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.
His framework aligns perfectly with my checklist for making faster, better decisions:
- Set parameters: Write down what the decision is about, who needs to be involved and when the decision needs to be made and revisited. This makes it clear from the start that decisions are a problem-solving process to be managed, not a mystical act of politics and charisma.
- Deliberate: Write down the relevant information and the potential options, take straw polls to highlight the top choices, and outline what could go right or wrong with these choices. This brings different perspectives to the decision quickly and creates a record of what was considered leading up to the decision.
- Decide: Make, communicate and record the decision. The driver now has the best information available to decide, but deciding is not enough. People who weren’t “in the room” during deliberations also need to know what was decided, and a record must be kept to follow up on the results and adjust as needed.
Avoiding Familiar Failure Modes
The fun “failure modes” highlighted in the Coinbase article are familiar to anyone working in large and fast-growth businesses. You may use different words for them -- for instance, what Armstrong calls the “accidental yes,” we call “zombie decisions,” and what he refers to as “lots of chatter,” we call “cat herding.” But whatever name these failures go by, our decision practice assessment shows they are found in every large company.
Those failure modes may feel like the inevitable consequences of getting work done, but the success of the Coinbase approach proves that isn’t true. Transparent digital practices can transform decisions from a political battleground to a problem-solving process. It’s no surprise that the company is lauded as the “bitcoin unicorn.”
However, there was one point in the piece where my opinion diverges. Armstrong says, “a decision-making framework is only needed when there is lack of clarity about a decision that is higher risk.” That may be true as far as formal deliberation goes. But it significantly understates the importance of recording, communicating and tracking decisions in general.
Even decisions that appear relatively clear and moderately risky upfront rapidly become unclear and high risk in the face of continuous lightning change. To manage effectively at high speed, companies need a single source of truth to communicate and track decisions. And this applies to all the different kinds of decisions that organizations face.
McKinsey’s Decision Categories
McKinsey has a great decision taxonomy that paints the broader landscape for decision-making as companies scale in size and scope. Here’s a summary of their ABCD’s of decisions:
- Ad hoc decisions: These are unplanned, low-stakes decisions
- Big-bet decisions: These infrequent, high-risk decisions that have the potential to shape the future of an enterprise
- Cross-cutting decisions: These are complicated, frequent and often high risk. This refers to a series of small, interconnected decisions that are made by different teams as part of a collaborative process.
- Delegated decisions: These frequent and low-risk decisions are effectively handled by an individual or working team, with limited input from others.
Each of these kinds of decisions can benefit from a defined decision-making process like the one at Coinbase. And decisions that at first glance appear to be low-stakes still need to be tracked and managed for effective execution as situations change.
Digital Decisions For Transformation At Scale
Decision effectiveness drives 95% of business performance, as reported by Bain & Company. Given that, it’s crazy that decision-making is the last part of the business world to be digitized.
Coinbase has been successful during early rapid growth using informal online spreadsheets, but this approach doesn’t scale to larger companies. Checklists and spreadsheets don’t give a full picture. Even the first cut of McKinsey’s categorization begins to reveal the complexity of modern decision-making and the challenge of scaling improvements.
Just as companies moved beyond financial planning spreadsheets to more robust software for predictive analytics, so should the most forward-looking companies do the same for decision-making. For example, we know that multi-generational teams drive better results. But your company lacks a lens into how inclusive your decision-making teams are if everyone is just doing their best to keep track of decisions in a Moleskine notebook or Excel.
Decisions are critical business information, and decision-making is a critical process. That’s why top leaders today see that decisions are the primary fulcrum on which their companies gain leverage. Decisions are the simple machine at the core of every company. Digitizing those decisions is the way to break them out of the pre-digital past and harness their full potential for digital transformation.
In the next 10 years, half of the Fortune 500 companies today will disappear. Optimizing your decision-making process using effective decision practices combined with modern digital systems is your best chance of survival. See you on the other side!