It’s hard to overstate how much business success relies on better, faster decision making. Bain & Company research found that decision making effectiveness drives 95% of business performance. The UK Institute for Employment found that decision practices impact 50% of employee engagement. Your company’s decision practices have a huge impact on how your business and your employees perform.
It’s my business to understand the role of bias when it comes to making decisions. Some of the most difficult biases cause people to dig their heels in when presented with anything that challenges their beliefs and perceptions. So it’s no surprise that our Cloverpop research, “Hacking Diversity with Inclusive Decision Making,” triggered dismissive tweets like this:
New Cloverpop research shows that as companies get bigger, their decision effectiveness declines. That means most large companies earn sub-par D grades for decision-making, significantly below the already mediocre average score of 7 on a 10-point scale. This is a critical finding for leaders of innovative businesses that rely on decision making to drive competitive success.
Our 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.
Most companies have a fairly specific method for making decisions. It may not be perfect. It could probably be improved with a more inclusive slate of people informing decisions. Sure, some decisions end up being wrong. But experienced decision makers know how to get people in a room, look at the information in front of them, and decide how to proceed.
“Every day at Amazon is Day 1,” according to its CEO Jeff Bezos. He has reminded employees of this for decades -- Amazon will never stop being a startup.
He even went so far as to name a building on Amazon's campus Day 1, and when Bezos switched buildings the name followed him to his new building.
Bezos thinks this focus is necessary considering what happens on Day 2, once the startup times are over.
“Day 2 is stasis," he wrote in his 2016 Letter to Shareholders. "Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1."
Innovative companies win or lose based on the speed and effectiveness of their decision practices. The First Round Review article "How This Head of Engineering Boosted Transparency at Instagram" unpacks the compelling story of a leader who took practical steps to transform his team's culture through transparency in decision-making.
The recent Medium article “How we make decisions at Coinbase” by CEO Brian Armstrong gets a lot right, especially this: Decision-making should be about problem-solving, not politics.
We used to expect businesses to last a lifetime, but digital transformation is a mass-extinction event for old corporations and a mass-creation event for new ones. It has changed everything. For instance, consider data from S&P, which predicts half the S&P 500 will disappear in the next decade.