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Leading Off
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Success, whether in business or your personal life, depends in part on making good decisions. At work, any decision you make—whether good or bad—has the potential to ricochet through your team, organization, and beyond. In a complex and rapidly changing business environment, making the right decisions in a timely manner becomes increasingly important. During the COVID-19 pandemic, leaders learned to make bold decisions quickly despite uncertainty. Yet many executives report dysfunctional decision-making practices at their companies. This week, let’s explore how you can untangle your decision making and create healthier decision-making dynamics for you and your team.
galaxy of stars
Cut through the system noise
Executives are aware of the importance of combating biases when making important decisions. Less noticed, but equally important, is understanding the “noise”—or unwanted variability—that affects your decision making. In their new book, Noise: A Flaw in Human Judgment, Nobel laureate Daniel Kahneman and Olivier Sibony describe how inconsistent and unpredictable inputs, as well as the ways people process information, greatly impact our ability to make steady and sound judgment calls. There’s more of this noise than you might think, and it infiltrates industries from insurance to medicine, as well as processes such as performance reviews. What can you do to mitigate the noise? Start with an audit to identify the degree of variability in your team’s decisions. Then improve your decision hygiene through preserving independent judgments to avoid groupthink, and make such practices second nature for your organization.
That’s the percentage of respondents in a recent McKinsey survey who say most of their decision-making time is used ineffectively. When limited to C-level executives, that number only slightly improves to 57 percent, but for middle managers, it rises to 68 percent. For a group that on average spends nearly 40 percent of their overall time making decisions, this inefficiency can have widely damaging effects. For managers at a Fortune 500 company, for example, it can lead to 530,000 days of lost working time and $250 million of wasted labor costs annually. See the exhibit below for three practices that can support better decision making.
A big number exhibit
person on a video call
There are many ways decision-making meetings can fail: a decision might not be made, the decision could be a bad one, or it could be slowed down. In this episode of The McKinsey Podcast, McKinsey senior partner Aaron De Smet and senior expert Leigh Weiss explain how better, faster decisions can be unlocked through better meetings. Before you head into your next decision-making meeting, pause and reflect on a few questions: Who is the ultimate decision maker? Is the decision being made at the right level? Are the right people in the meeting, and what are they contributing? Once a decision is made, seek buy-in to execute on that decision.
“Choice architecture is something that can apply in any company. How are we framing the options for people? How is that influencing the choices that they make?”
That’s Richard Thaler, a University of Chicago professor and Nobel laureate in economic sciences, who has long studied human behavior and the biases that thwart good decision making. While it’s impossible to present choices in an entirely neutral way, Thaler says this idea of “choice architecture” can help us become less susceptible to our collective biases and nudge people toward better decisions. In this interview, he also explores how technology and diversity in thought can play a role.
cubes and ladders
Beyond managing your own decisions and your involvement in decision-making meetings, you as a leader can encourage better decision making throughout your team by fully empowering your employees. Based on our research, organizations with leaders who empower others through coaching are nearly four times more likely to make good decisions and to perform better financially than their peers. Delegating and coaching may not come naturally to all managers or organizational leaders, but finding the balance of empowerment and guidance is a critical skill that can improve decision making and its cumulative impact across your organization.
Lead decisively.
— Edited by Dana Sand, an editorial production manager in McKinsey’s Atlanta office
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