structure evaluation toward decision making
Decision style
Select 1-Strongly disagree, 2-Disagree more than agree, 3-Agree more than disagree, or
4-Strongly agree for the below regarding your company’s organizational structure and the
decision making process.
People
Culture
Priorities
We make decisions in a style that is effective. They
appropriately balance inclusiveness & momentum.
(1, 2, 3, 4)
Behaviors
We put our best people in the jobs where they can
have the biggest decision impact.
(1, 2, 3, 4)
Our leaders at all levels consistently demonstrate
effective decision behaviors.
(1, 2, 3, 4)
Our culture reinforces prompt, effective decisions
and action throughout the organization.
(1, 2, 3, 4)
People understand their priorities clearly enough to be
able to make and execute the decisions they face.
(1, 2, 3, 4)
Roles
Processes
Measures & incentives
Structure
Individuals are clear on their roles and
accountabilities in our most critical decisions.
(1, 2, 3, 4)
Information
Our processes are designed to produce effective,
timely decisions and action.
(1, 2, 3, 4)
The people in critical decision roles have the
information they need when and how they need it.
(1, 2, 3, 4)
Our measures and incentives focus people on
making and executing effective decisions.
(1, 2, 3, 4)
Our structure helps, rather than hinders, the
decisions most critical to our success.
(1, 2, 3, 4)

12
Organizational structure evaluation toward decision making - example
Decision style
People
Culture
Priorities
We make decisions in a style that is effective. They
appropriately balance inclusiveness & momentum.
(1, 2, 3, 4)
Behaviors
We put our best people in the jobs where they can
have the biggest decision impact.
(1, 2, 3, 4)
Our leaders at all levels consistently demonstrate
effective decision behaviors.
(1, 2, 3, 4)
Our culture reinforces prompt, effective decisions
and action throughout the organization.
(1, 2, 3, 4)
People understand their priorities clearly enough to
be able to make and execute the decisions they face.
(1, 2, 3, 4)
Roles
Processes
Measures & incentives
Structure
Individuals are clear on their roles and
accountabilities in our most critical decisions.
(1, 2, 3, 4)
Information
Our processes are designed to produce effective,
timely decisions and action.
(1, 2, 3, 4)
The people in critical decision roles have the
information they need when and how they need it.
(1, 2, 3, 4)
Our measures and incentives focus people on
making and executing effective decisions.
(1, 2, 3, 4)
Our structure helps, rather than hinders, the
decisions most critical to our success.
(1, 2, 3, 4)
Current decision making status:
1. Over 35: You are doing great, keep it up.
2. 31 – 35: Good but room for improvement.
3. 26 – 30: There are major barriers to decisions.
4. 10 – 25: Major organization transformation is required.
Total scoring method:
Total score (add all the
scores)
26

Step 2 (Identify): Identifying critical decisions
13
List all major department project decisions and
the value they create.
Use surveys, interviews, and workshops to assess
the value and degree of attention required of
each.
Determine the single decision with the greatest
company value potential and risk.

Categories of critical decisions
14
Small but critical decisions that is made
and remade frequently and add up to
value over time. These are made every
day and none by themselves carry
much value, but add up over time. An
example would be how sales people
meet customers on a daily basis.
Small, frequent decisionsLarge, one-time decisions
Big decision that carry enormous value
and risk. Usually, onetime or
infrequent organizational or operational
decisions. If these decisions are not
made and executed effectively,
shareholder value could be lost. Once
made, they usually can not be modified
or undone.

15
Finding major decisions along the value chain
Operations
&
processing
Outbound
items
&
services
Marketing
&
sales
After
sales
support
(Processing)
End Users
Technology Development
Direct Activities
Suppliers
Human Resource Management
Infrastructure
Procurement
Support
Activities
Inbound
items
&
services
(Shipping) (Marketing) (Service)(Receiving)
Value Chain Activities
Valued added, cost incurred over time
and a profit margin

Analyzing the status of the most critical decision
16
Once the most critical decision is
determined, its status must be
reviewed.
Is it getting the priority
and attention required?

17
Critical decision status review
Rating
4-strongly agree;
3-agree; 2-disagree;
1-strongly disagree
Organization strengths and barriers
to efficient decision making
Decision roles are clear and appropriate. (1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
(1, 2, 3, 4)
We use a very effective decision making process.
We have the right information at the right time.
People’s objectives and incentives reinforce the right decision and action.
Participants have the right atmosphere and environment to make and execute decisions.
We use the appropriate decision style. (described below)
We have the right skills and talent in the right decision making roles.
Participants demonstrate good decision behavior.
Our overall culture reinforces making and executing the decision well.
Our structure facilitates making and executing the decision well and quickly with the right effort.
Were “1” or “2” selected?
Those are the concerns that
must change.

Four common decision making styles
18
1. Directing – Management tells people what to
do.
2. Participating – All related personnel are
involved in the decision making process, but
one person finally decides and is accountable.
3. Democratic - All related personnel vote on what
is best. The most popular decision is selected.
4. Consensus - All related personnel must agree to
move forward.

19
Step 3 (Improve): Decision Clarification
What?
Make sure everyone
knows exactly what is to
be done and why.
Who?
The roles of decision
makers, recommenders,
experts and executers are
decided.
How?
The approach and total
process are decided.
When?
A timeline of each
process is decided,
including milestones
and progress reporting.
Making
decisions
work
The decision goals
must be specific and
understandable to all!

20
Decision Clarification – What is it?
What?
Tips for success
1. Start all discussion with reminder of what
goal is to be achieved.
2. Explain the situation and reasons to make
the decision.
3. Break down the decision into specific
tasks and confirm task dependences (one
is finished first before another task starts).

21
Decision Clarification – Who should do it?
Who?Use the RAPID system to assign roles
1. R - RECOMMEND
2. A - AGREE
3. P - PERFORM
4. I - INPUT
5. D - DECIDE

22
Who performs the decision process (Rapid)?
R - Recommend
A - Agree I - Input
P - Perform
D - Decide
1. R – Recommend: Who will be responsible for making the recommendation that
something should be done? What options or alternatives does he recommend? What is
his final recommendation? This person is usually close to the problem or opportunity.
2. A – Agree: Who are experts or specialists that know many of the concerns that may
arise with the recommendation(s) given?
3. P – Perform: Who will actually execute the decision until it is successfully
completed?
4. I – Input: Who will be responsible for gathering information, data and facts? This
includes resource/skill requirement facts. This is the gathering point of information.
5. D – Decide: Who will make the final decision and be responsible for its outcome?
For major decisions, several people for these tasks should be assigned.
Usual sequence
#1#2
#4
#3

23
Decision Clarification – How should it be done?
How?
Use best practices to
determine each required
task throughout the
decision making and
execution process.

24
Clear steps and
sequences
- Logical steps and sequence for how decision roles and process will work in practice
- Clear guidelines on how and when to escalate and when to slow down.
Best-practice decision process - How
How?
Closure and
commitment
Structured
decision approach
Feedback system
Meetings and
committees
- Key meetings required for the decision are scheduled with purpose and
participants clearly understood. Why is the meeting needed, who should attend
and what is to be achieved?
- Meetings are reviewed and assignments confirmed afterward in writing.
- Final decision communicated to key personnel.
- The resources allocated (people and money)
- The execution plan in place (actions, accountable people, check-points).
- Ongoing review of execution progress for fast corrective action or expand on
successes.
- Conscious approach to decision: sets goals to achieve, considers relevant facts,
develops alternatives (at least two others) and makes a clear decision after analysis.

25
Decision Clarification - How
Tips for success
1. Handle (1) information gathering, (2)
alternative selection and (3) final decision at
different times so they can be thought over (not
at once).
2. Set a target of seven people to attend every
meeting. More or less is usually counter-
productive (information, perspectives opinions).
3. Track all bottlenecks and learn why.
How?
If there are too many people in
meetings, decision speed could
suffer.
If there are too few people
quality decision making could
suffer.

26
Decision Clarification – When should it be done?
When?
Best companies make
explicit schedules,
timetables, milestones,
and deadlines.

27
Visualizing a decision process– Time (When)
A Gantt chart can track the progress of each task throughout
the decision process.
Note: Reasons for all 1-rework, 2-rediscussions and delays should be
recorded, reviewed and analyzed.

28
Step 4 (Organize): Decision making & organization
Concerns
1. Does the organization structure support decision
making?
2. Does the organization support fast, accurate
information flow?
3. Are the decision maker’s, researchers’, experts’
and executers’ roles and responsibilities defined?
4. Are resources proper for the decision?

29
Decision-centered organization
Does the information flow well between them?
Has the decision maker, recommender, expert(s), researcher(s) and
performer(s) been decided?
In any decision, how many interactions does this involved? Is that
number appropriate?
A traditional organization chart must be flexible for every decision-
making and executing situation.
One decision to purchase equipment could be made in three departments.

COMMON CONCERNS: Critical decision-making locations
30
Should cover decisions
that cross product lines,
regions and functions.
National level
decisions
Local level decisions
Choosing the right people and locations for decisions to be
made and executed is an important common concern.
Global level
decisions
Should cover the local
operations, but be
coordinated with other
parts of the organization.
Should cover the
national operation, but
be coordinated with
other parts of the
global operation.
Strong global-national-
local communication link
Decisions made
in the wrong
place is
frustrating!

Where is the information
and how well and fast is it shared?
31
If information is lacking,
people give up.
At the world HQ In an individual
Needed Information
Concerns
1. Is it shared at all?
2. Is it understandable?
3. Is it distributed fast?

32
Step 5 (Promote): Multiply good decision making & execution
Action plan
1. Make good decision-making a priority in the
whole organization.
2. Leaders actively use good decision making skills.
3. Promote successful decisions.
4. Train others on good decision making
techniques.
5. Measure the impact on profit.

Managing the
Decision Making
process
33
Harvard Business Review Press, Copyright, 2010
Thank you
Putting your
attention and focus on
decision-making could give you a strong
competitive advantage.
Decision
making
focus

The Decision-making Process, make it your competitive advantage

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