Great Britain decided to leave the European Union. Apple bet on iPod, iPad and iPhone. Amazon is weighing where to locate a second headquarters. These are big-bet decisions with a broad impact and significant value at stake for organizations.
They’re also risky and often involve a high degree of uncertainty. If you wait for certainty, the chance to make a bold move – say, about strategic direction, M&A and resource allocation – usually has vanished.
Truisms abound for making big decisions. Think hard about your options. Bring insight, not just intuition. One organization has posted this sign: In God we trust. All others must bring data.
Yet, getting the basics right isn’t sufficient generally. In our experience, organizations that consistently make decisions well use three ingredients. They emphasize decision velocity as much as decision quality. They add more debate and mitigate bias, and they choreograph the process from start to finish. Let’s look at each:
Make speed part of the process: It’s often better to make a fast decision with 80 percent of the necessary information and analysis than wait until everything is available. We’ve seen companies wait so long to acquire a target that in the meantime, a competitor grabs the prize. To avoid this, senior leaders must focus on the decisions only they can make – setting strategy, (re-)allocating resources, M&A, bold commercial moves, etc. – and delegate the rest.
Also, involve more people but give fewer a vote. Favor dynamic debates with lots of input, then shut it down and decide. Be clear about where decision-making resides – an individual or committee. If it’s a committee, who specifically has a vote? Break up the biggest decisions into meaningful chunks that can speed decisions when that’s critical. But design them to accelerate decisions by taking good ideas quickly to the next phase of exploration and analysis.
Stop presenting, start debating: Healthy tension, constructive dialogue and conflict spark high-quality decisions. This requires a foundation of trust and healthy team dynamics plus high-caliber leaders with good interpersonal skills and diversity of people and perspectives. Our research shows that quality of interaction trumps analysis every time. With those elements, you’re far more likely to make a good big-bet decision.
Diversity, focus and healthy conflict also help correct for inherent biases that often sneak into decisions, including by executive-level committees that can serve as an echo chamber to amplify rather than mitigate such biases. Historians often cite international events as examples of such groupthink, including the ill-fated 1961 Cuban Bay of Pigs invasion.
Choreograph the decision process: Grasp how decisions are made. Ages ago, a film about how a bill becomes U.S. law was three minutes long. The equivalent video today of how large global corporations make a big decision would take hours. Too often, decision-making requires a gauntlet of team alignment sessions, reviews and approvals.
When following the life of a decision, architect the process so it is made in one place with, at most, one additional approval. Otherwise, you waste time and can dilute accountability. Also, design governance around decisions and those that make them, not topics and meetings. And establish good governance “hygiene.” For example, shun back-room parleys to undermine decisions made.
Or, develop simple and clear charters to convey how decisions are made and who makes them. Tap someone to handle the administrative work, including follow-up actions after making a big decision. Finally, commit to a big-bet decision once made – even if you disagree with it.
If you want confirmation of these elements of effective decision-making, just read Amazon CEO Jeff Bezos’ 2017 letter to shareholders.