Cumbersome decision-making processes, cognitive biases, and a false sense of the permanence of decisions can all work against leaders’ ability to sense and adapt to rapidly changing realities.
“Decision making is overrated.”
That insight penetrated my mind during the last years of my career in government. My job was to help manage the analysis we provided policymakers—the information that nourished the decision-making process. During the last 10 years of my career, I watched as big decision after big decision was made: in Iraq, in Afghanistan. Oftentimes the same fundamental questions were asked multiple times. Strategic reviews of policy options piled up on top of each other like beads on a necklace.
And that’s when it hit me.
Decision making was overrated.
To be accurate, it’s not really the making of decisions that’s overrated but, rather, the ceremony, infrastructure, and permanence that we attach to decision making. Many enterprises, not just government but also private businesses, initiate big processes when they need to make important decisions. Focus groups are convened, studies are commissioned, lengthy meetings are held, and then come the decisions. Sizable bets are made based on the information and analysis assembled during the process, although sometimes the decisions reflect just as much the intuitions of the key decision makers. The course coordinates having been set, the special decision-making process teams return to their regular day jobs, hoping for a decent interval of rest and relaxation before they are reconvened. More likely than not, their recall to action will be linked to the passage of time or some leadership transition.
I think we can all agree that this cycle of activity—exaggerated a bit, I admit, for dramatic effect—bears no relationship with how reality unfolds. The 7 billion people on this planet continue to interact with one another and make their own micro-decisions with little awareness of, let alone respect for, the decision-making cycle of large organizations or governments. And usually, sooner rather than later, the new realities that accrete every day begin to erode the solution space that was so carefully crafted by the formal decision-making process.
Perhaps it has always been this way, but I suspect not. Once upon a time, when there was less happening on the planet, organizations could make educated and largely correct guesses about the future—i.e., decisions. The validity of the decisions would eventually expire, but not before they provided the organization some tangible benefit, some actual lift or impetus. Of course, the ultimate value of the decision also depended upon how well it was executed. Many potentially great decisions were undermined by poor and indifferent execution.
But today it’s not just execution that can derail a carefully considered decision. Decisions are also undermined by the quickening pace of change. In their work on the Shift Index, John Hagel and John Seely Brown documented how, since 1965, the rate at which big companies lose their leadership positions has more than doubled.1 I’m sure the rapid adoption of new technologies in the last few decades bears a good part of the credit . . . or blame. While it took the telephone and electricity more than 25 years to achieve 10 percent market penetration in the United States, tablets achieved the same share in about three years. And, despite a recession, it took smartphones only four years to go from 5 percent to 40 percent market penetration of US households.2
Our ability to anticipate the future is deteriorating, I suspect in some exponential way. The shelf life of any decision is a function of the executive team’s sight horizon. And if that isn’t problematic enough, every time we make a grand decision about what to do next, we actually reduce our sensitivity to the developments that could signal us to change course. We become highly attached to the “sophisticated model” we developed and are loath to abandon it. This is known in cognitive sciences as the anchoring bias, a topic well explored by the Nobel prize-winning economist Daniel Kahneman in his most recent book Thinking, Fast and Slow.3
To stand a better chance of anticipating their own futures, organizations need to supplement their current decision-making infrastructures with more lightweight approaches to making sense of the world. The growing importance and application of data analytics are an obvious boon to sense making, but not if analytics is only used to support the annual strategic review or the new CEO’s first strategic plan. In fact, the benefits of data analytics are likely to be lost on organizations that let calendars be the only drivers of their strategic decision-making process.
Data analytics can instead be used to enable a decentralized and more modest approach to decisions. Micro adjustments should be made continuously by managers and workers empowered to respond to changing signals. The strategic plans developed by C-suite leaders need to incorporate constant testing of their assumptions against incoming data streams. Performance of management teams should be judged not just by how well they executed the annual plan, but by how long it took them to notice changing conditions and make appropriate adjustments.
When I was in government I would sometimes hear the question: “Are you suggesting that I revisit the decision we made a year ago?” It was a scary question; it implied that all the work we had done to staff the issue was somehow in vain and, even worse, that the official should risk appearing indecisive or lacking in conviction. Now I believe that that type of questioning is not only necessary, but perhaps the most important responsibility of a corporate team. The future belongs to those who revisit their decisions early and often.