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Untangling your organization's decision making

https://www.mckinsey.com/business-functions/organization/our-insights/untangling-your-organizations-decision-making

mckinsey.com

Untangling your organization's decision making
It's the best and worst of times for decision makers. Swelling stockpiles of data, advanced analytics, and intelligent algorithms are providing organizations with powerful new inputs and methods for making all manner of decisions. Corporate leaders also are much more aware today than they were 20 years ago of the cognitive biases-anchoring, loss aversion, confirmation bias, and many more-that undermine decision making without our knowing it.

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The ABCDs of categorizing decisions

The ABCDs of categorizing decisions
  • Big-bet decisions: infrequent and high-risk - from major acquisitions to game-changing capital investments;
  • Cross-cutting decisions: frequent and high-risk - think pricing, sales, and operations planning processes or new-product launches;
  • Delegated decisions: frequent and low-risk - routine elements of day-to-day management, typically in areas such as hiring, marketing, and purchasing;
  • Ad hoc decisions: infrequent, low-stakes.

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Approaching big bet decisions

  • Appoint an executive sponsor to work with a project lead to frame important decisions for senior leaders to weigh in on;
  • Break things down (with decision meetings at each stage), and connect them up.
  • Focuses on debating the solution (instead of endlessly elaborating the problem) and gather the right people.
  • Move faster without losing commitment: get comfortable living with imperfect data and being clear about what “good enough” looks like.

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Approaching cross-cutting decisions

  • Identify decisions that involve a cross-cutting group of leaders, and work with the stakeholders of each to agree on what the main steps in the process entail.
  • Work through a set of real-life scenarios to pressure-test the system in collaboration with the people who will be running the process.
  • Limit the number of decision-making bodies, and clarify for each its mandate, standing membership, roles etc.
  • Create shared objectives, metrics, and collaboration targets.

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Approaching Delegated decisions

  • Delegate more decision.
  • Avoid overlap of decision rights.
  • Establish a clear escalation path.
  • Get people to  take ownership of the decisions.

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Pretend You're Advising a Friend

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This makes decision making way more difficult.

Reverse Your Assumptions

You're so prone to continue making the same kind of choices throughout your life that challenging yourself and doing the exact opposite is often the best way to get around this problem. 

The idea here is to confront your default behavior, step outside your comfort zone, and use your imagination to test some completely new ideas.

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