Right Decision and Decision Quality
Everything we do has a result. But that which is right and prudent does not always lead to good, nor the contrary to what is bad.
Earlier in this chapter, I defined a decision as clear or right when it is aligned with the decision maker at the time of the decision. Notice that arriving at a right decision in this definition does not guarantee good consequences of a post-decision state of affairs.
If you are a conventionalist, you judge a decision by its consequences. Because you cannot fully foresee the consequences at the moment of making the decision, you will be under the spell of fear of not making the right choice. If you are a revolutionary leader, like Walt Disney, you judge your decision by the degree of its alignment with your vision.
As leaders, we are paid to select strategies that "increase value to shareholders," "increase sales," and "improve effectiveness"—strategies that will deliver the best consequences to the business. All our decisions are made with these major objectives in mind. Given the higher-than-average competitiveness of this group, we are always on the lookout for strategies that will place our businesses ahead of competition and enable them to reach the status of "industry leader."
Therefore, as leaders, when we make a decision, we select a solution that will lead to the best consequences in our judgment. We also take responsibility for the consequences, independent of whether they turn out to be good or bad. Only those who are prepared to bear the consequences of a decision have the right to make it.
Experts in decision-making and negotiation techniques John Hammond, Ralph Keeney, and Howard Raiffa agree: "Although many people judge the quality of their own and others’ decisions by the quality of the consequences—by how things turn out—this is an erroneous view10."
Most strategic decisions involve uncertainty. When uncertainty is involved, a decision maker must foresee how things will evolve in the future when a proposed action is taken. Because you cannot predict the future, there can be no guarantees of how a decision will turn out—whether it will have good or bad consequences. The market, along with other forces, can interfere and change the environment. As a result, a good decision can turn out badly, and a bad decision can turn out well.
Consider the following example, in which a decision that was not thoroughly evaluated turns out well.
Did Ellen make a good decision to go through with the acquisition? She admits that the answer is no. However, if you did not know the details of the story, your outside assessment would have been that this acquisition was a success. But the success was unexpected and unforeseen.
Next, let’s consider an example when a perfectly good undertaking goes badly.
Did the founders make a good decision to open a company based on their research? The answer is a resounding yes. Were they justified in taking money from investors and signing contracts with customers? This answer is also yes.
It is common in the security software industry, however, to find problems with an algorithm during the first 10 years after the algorithm starts being used. Were the founders aware of this risk? Yes. Were they willing to take this risk? Yes. Unfortunately, in their case, this risk materialized. As a result, the consequences to those involved, such as founders, employees, investors, and customers, were not good.
Experts advise that "decisions under uncertainty should be judged by the quality of decision-making, not by the quality of the consequences10."
There are two major sets of decision quality parameters. One set is related to the quality of the decision-making process (such as its organization and rigor), and another set is related to the quality of the decision-making content (such as the depth and breadth of considered decision parameters and specific information related to the decision)11.
Inherent in the decision-making process presented in this book are standard parameters of decision quality included in these sets. For example, a good decision-making process requires that a business objective and an outstanding business need be addressed. It requires selecting an option that is better than others in satisfying the main objective and is projected to bring the best outcome to the business.
My definition adds a third evaluation factor—the level of internal alignment with the decision that brings extra clarity to the decision maker and, with it, the benefits I discussed before—commitment, flexibility, and a positive drive to execute the decision.
Here are the decision quality evaluation factors:
l Quality of the decision-making process
l Quality of the decision-making content
l Quality of internal alignment with your vision
We should judge a decision by the quality of the decision-making process, the quality of the data utilized in making the decision, and the degree of internal alignment with the decision maker.