Evaluating Organizational Decisions
Read Time: 4 minutes, 10 seconds
Organizational decisions differ from personal decision-making for the following reasons:
- Decisions may be delegated.
- Furthering the interests of the organization, often without considering individual interests, is the primary goal.
- Reactions of those making or affected by the decision have no bearing on the decisions being made.
- Decisions are largely made to support company values, alter situations so that the company might run smoother, and eliminate excess spending and/or waste.
- Competitors can influence decisions in terms of urgency, importance, timelines, and investment.
Because of the complexity of organizational decisions, it is no wonder decision-making rise to the top of the job requirements as one moves up the career ladder.
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 leaders 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. Use the 5 Whys activity to get to the core of why a decision must be made.
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. The following two versions of Rational Decision-Making models guide you through similar processes, your starting point is different. Scenario I is best used when the problem is easily identifiable, staff is complaining, or your online reputation is negative. Think, if something needs to be fixed or if you are working retroactively, Scenario I is a SMaRT tool. Scenario II is highly effective when you are wanting to work proactively to achieve goals and advance growth.
Rational Decision Making: Scenario I
- Identify the Problem: Make sure that a problem exists before you try to solve one.
- Identify the Goal: Understand why you are attacking the problem and what change you expect.
- Generate Alternatives: Involve the people potentially affected by the decision in an open, non-confrontational discussion.
- Evaluate Solutions: The evaluation should be based on the goal and the solution should be the best way of achieving that goal.
- 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.
- Measure the Results: Determine whether the decision is effective by measuring the results against the goal.
Rational Decision Making: Scenario II
- Establish Criteria/Goal: What are your criteria for making a decision: better revenue, recruitment, talent development?
- Establish Facts: What are the facts and what are your sources for facts: market data, turnover data, competitor analysis?
- Establish Alternatives: What alternatives are you considering and what is your basis for accepting or rejecting them?
- Gain Commitment: Has the organization committed the needed resources and are the parties responsible for seeing the decision through committed to the decision?
- Monitor the Response: Do you know if the decision is working and are you prepared to pivot if necessary?
Use the fillable SMaRT Tool, “Rational Decision Making Scenarios,” to answer these questions!
- The way decisions are made is more critical to the success of that decision than determining a strategy or tactic based on the problem.
- Rational decision making can start by thinking of the problem OR the goal.