Posted October 25, 2021 by johnspence
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I was coaching in a large financial firm in Dallas, Texas, and I sent this note to one of their senior executives. The organization was an absolute joy to work with because of their eagerness to learn, be thoughtful, and apply the ideas I was sharing. They were faced with some big decisions and asked for input on improving their decision-making process. Here’s the advice I offered.
It has been my experience that most people are not superb decision-makers because they simply do not follow a process. They go with their gut, they make a snap decision, then make an uninformed decision, or they make no decision at all. I have read a great deal on this topic and attended several seminars, and from all of that, here are the key things that I look at when faced with making a decision.
The first things I think about are probability and impact. What is the likelihood that something could go wrong with this decision, and if it did, how bad/significant might the impact be?
- Low probability/low impact: I don’t give the decision too much thought and would typically delegate it to someone else.
- Mid-level probability and a mid-level impact: I would involve a few people in the decision and spend a little time to make sure that I was making an appropriate and thoughtful decision—but I would try to make the decision quickly and move on to other more important issues.
- High-probability/high-impact decision: I want to take every step of the decision-making process carefully, pull in all the right people, look at my information carefully, and make a very thoughtful and well-reasoned decision.
So on high-probability/high-impact decisions, I take my time and ask several critical questions to make sure that I’m making the best possible decision.
Here Is the List of Questions I Go Through:
- Am I the right person to be making this decision, or is there someone else who is in a better position to make this specific decision?
- What is the real time frame to make this decision? Do I need to make it immediately? Do I have an hour, 24 hours, a few days, a month? When is the actual time that I must have a decision?
- Do I have all the information I need to make this decision? If not, where can I get it? Who can I ask to help me? What data/information do I still need to gather to make a good-quality decision?
- Can I trust the quality of the information/data? How can I know that it is accurate, timely, and unbiased? Where did the information come from? How can I verify it?
- Do I have all the right people involved in this decision and do they have all of the information they need to be truly helpful in the decision? Is there anyone that should not be involved in this decision and needs to be removed from the situation? Do any of them have a bias that I need to keep in mind as they give me advice and input around this decision?
- Who else will be impacted by this decision? What is the ripple effect—how will this decision affect other people, departments, parts of the organization, suppliers, vendors, customers?
- Can the decision be reversed or overturned in the future if necessary? If so, what would be the impact of having to reverse it?
- Can someone else reverse or overturn this decision after I have made it? If so, who are they, and why might they overrule my decision? What will I do if they decide to overrule/reverse my decision?
- Once I have made the decision, what are the steps necessary to implement it? Can I create metrics to measure the success or failure of the decision? Do I have a specific time frame for the implementation of the decision? Who, specifically, will be responsible for implementing the decision? Do they have all the tools, information, support, and resources they need to implement the decision successfully?
- Once the decision has been fully implemented, do I have a process to review the success/failure of the decision and how I might make future decisions differently based on the outcome?
When faced with a major decision, I strongly advise you to go through all the questions above. If you cannot give a satisfactory answer, you need to do more homework, take more time, and be disciplined enough to make a thoughtful and thorough decision. Now let me give a little bit of advice around a few of the areas above.
Am I the right person to make this decision?
This is an excellent question because it has been my experience that many people involve themselves in decisions that should be delegated away or would be better made by someone else. A lot of time is wasted when high-level people make low-probability/low-impact decisions.
Actually, this is an issue that I struggled with considerably when I was a young manager. When I first became a CEO, I thought it was so cool that everyone came to me to make “The Decision.” Until one day, I looked out the window in my office and saw nearly my entire staff standing in the hallway waiting for me to make the decision! That’s when I instituted a tool that I call “Four Level Decision-Making” and taught it to my entire team.
Here Is What I Told My Folks:
Level One Decision:
This is your decision, your area of expertise, and this is why I hired you. You make this decision without any input, make it quickly, and then own 100% of the results.
Level Two Decision:
This is a decision where you likely need some feedback and input, but make sure that you pick the right person to go to. If it’s finance, go talk to the CFO; talk to the head of that department if it’s membership; if it’s marketing, talk to them. Get some quick input from the appropriate people, then make the decision and own it 100%.
Level Three Decision:
This is a team decision; we will get the appropriate people together, maybe the entire team, maybe only part of it; we will discuss it thoroughly but quickly, and then we will all decide what the decision should be. As the CEO, I will go with whatever the team decides, even if I don’t think it is best. If all of you want to go in direction A, and I want to go in direction Z, when it is a team decision, I will go with what the team decides and then own the outcome 100%. And if the decision fails, I will take full accountability to the board of directors on your behalf.
Level Four Decision:
This decision is totally mine. I may come to you for input and ideas, or I may not. I could possibly have information that you don’t have or a longer time horizon in my decision-making process. But on a level four decision, I’m going to make the decision, and I will 100% own the outcome, and I need all of you to back me 100%.
I have used this four-level decision-making process in every company I have owned or run and found it to be a wonderful way to quickly delegate away about 60% of my decisions to the people who actually should be making the decisions and also help the rest of my team figure out where they should be delegating decisions too.
What is the Real Time Frame for This Decision?
This is very straightforward: You want to use as much time as you have to make a decision—and not 1 minute longer. I have seen tremendous damage caused when people make a decision far too fast and find out later that, taking just a few more hours or a few more days, they would’ve made a drastically different and better decision. On the flip side, I’ve also seen significant damage done by people who seem incapable of ever making a decision. They need more data, want more people involved, need more input, and keep pushing off the decision until the decision is basically made for them. Either by the marketplace or by someone else in the organization. Figure out when you need to have a decision made. Set a date and time, and then take your time and make a decision at that time.
Do I Have All the Information I Need to Make This Decision?
Again, this one’s pretty simple:
1. Do not get caught in the trap of analysis paralysis.
2. Collect all necessary information to make a great decision and not one bit of information more than that.
3. Get good data, set an appropriate time frame for the decision, and make it.
Can I Trust the Quality of the Information/Data?
Several years ago, I sat in a strategic planning meeting for a major company. I watched them make huge global decisions based on the numbers they were estimating. It went something like this: “Paul, how do you think you’ll do in the European market next year?” Then, Paul would say, “I don’t know, Sam, I guess we’ll do about 35 to 50 million.” And then Sam would reply, “Great, let’s just call it 45 million—go ahead and put down the flip chart. Okay, Sue, how do you think you do in the Canadian market next year?” And so it went, with them throwing numbers up on the flip chart that would eventually be used to set the global strategic plan. If you’re going to use data to make a decision—make sure it’s accurate and reliable.
Do I Have All the Right People Involved In the Decision?
This one is critical; you want everyone needed to make the decision fully informed. It is invariably the person who doesn’t need to be in on the decision that will drag the process down. Destroying any hope of making a quality decision. Get the right people together and ensure everybody has the correct information to make the decision.
What is the Ripple Effect?
I think people often forget to think about who else will be impacted by the decisions they make. It’s worth it to take a few minutes to figure out. “After I make this decision, how will it ripple out across all the people that might be impacted?” You might be surprised to realize that a decision that seems trivial to you might have a major impact on other people.
Can the Decision Be Reversed or Overturned in the Future if Necessary?
If the answer is no. You need to take your time and answer every question above before you make an irreversible decision.
Can Someone Else Reverse or Overturn This Decision After I Have Made it?
If the answer is yes, then why aren’t they making the decision? It is frustrating to spend time, energy, and resources to make the decision. Only to have it reversed/overturned by someone else. When possible, try to avoid getting into this sort of situation.
Once I Have Made the Decision, What Are the Steps Necessary to Implement it?
If you’re going to invest the time to attempt a high-quality decision, it is also critical to invest the time necessary to create an implementation plan for that decision. I’m not saying a 300-page document that fully details every aspect of implementing the decision for the next 25 years. But a major decision without a quality implementation plan is almost assuredly headed for disaster!
Once the Decision Has Been Fully Implemented. Do I Have a Process to Review the Success/Failure of the Decision and How I Might Make Future Decisions Differently Based on the Outcome?
Call it what you will, an after-action report—a postmortem—a postgame review. One of the critical ways that great decision-makers become that way is by taking the time to review their past decisions and learn from them. In my early days working for one of the Rockefeller foundations, my mentor, Charlie Owen, always forced me to do these postmortems after every major decision. He would probe, push, and question to understand why I made the decision the way I did. Then, help me understand why the decision turned out well or poorly. As I learned from Charlie, reviewing your past choices is a fantastic learning tool for your future decisions.
One Last Thing:
When I make decisions about hiring someone, investing in a project, buying a car, or something of that sort, I always create a checklist BEFORE I begin the actual decision-making process. I create a specific, clear, binary set of criteria that has to be met every time. In other words, when I hire someone, I might create a checklist that contains a minimum amount of education, experience with this sort of work, expertise with certain software programs, and specific skill sets that I require. In this way, I can take emotion out of the decision; they either have the required elements or they don’t.
To continue the example, I always have a clear checklist of precisely what I want and don’t want when I purchase a car. There are certain colors I absolutely will not buy. There are things that the car must have (like air-conditioning), there is a certain price I will not go above. I have all this written down before I walk on the car lot to ensure I can remove all emotion and make an appropriate decision. From years of experience, I’ve learned that if you do not do this, and write it out clearly and thoughtfully. Often emotion, excitement, or pressure will overwhelm your intellect, and you will end up making a very poor decision.
I hope you found all of this helpful. Let me know if you have any further questions. Take good care.
If you would like to discuss how I might be of assistance to you and your company please send me a note and we will set up a call. email@example.com
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