At it’s most basic level, business is about selling a product or service to a market of customers. It starts with decisions based on what the market wants, what products to sell, what services to create, how much to charge, how to deliver, how to communicate with the market, and so on.This applies equally to large corporates as it does small and medium-sized businesses. Regardless of the size or type of business, every aspect of business is decision based. Yet often we fail to consider how we go about making our decisions.
We have marketing systems, planning systems and IT systems, yet few companies have formal ‘decision systems’. Sure we have sign off processes – but these are unstructured in terms of making a logic based decision. Thus, in absence of any formal decision system, we rely on experience, intuition and some form of collaborative communication to aggregate the ‘opinions’ of various stakeholders. Does this result in a ‘rational’ decision? In 99.99% of cases it does not. Knowledge, experience, gut feel and emotion do not constitute a ‘rational’ decision platform. Rational decision-making requires visibility of all relevant information, and resolution of various objectives, historical experiences, expectations, preferences, alternatives, probability and decision making styles.
The results of a survey analyzing the current status of corporate decision-making found that more than nine out of 10 corporate executives admit they are making important decisions on the basis of inadequate information. More than half of these senior executives are concerned that they may be making poor decisions as a result of missing information. And a quarter believes that management frequently or always gets its decisions wrong.
These poor business decisions can cost an organization millions of dollars. The main findings demonstrated few executives received the information they need, and most believed that management decision-making was only moderately effective, or worse. If these findings are not significant enough, the bigger concern is that in spite of such decision performance, only 29% of executives believed that poor decision-making structures were a common cause of bad decisions, despite 80% of respondents indicating that data is the most important factor in making decisions. On an encouraging note, respondents did rank data-based decisions higher than the opinion of others, personal intuition, or external consultancy.
The report concluded that decision making was at the core of both strategy and operations, with a vast array of factors used to balance risk and reward. Yet decision-making was not being recognized as a strategic asset.
At a time when the economy and intense global competitive pressure is driving businesses to optimize every advantage, it is clear from this study that key decision makers are not getting the data they value and need, and are relying more on “gut instinct” than proven drivers. Obviously, supporting good decisions requires a lot more than technology. It requires an Organizational culture based on logic, rather than emotion. A culture based upon:
High-quality data – the more acceptable the data, the more time spent on decision making instead of debating whether the data is correct.
Access to advanced systems and training – high quality systems require data source integration, master data management and easy user access to timely delivery of information in formats that support rapid assimilation and action.
Sound management – including governance, compliance and risk management
Trust – in both the data and the interpretation of data by others
Flexibility – to adapt actions to new insights
