15 Oct 2001  Research & Ideas

What You Don’t Know About Making Decisions

As you weigh the options for your company's next step, how do you decide which way to turn? HBS professors David A. Garvin and Michael A. Roberto offer some tips in this excerpt from Harvard Business Review. Plus: Q&A with Garvin and Roberto

 

Unfortunately, superior decision making is distressingly difficult to assess in real time. Successful outcomes—decisions of high quality, made in a timely manner and implemented effectively—can be evaluated only after the fact. But by the time the results are in, it's normally too late to take corrective action. Is there any way to find out earlier whether you're on the right track?

There is indeed. The trick, we believe, is to periodically assess the decision-making process, even as it is under way. Scholars now have considerable evidence showing that a small set of process traits is closely linked with superior outcomes. While they are no guarantee of success, their combined presence sharply improves the odds that you'll make a good decision.

Multiple Alternatives. When groups consider many alternatives, they engage in more thoughtful analysis and usually avoid settling too quickly on the easy, obvious answer. This is one reason techniques like point-counterpoint, which requires groups to generate at least two alternatives, are so often associated with superior decision making. Usually, keeping track of the number of options being considered will tell if this test has been met. But take care not to double count. Go-no-go choices involve only one option and don't qualify as two alternatives.

Assumption Testing. "Facts" come in two varieties: those that have been carefully tested and those that have been merely asserted or assumed. Effective decision-making groups do not confuse the two. They periodically step back from their arguments and try to confirm their assumptions by examining them critically. If they find that some still lack hard evidence, they may elect to proceed, but they will at least know they're venturing into uncertain territory. Alternatively, the group may designate "intellectual watchdogs" who are assigned the task of scrutinizing the process for unchecked assumptions and challenging them on the spot.

Well-Defined Criteria. Without crisp, clear goals, it's easy to fall into the trap of comparing apples with oranges. Competing arguments become difficult to judge, since advocates will suggest using those measures (net income, return on capital, market presence, share of mind, and so on) that favor their preferred alternative. Fuzzy thinking and long delays are the likely result.

To avoid the problem, the team should specify goals up front and revisit them repeatedly during the decision-making process. These goals can be complex and multifaceted, quantitative and qualitative, but whatever form they take, they must remain at the fore. Studies of merger decisions have found that as the process reaches its final stages and managers feel the pressure of deadlines and the rush to close, they often compromise or adjust the criteria they originally created for judging the appropriateness of the deal.

Dissent and Debate. David Hume, the great Scottish philosopher, argued persuasively for the merits of debate when he observed that the "truth springs from arguments amongst friends." There are two ways to measure the health of a debate: the kinds of questions being asked and the level of listening.

There are two ways to measure the health of a debate: the kinds of questions being asked and the level of listening.
—David Garvin and Michael Roberto

Some questions open up discussion; others narrow it and end deliberations. Contrarian hypothetical questions usually trigger healthy debate. A manager who worked for former American Express CEO Harvey Golub points to a time when the company was committed to lowering credit card fees, and Golub unexpectedly proposed raising fees instead. "I don't think he meant it seriously, " says the manager. "But he certainly taught us how to think about fees."

The level of listening is an equally important indicator of a healthy decision-making process. Poor listening produces flawed analysis as well as personal friction. If participants routinely interrupt one another or pile on rebuttals before digesting the preceding comment, affective conflict is likely to materialize. Civilized discussions quickly become impossible, for collegiality and group harmony usually disappear in the absence of active listening.

Perceived Fairness. A real-time measure of perceived fairness is the level of participation that's maintained after a key midpoint or milestone has been reached. Often, a drop in participation is an early warning of problems with implementation since some members of the group are already showing their displeasure by voting with their feet.

In fact, keeping people involved in the process is, in the end, perhaps the most crucial factor in making a decision—and making it stick. It's a job that lies at the heart of leadership and one that uniquely combines the leader's numerous talents. It requires the fortitude to promote conflict while accepting ambiguity, the wisdom to know when to bring conversations to a close, the patience to help others understand the reasoning behind your choice, and, not least, a genius for balance—the ability to embrace both the divergence that may characterize early discussions and the unity needed for effective implementation. Cyrus the Great, the founder of the Persian Empire and a renowned military leader, understood the true hallmark of leadership in the sixth century BC, when he attributed his success to "diversity in counsel, unity in command."

Two Approaches to Decision Making

Advocacy Inquiry
Concept of decision making a contest collaborative problem solving
Purpose of discussion persuasion and lobbying testing and evaluation
Participants' role spokespeople critical thinkers
Patterns of behavior strive to persuade others
defend your position
downplay weakness
present balanced arguments
remain open to alternatives
accept constructive criticism
Minority views discouraged or dismissed cultivated and valued
Outcome winners and losers collective ownership

Four Questions for David Garvin and Michael Roberto

Harvard Business School professors David A. Garvin and Michael A. Roberto fielded questions about their article in an email interview with HBS Working Knowledge senior editor Martha Lagace. Garvin and Roberto discuss the "inquiry" process of decision making, which is another way to describe collaborative problem-solving. The "advocacy" process they mention is more of a contest among multiple points of view.

Lagace:What leaders come to mind as people who use or have used the inquiry process to great advantage?

Garvin and Roberto: Harvey Golub of American Express, Bob Galvin of Motorola, Jack Welch of G.E., Andy Grove of Intel, and Chuck Knight of Emerson Electric all used inquiry processes extremely effectively. All were CEOs who led their companies through long periods of growth and profitability.

You present a "litmus test" that leaders could use to assess the decision-making process at their companies. How often should leaders do such self-assessment?

They should use the litmus test—in real time—as they wrestle with all major strategic decisions. This is not as often as it sounds, since major strategic decisions (a large-scale merger or alliance, a restructuring, or entry into a new market or product category) arise relatively infrequently.

Is there a place for the advocacy (or "contest") approach in real time and in some situations?

There's nothing inherently wrong with advocacy. Problems arise, however, when power is unequally distributed among the participants, when information is unequally distributed, and when there are no clear rules of engagement—especially about how the final decision will be made.

Unfortunately, in many senior teams these conditions are common. When they are not, advocacy can be an effective approach to decision making. It does, after all, work exceedingly well in our court system, where both sides are represented by skilled attorneys, discovery proceedings unearth common information and evidence, and deliberations are ultimately decided by a judge, jury, or tribunal.

You write in the article that the inquiry approach, which you prefer, doesn't come easily or naturally to most people. How can people make inquiry their main method of decision making?

The best recommendation is to work hard to raise awareness. We suggest two routes: after-the-fact reflection and real-time diagnosis. Executives can review a past, flawed decision and try to understand where they deviated from an inquiry approach.

Alternatively, they can use the litmus tests to assess themselves at critical junctures during the decision-making process. Have they, for example, generated multiple alternatives? Are they locking in too quickly to a commonly-shared view, without hearing the voices of dissent? This can be done individually or, even more effectively, as a team.

Excerpted with permission from "What You Don't Know About Making Decisions," Harvard Business Review, Vol.79, No. 8, September, 2001.

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