New Research: The 7 Decision Practices Top Companies Use To Innovate

Posted by Erik Larson on Oct 10, 2018 9:46:36 AM

Innovative teamOur new research shows there are seven key decision practices that distinguish top performing companies and act as practical benchmarks for the rest to improve and compete. In day-to-day work, top companies rarely fall short of these benchmark practices, while low performers usually do. The rest muddle along in the middle with decision practices that sometimes go right and sometimes go right off the rails.

The study is based on surveys of managers and executives in over a thousand companies, and analysis of tens of thousands of business decisions using the Cloverpop enterprise decision database. A free white paper about how to apply these seven decision practices at your company is available for download if you’d like to learn more.

This is not a theoretical framework, it is a practical behavioral approach to measuring the decision activities inside companies. These seven decision practices measure how people in the most innovative companies identify, make and execute business decisions in their daily work:

1. Bias For Action

A bias for action focuses on how people behave when they face their own decisions and when other people make decisions that affect their work. In high performing companies, people:

  • Are empowered to make decisions that solve problems affecting their work.
  • Are willing to decide in the face of risk, uncertainty and disagreement.
  • Are able to disagree and then commit to supporting each other’s decisions.

It should come as no surprise that decision practices at the top 20% of companies show a very strong bias for action in daily work, including companies like Amazon where bias for action is a core leadership principle.

2. Broad Perspective

Bringing a broad perspective to decision-making is about widening how decisions are framed to generate and evaluate different options. High-performance companies actively engage their people by ensuring decisions:

  • Get broad input from the right stakeholders up, down and across the organization.
  • Actively include this input in decisions, without single voices dominating.

Our research shows that decision-making teams outperform individuals 66% of the time, and that advantage increases to 87% for more inclusive teams.

3. Fast And Efficient Process

A fast and efficient decision process gathers input and reaches conclusions quickly with minimal wasted effort. In high performing organizations, decisions:

  • Are made as fast as possible, and at least as fast as the competition.
  • Are reached without excessive meetings and discussion.

Companies are more likely to fail at speed and efficiency than any of the other decision practices, with almost two-thirds regularly deciding too slowly for their business needs.

4. Just-Right Analysis

Just-right analysis happens when decisions are made with enough study to avoid reckless shots from the hip but not so much that decisions are held back by analysis paralysis. High-performance companies do analysis that:

  • Gives good enough understanding so everyone has shared context for decisions.
  • Favors speed over perfection, especially for reversible or testable decisions.

Companies are 50% more likely to struggle with too much analysis versus too little. High performers emphasize understanding problems over exhaustive analysis of solutions.

5. Clear Communication

Clear communication is about making sure people are informed of and understand all relevant decisions that affect their work. In high performing companies:

  • Decisions are communicated quickly and clearly to everyone affected.
  • People remember the decisions made and the reasons why.

Before they can be acted on, decisions must first be communicated. Our research shows that only 1 in 5 companies effectively communicate decisions on a regular basis.

6. Aligned Execution

Aligned execution means that people consistently follow through on decisions that are aligned with shared business goals. In many ways, this is the stereotype of business performance:

  • Decisions align with broad business goals rather than narrow stakeholder interests.
  • People consistently follow through on decisions once they are made.

Companies are better at aligned execution than any other decision practice -- more than one in three companies excel, and less than 10% perform poorly.

7. Effective Feedback Loops

Effective feedback loops help keep good decisions on track while quickly fixing bad decisions when they arise. When high-performance feedback loops are in place:

  • People stay committed to decisions until seeing results, without arbitrary churn.
  • Decisions change quickly when conditions change or results disappoint.

In some companies, undisciplined feedback loops allow decisions to be arbitrarily changed in momentum-sapping churn. But almost twice as many companies have the opposite problem -- bad decisions stick around and are hard to change, forming a cracked foundation for follow-on decisions with no review to track how well results meet expectations.

Where Does Your Company Stand?

To paraphrase Tolstoy, "Decisive companies are all alike, but every underperforming company underperforms in its own way."

How do you think your company compares to these benchmarks? The downloadable white paper about the research gives more detail to help you suss out where to focus and how to make improvements.

Very few companies excel at all seven decision practices today, but all have the capacity to improve. Increasing pressure to innovate and perform demands it.

Topics: Leadership and Management, High Performance Decision Making, The Art and Science of Decisions