Decision making is a business process (with a decision being the result of that process) that allocates goods and values in a system (such as one's own time and assets, family or organizational wherewithal, or community and national resources). In a business context, the system is the business organization as the decision unit, with the manager or executive the decision maker.
All businesspersons recognize the painful necessity of choice. Furthermore, choice must be timely because "not to decide to is to decide" (as the popular saying goes). Ultimately, what drives business success (where success is defined as producing, repeatedly, high-quality results [HQR]) is making high-quality decisions (HQD) and delivering high-quality implementation (HQI). (HQD + HQI = HQR.) Good decisions mean good business; great decisions mean great business.
The concept of decision making has a long history; choosing among alternatives has always been a part of life. But sustained research attention to business decision making has developed only in recent years. Contemporary advances in the field include progress in such elements of decision making as the problem context; the processes of problem finding, problem solving, and legitimization; and procedural and technical aids, and includes the very conception of decision making itself.
As with many fields, the language needs to be expanded to convey the richness of the processes within. Decision discourse is a phrase that attends to this task. "Decision work" replaces, in a way, the gaggle of concepts that used to be called "decision making." Decision work refers to all the parts of the decision process. Decision making is coming to have a much more specific meaning. "Making" a decision carries the implication that "a" decision is a unitary thing. It's really not. The word decision is a collective noun. One should really think of the decision as a mosaic of smaller pieces. In that case, decisions are "built" or constructed rather than made. Decision making, then, refers to work on the series of elements in the mosaic. These elements might be called "micro" decision work. Decision making works with the smallest part of the decision mosaic. "Decision building" refers to constructing the mosaic itself. Decision sculpting addresses decisional work on the whole mosaic, taken as a whole. It might be thought of as "meso" decision work. "Decision sculpting" refers to shaping the whole mosaic after it has been built and making some changes and adjustments in the overall way the whole mosaic fits together. It might be called "macro" decision work. "Decision taking" is a phrase that refers to decision action (making, building, sculpting) in a generic or general sense.
From the business perspective—which looks at the world through the lens of action—the following eight areas seem most salient for a brief consideration of this large field of study. First is the "issue context," or arena in which the issue is occurring. As firms globalize, context matters more and affects, as well, all the remaining issues. A second element deals with "problem finding." Exactly how is the "problem" defined, and by whom? Agenda setting refers to the movement from "issue" to "problem" to "ready for decision work." "Option creation" deals with the development of acceptable alternatives among or between which decisions will be taken. "Decision making process" addresses questions about the steps and rationale that organizations and individuals use in decision taking. Decisions, of course have "results." The "outcomes" looks at what, if anything, comes out of the decision work. Decision taking must concern itself not only with getting a result but also with legitimating that result. What, after all, would allow a loser to accept a decision that goes against his or her interests? Decision "legitimating processes" considers this issue. "Evaluating decision making and decision making patterns" is becoming more and more crucial, as "decisions" are coming to be recognized as crucial organizational "products." And finally, organizations are interested in "improving decision making."
All decisions are about issues (problems or opportunities). Three kinds of context help to shape the issues and the way we approach them. The macrocontext draws attention to issues outside the organization—global issues (exchange rates, for example), national concerns, markets, customers, supplier concerns, and so on. National style (the cultural orientations toward decision processes of different countries), and provincial and state laws and cultures within nations are also important in the macrocontext.
The mesocontext considers how issues are shaped by elements within the organization that affect the decision process. Typically these are organizational values, and structure and culture both overall and in terms of a firm's specific approach to decision making. Structure refers to the way the organization is configured—flat, hierarchical, loosely coupled, and so on. Values refer to commitments espoused by the organization ("values, vision, mission"). Culture refers to the particular combination of policy and practice that characterizes the firm at any given moment. Microsoft and General Motors have rather different cultures. Decision making within them is different. We need to consider how universities are different from governments, and how these in turn differ from Fortune 500 companies. More concretely, each organization has a "decision subculture"—that is, ideas and practices about how the decision process should be handled. This too is a part of the mesocontext. Technical and information aids are a part of the mesocontext as well. Readers might want to consider the decision subculture at their firm. For example, how does Microsoft approach decisions, as opposed to General Motors?
The microcontext addresses the immediate decision environment—the organization's employees, board, or office, the time of day, the amount of pressure, and so on.
To be a problem, an issue must be identified as problematic and of consequence. An important difficulty in decision making is failure to act until one is too close to the decision point—when information and options are greatly limited. Organizations usually work in a "reactive" mode. Problems are "found" when there is a "whack on the side of the organizational head." Nevertheless, processes of environmental scanning and strategic planning are designed (though they often do not work well) to perform problem reconnaissance to alert businesspeople to problems that will need attention. Proactivity can be a great strength in decision making, allowing less fateful experiments, prototypes, and research. Proactivity requires, however, a decision intelligence process that is missing from many organizations.
Even if problem finding works, a subsequent procedure of agenda setting is needed. Less is known about how potential problems get on the action agenda in companies. Too frequently, potential areas of difficulty are noticed, and even mentioned, but are neither heeded nor resolved.
As a problem is identified, information is needed about the problem and potential actions to be taken. One kind of information is purely factual—what is the problem? A complication is that the processes and procedures of gathering and packaging information—"editing"—often leaves business executives at the mercy of "editors." In 1958 James March and Herbert Simon (who later won the Nobel prize in economics) pointed to an important aspect of the editing process, one they called "uncertainty absorption." They suggest that since uncertain information may imply the editors (other staff in the organization) are inept, editors tend to edit out the uncertainty and present information to their superiors as more certain than it really is.
Another kind of information reflects the array and priority of solution preferences. These options are the "values" in the famous "fact and value in decision making" idea. What is selected as possible or not possible, acceptable or unacceptable, negotiable or nonnegotiable depends upon the culture of the firm itself and its environment, as in the statement, "We here at J&L always look for victory."
A third area of information is the possible scope and impact that the problem and its consequent decision might have. Knowledge about impact may alter the decision preferences. To some extent, knowledge about scope dictates who will need to be involved in the decision process.
Typically decision making groups cannot handle too many options. Sometimes, when there is really only one option, decision taking is really a ratification or validation of action. At other times the "painful necessity of choice" sits right on the table. The process through which "agendas" (or "issues") get translated into "alternatives" is a vital one. At issue here is the radical nature of the alternatives (transaction or transformational ones) and the number of choices. Research suggests that an odd number of choices is better than an even one, and that about three to five options seem optimal. If there are more than five options, brainstorming is best continued until the main planes of choice are revealed.
Several sets of elements need to be considered in looking at the decision process. One set refers to the rationales used for decisions. Others emphasize the setting, the scope and level of the decision, and the use of procedural and technical aids.
One approach to process is optimizing, in which all decision possibilities are listed, explored, and prioritized. The rational decision maker proceeds, perhaps one-item-at-a-time, through the list and the "best" solution is found after a complete review. This is also called the rational-individual approach. The problem, of course, is that such a process in its pure form cannot really be accomplished, and it is time consuming and exhausting. Alternatively, one can decide on something that is acceptable for the matter at hand, though less than optimal. These approaches reflect the famous distinction made by Simon, and reported (later) by March and Simon, between optimizing and "satisficing" in the solution of day-to-day organizational problems—the difference between finding the sharpest needle in the haystack and finding one sharp enough to sew with.
From a welfare economics perspective, the economist would list preferences, and similarly work through the list. This perspective focuses somewhat on system optimality, and questions might be raised about whether individual optimality should be replaced by system optimality (does Adam Smith's "hidden hand" really work?). David Braybrooke and Charles E. Lindblom presented a good discussion of these problems in A Strategy of Decision.
They also discussed an approach called disjointed incrementalism. Lindblom also called it "muddling through." Decisions are made "at the margin" or built, element by element (with an element being the smallest irreducible part of the decision matrix, a matrix that contains many such small parts), until the overall decision has been assembled. In this approach what we often call "decisions" might better be called a "decision mosaic"—a construction made of decisions about each element. (Once the mosaic has been constructed, one can use "decision sculpting" to look at the overall mosaic and make adjustments so that everything fits).
Timing and order can be crucial in the "disjointed incremental" approach. To be effective, decisions must be taken in a timely manner, such that the overall "construction project" can proceed. This just-in-time approach occurs at the appropriate moment, not the last possible moment. Sequence is also important. Dominant elements that influence later elements need to be completed first. While it is clear in construction that one does the basement first, then adds the other floors, such clarity is not always obvious in decision processes.
Sometimes events take over, in what R. Daft called "nonprogrammed" decisions. A process of constraints and tradeoffs dominate, often simultaneously.
In most cases, business decisions are made in collective settings called "meetings." Meetings, committees, and task forces have taken on a pejorative meaning. Most meeting humor expresses a meeting's ineptitude, as in the examples, "A camel is a horse constructed in a meeting," and "A meeting is a group which takes minutes to waste hours!" Meetings can be improved, and made into effective information processing systems that have decisions as their outcome. Much work has been done to develop more effective meetings. Antony Jay's famous piece, "How to Run a Meeting," essentially became the script for the well-known meeting improvement video starring John Cleese, "Meetings, Bloody Meetings" (Video Arts). Meetings can be thought of as places where "coalitions" crystallize and ebb. Coalitions are important in business organizations because of the myth of the individual decision maker. As discussed, organizational "editors" assemble information, making subdecisions along the way. But also, different perspectives are needed. The final decision mosaic is a construction of many hands, as often blessed as made by the decision maker. Our individualistic culture retains a fiction that individuals decide; more often they are components in a decision process. (The truth is even more stark—many times decisions are made, or not made, in the meeting situation without an actual decision maker; rather, there is a decision system/team that works well, or not.)
Finally, attention must be paid to problem scope and organizational level. Problems of large scope need to be dealt with by top levels of the organization. Similarly, problems of smaller scope can be handled by lower levels of the organization. Most organizations could improve on getting the right problems to the right decision groups. Typically, top-level groups spend much too much time deciding low-level, low-impact problems, while at the same time avoiding problems of high importance and organizational impact.
In recent years, a number of procedural and technical aids have been developed to deal with effective group decision making in meetings. Other such aids deal with the use of computers and computer-based decisions. Decision assistance software, called groupware, is helpful. Groupware is a term used for computer-based decision support systems, group writing programs, and group spreadsheet programs—programs that tally preferences in order to aid the business team in making high-quality decisions. There are many new titles in this area. One is Groupware and Teamwork: Invisible Aid or Technical Hindrance?, edited by Claudio U. Ciborra. For example, in "chauffeur-driven" systems individuals respond over a set of keypads to questions. Overall preferences can be displayed anonymously without regard to race, gender, or power. These improvements have led to virtual meetings and team interaction. Virtual meetings are becoming very much the norm. Here too there is much new literature. One example is Virtual Teams: Reaching across Space, Time, and Organizations with Technology, by Jessica Lipnack and Jeffrey Stamps.
Whatever the process, there also needs to be an outcome. Many times there is uncertainty in business meetings about what has actually happened. In exit interviews the author has conducted, participants of decision making meetings were unclear about what happened, and in a considerable number of instances different participants thought different results had been achieved. Stepping away from a decision, or failing to nail it down, is a nonresult that occurs for many reasons. One cause is stalling; opposing interests neutralize each other. Another cause is that decision making tears at group cohesion, something groups resist, especially when the same individuals defeated this morning are one's colleagues this afternoon. And there is sometimes honest confusion about what is up for decision, and which group (or person) should make it.
Once made, or while being made, decisions need to be legitimated. Decisions are accepted by the losers, even if they do not like the outcome. In an article published in Personnel, Robert Quinn, J. Rohrbaugh, and M. R. McGrath provided an excellent slant on decision legitimacy with four perspectives or orientations to decision making in organizations—consensual, empirical, rational, and political (see Table 1).
Readers will doubtless recognize their own styles, and may also sense that their business approaches different kinds of decisions with different perspectives, There may also be conflict over which perspective is appropriate. Two key points are important, and for high-quality decisions, some of each of these perspectives is needed. First, if an executive or firm works only in one area, then there is vulnerability and exposure from the others. Secondly, one can supplement or buttress one's own style with that of others, in a "decision team." It's unlikely that any of us have the ability to work in all of these areas; we can build a decision ensemble that can.
Another approach to decision legitimacy is to look at decision rules, which are defined as "extra group norms which make decisions ok." There are several decision rules, and they conflict with the other (an outcome determined by any one of them would have a different distribution of winners and losers). So far, five rules seem prominent: the extensive rule (one person, one vote); the intensive rule (what people who care or feel deeply about the issue want); the involvement rule (what those who might have to implement any decision prefer); the expert rule (what the "lawyers" or other experts think); and the power rule (what the boss wants). It appears these rules are brought into decision settings from the culture at large. Since they conflict, decisions tend to be sought that will address as many as possible. Three or more seems like the minimum acceptable number. In other words, managers who can frame decision options that can be seen to address at least three of these five at any one time are more likely to make decision progress than managers who can't.
Managers, executives, and businesspeople attending to each of these areas still have more elements to take into consideration. One of them is the quality of the decision. In the press for action, groups not only avoid decisions, they make premature decisions (and exhibit other problems). Quality decreases, and may even become negative (in which everyone is worse off than before.)
|Key Base||Participation Base||Data Base||Goal Base||Adaptive (Interests) Base|
|Result/Outcome||Good Feelings Results||Numbers Add Up||Logic Is Flawless||Stakeholder Needs Met|
Decisions are a product, and decision makers need to look at those products and ask if they are of high quality. One method is to sample the group's decisions (or your own, for that matter) and give them a grade: A B C D F. An A decision is one in which all stakeholders come out ahead, though they do not need to come out equally ahead. The B decisions involve winners and losers, but the final result is that the organization is better off. The C decision, a very common one, occurs when there is a shift in the winner/loser mix, but the organization is no better off than it was. The D is the opposite of the B; now there are some losses that mean that the organization is worse off. Finally there is the "nuclear war" decision, the F. In this decision, everyone winds up worse off than before.
This method relies on judgment, as a small group looks at each decision in the sample and gives it a grade. It certainly has no claim to superiority over other methods the businessperson might develop. The important thing about decision analysis, however, is that some system be used so that a review can occur. Once decision making systems are aware that their decisions are being reviewed, greater attention will be paid, and they are likely to improve, for reasons of the measurement itself.
What happens after the "grading"? The executive can sit down with a staff or an operations group and review the results, seeking to find out, in the spirit of constant improvement, what—about problem finding, problem context, decision legitimization, or problem solving—could be improved. This "decision audit" can be helpful in pointing to specific problem areas, and in calling attention to the whole area of decision making in general. Care must be taken to avoid blame, and to avoid a "shooting the messenger" mentality, in these situations.
A further step one can take is the decision autopsy. Here, one takes an A and an F decision and takes each of them apart. One seeks to find out what went right, and continue it; and what went wrong, and stop it. For most companies, these are not the same things. Because most organizations are doing some things right and some things wrong at the same time (we all have many processes going on), they tend to assume that if they are doing things right then they are not doing things wrong. This error is a common one, because wrong things and right things are generally in different business behavioral repertoires. Consider Figure 2. It assumes that an organization has a mix of success decisions and failure decisions. Depending upon the mix or ratio of these, the organization can be in any quadrant. True excellence requires that one do lots right, and little wrong (the upper left quadrant). Executives should seek to have a decision pattern that can fit there. Doing lots right and lots wrong at the same time can lead to a shooting star organization, one that can "drop dead" at any moment (upper right quadrant). Many organizations don't make many right decisions, or many wrong ones—they don't do much at all. These organizations are "lingering," and may move into "organizational death" (from the lower right to the lower left quadrant).
Why do decisions go wrong? Given the great desire to do the right thing, decision-wise, one might wonder why things go wrong, so badly, so often. The reason is that there are important limitations in each of the five areas mentioned above, especially in the decision process.
The following list (adapted from Braybrooke and Lindblom's A Strategy of Decision) suggests some of the more common and perhaps inherent, process limitations: limited organizational capacity; limited information; the costliness of analysis; interdependencies between fact and value; the openness of the system(s) to be analyzed; the diversity of forms on which business decisions actually arise. Problems of time insufficiency, distraction, low level of decision making skill, conflict over goals (and no way to resolve the conflict) are also important. While these cannot be completely controlled, executives can be alert to them.
A second category of difficulties is captured in a number of common pitfalls of the decision procedure. One such pitfall is "decision avoidance psychosis" that occurs when organizations put off until the very last minute making decisions that need to be made. One form of this is the "nondecision." It may appear a decision has been made, when in reality one has not. For example, one organization I knew put contentious things on the "list." Putting an item "on the list" had the "feel" of a decision; in reality, of course, as everyone knew, the list was never revisited.
Things here, and usually, go along very much as they have. Over time this pattern of nondecision can lead to the boiled-frog phenomenon, as described by Noel Tichy and Mary Anne Devanna in The Transformational Leader. This phenomenon takes its name from an experiment in which one puts a frog in a petri dish filled with water, and slowly heats the water over a burner. The frog boils to death. Why does it not leave? The answer seems to be that the barely perceptible difference in the temperature is never enough to cause action. This "just noticeable" difference phenomenon is an important source of nondecision in organizations. Members see things pretty much as they were, and thus wrongly conclude that there is no need to act.
A second problem is decision randomness. This process was outlined in the famous paper entitled "A Garbage Can Model of Organizational Choice," written by M. James Cohen, G. March, and J. Olsen. They argued that organizations have four roles or vectors within them: problem knowers (people who know the difficulties the organization faces); solution providers (people who can provide solutions but do not know the problems); resource controllers (people who don't know the problems and don't have solutions but control the allocation of people and money in the organization); and a group of "decision makers looking for work" (or decision opportunities). For effective decision making, all these elements must be in the same room at the same time. In reality, most organizations combine them at random, as if tossing them into a garbage can.
Decision drift, or the Abilene Paradox, is another famous bad decision case (described by Jerry B. Harvey). A group of people were outside of Abilene, Texas, with nothing to do. It was hot. Somehow they wound up going into town (many miles, dusty drive, no air conditioning) to have a very bad meal. On the way back, the "search for guilty parties" began. As they sought to find out whose idea this was, the troubling truth emerged that it was no individual's idea—each had thought the others wanted to do it; no one had questioned it. The Abilene Paradox has come to refer to group actions where there never really was a decision to take that action.
Decision coercion, also known as groupthink, is another very well-known decision problem, made famous by Irving Janis, author of Groupthink. In groupthink, decisions are actually coerced. It is a false agreement in the face of power. When the boss says, "We're all agreed then," most at the table say "Aye." Only later, in the hallway, when the real discussion occurs, do the problems surface.
Naming these common problems will not prevent them. Because they are so common, however, executives can be more aware of them, and seek to prevent them.
What can businesspersons do to improve the decision making process at their firms? Six sets of possibilities are explored below.
Decision making is at the heart of business operations. High-quality decision making is essential for businesses to thrive and prosper. Unfortunately, the decision process is hard to pin down and understand and often receives far less attention than it deserves. The future of one's business is written in the decisions of today. Every effort to make those decisions of high quality will be rewarded.
[ John E. Tropman ]
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