Evaluating Organizational Decisions

Organizational decisions may be delegated and focus on furthering the interests of the organization—including revenue, customer relationships, productivity, and values—often without considering individual interests. The difference between personal and organizational decisions is that upper management can, for example, delegate firing and hiring to lower management and the reactions of those affected then have no bearing on the decisions being made. Organizational decisions are largely made to shuffle company culture, test situations in which the company might run smoother and to eliminate excess spending. The easiest way to gauge whether an organizational decision is necessary is to evaluate the effectiveness of the change and then to decide where to begin. 

The Why of Decision Making

A Harvard Business Review study found a 95% correlation between revenue and the effectiveness of organizational decisions and execution. They noted that executives who concentrated first on why the decision was necessary,  were much more successful than those who immediately began changing responsibilities, organizational structures, and systems. When these changes enabled faster and better decision making throughout the organization, revenue increased; when changes ignored why the decision was necessary, revenue fell.

Effective decision making starts with the decision making process itself, as opposed to, examining a strategy (merger, reorganization, targeting different customers) or tactics (building IT, changing the sales structure.) No matter how logical or rational a decision appears, we must not ignore the why, how, and who of decision making. For example, if a company decides to separate sales and marketing, will decision making by the two departments result in conflicts, will they argue over resources, and who will decide the differences? If a company off-shores manufacturing, where will future decisions be made and will both parties commit to the decision?

Decision Making Models

Making good organizational decisions requires having a model to work from. In the following two scenarios, you will see some overlap.

Rational Decision Making: Scenario I

One model of rational decision making starts with the problem. It follows these steps:

1. Identify the Problem: Make sure that a problem exists before you try to solve one.
2. Identify the Goal: Understand why you are attacking the problem and what change you expect. 
3. Generate Alternatives: Involve the people potentially affected by the decision in an open, non-confrontational discussion.
4. Evaluate Solutions: The evaluation should be based on the goal and the solution should be the best way of achieving that goal.
5. Plan Ahead: Arrange for resources and plan for setbacks—figure out how to provide people, training time, consultants, or other resources to support success; build in a Plan B.
6. Measure the Results: Determine whether the decision is effective by measuring the results against the goal.

Rational Decision Making: Scenario II

Another way to look at rational decision making is to start from the goal:

1. Establish Criteria: What are your criteria for making a decision: better revenue, recruitment, talent development?
2. Establish Facts: What are the facts and what are your sources for facts: market data, turnover data, competitor analysis?
3. Establish Alternatives: What alternatives are you considering and what is your basis for accepting or rejecting them?
4. Gain Commitment: Has the organization committed the needed resources and are the parties responsible for seeing the decision through committed to the decision?
5. Monitor the Response: Do you know if the decision is working and are you prepared to pivot if necessary?