Achieving success and objectives requires informed and intelligent decisions.
I have just started Problem, Risk, and Opportunity Enterprise Management by Brian Hagen. (Thanks to Jay Taylor for sharing the good news about the book.)
I have already highlighted some nuggets of wisdom:
- As Peter Drucker made clear in the 1950’s, “Whatever a manager does, he does through making decisions.” Decision making is the headwaters from which all value creation and protection flow.
- For the highly complex and impactful decisions faced by corporations, there are good, proven decision analytical methods available: decision analysis, Monte Carlo methods, game theory, and real options. But those methods require experienced experts and significant time and effort to apply. As a result, these methods are consigned to the most complex situations and are not used for generalized decision making. Moreover, decisions have a shelf life. Delaying a decision can be beneficial or deleterious, but usually time is working against you as options begin to dissipate or the situation is redefined by events. Opportunities can become risks, and risks can become costly problems. Decision timeliness matters.
- Every day, managers at every level within an organization are faced with the challenging question of how to allocate scarce organizational resources against a myriad of competing and usually worthwhile objectives. Of course, answering the question requires a method for sorting through, in an objective and practical manner, all the competing proposals as well as being able to demonstrate that some are better than others in allocating limited organizational resources.
- A recent study of 500 managers and executives showed that “98% failed to apply best practices when making decisions[1].”
Let me repeat and stress some of those key points.
- Decision making is the headwaters from which all value creation and protection flow.
- …good, proven decision analytical methods… require experienced experts and significant time and effort…[and] are consigned to the most complex situations and are not used for generalized decision making.
- Delaying a decision can be beneficial or deleterious, but usually time is working against you as options begin to dissipate or the situation is redefined by events. Opportunities can become risks, and risks can become costly problems. Decision timeliness matters.
- Every day, managers at every level within an organization are faced with the challenging question of how to allocate scarce organizational resources against a myriad of competing and usually worthwhile objectives.
- …answering the question requires a method for sorting through, in an objective and practical manner, all the competing proposals as well as being able to demonstrate that some are better than others in allocating limited organizational resources.
- 98% [of managers and executives] failed to apply best practices when making decisions.
Achieving success and objectives requires informed and intelligent decisions.
Those decisions are where risk is taken or addressed.
Those decisions are being taken every day across the extended enterprise – not just at periodic executive and board meetings.
A poor decision by a middle manager can have devastating effects on enterprise performance. As I said in World Class Risk Management and Risk Management in Plain English, you can trace the roots of calamities such as the BP Deep Water Horizon spill to poor decisions made below executive levels.
Taking the time to gather information (that is trusted, complete, and up-to-date) and involve the right people is essential to making informed and intelligent decisions. Yet, the great majority of decisions are made quickly and without a great deal of thought.
That may be OK, if the consequences of those poor decisions are inconsequential – but so many are not.
Now let’s turn to one of my heroes, Tom Peters.
He recently shared this:
I think Tom is, again, right on the money.
Decisions that can affect enterprise objectives should take time.
What do you think?
Do risk, governance, and audit practitioners consider the problem of decisions where insufficient time was taken to obtain the necessary information, consult with all affected parties, and THINK about the options?
[1] E. Larson, “Don’t fail at decision making like 98% of managers do,” Forbes, May 2017
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