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Why Decision-Making Needs To Top Your 2022 Growth Agenda

Erik Larson Jan 6, 2022 2:22:31 PM

Every business executive should wear a charm bracelet on their wrist bangled with this statistic:

Decisions = 95%

Why that statistic? It comes from a ten-year-old study by Bain & Company that found a company’s past decision effectiveness is 95 percent correlated with financial performance one year in the future.

So, while it may be true that a company’s past financial performance does not guarantee future returns, it turns out that a company’s past decisions are an excellent indicator of future growth, good or bad.

That’s why executives should hang that statistic from their wrists. That way, the next time they raise their hands to take on ever-bigger growth agendas, it’ll be dangling right there, staring everyone in the face.

Some Companies Are Beginning To See The Light

This idea of focusing on decision-making is taking hold in a few companies. For example, Cloverpop is working with a large global company that envisions driving growth and innovation by creating a Decision Lab to improve their decision-making processes. They determined that, all together, the decision-makers across hundreds of brands must make one million business decisions every quarter, or eight decisions every minute, twenty-four hours a day, seven days a week.

If Bain’s research is correct, then that company’s decision-focused initiative has a near-perfect chance of improving its financial performance. And a good portion of their future success will come at the expense of their delusional competitors, who still think they’re already pretty good at decision-making.

The Enduring Delusions Of Decision Making

In a book about the Bain decision research published by the Harvard Business Review Press in 2010, Bain’s partners found that “While nearly everyone would accept the premise about the connection between decisions and results…few companies look systematically at what gets in the way of good decision making and execution. And few take the actions necessary to improve how they make and execute their important decisions.”

Depressingly, that pronouncement is still true today, for many reasons:

  • Few companies systematically record decisions or monitor the decision process. So, reversing the famous business adage, what isn’t measured doesn’t get managed.
  • Rather than doing the work to directly improve how they make decisions, companies substitute extensive tangential investments in analytical and artificial intelligence systems to inform decision-making and operational systems to monitor results.
  • Business leaders lack motivation to improve since they assume that their past success proves their decision-making skills. And while they are relatively skilled, they forget that the peer group they compare themselves to has a shockingly low bar for decision discipline.
  • Since the apprentice model is how senior managers train their successors on decision-making, the situation persists.

Common sense, business research, business software and artificial intelligence have not been able to break that decision-making status quo. However, the pandemic may be doing what everything else failed to do.

A Pandemic Silver Lining?

As the global pandemic disrupts their businesses, companies face an unprecedented onslaught of rapid, radical decisions, and executives are taking notice. For example, in the immediate aftermath of the first wave of cases, the chief executive of a major food company we are working with created a company-wide initiative to standardize and streamline how people make decisions at all levels of the organization. The goals of the effort are simple and sweeping: revenue and profit growth and increased employee engagement.

On top of increased awareness due to the unprecedented spike in the pace of decision-making, the move to remote work has put tremendous pressure on traditional centralized and hierarchical decision processes. As McKinsey & Company found last year, executives are “interested in moving to flatter, nonhierarchical structures, taking more radical approaches to decision making and ways of working. Gone are the days of waiting around for best practices to emerge. CEOs recognize the need to shift from adrenaline-based speed during COVID-19 to speed by design for the long run. The winners are experimenting now, and boldly.”

Finally, these pandemic pressures are overlaid on the ongoing mega-trend of increased employee demands for autonomy, meaning and impact:

  • People want to be empowered to make decisions themselves.
  • People want to be engaged in decisions that directly affect their work.
  • People want transparency to learn how to avoid past mistakes and gain future success.

It’s not often that the external business environment, internal organizational strategies and changing employee expectations all align to drive change. That represents an enormous leadership opportunity.

Decision-Making For The People, Growth For The Business

Directly improving decision-making is an intimidating prospect. Leading business executives are beginning to take advantage of this unprecedented opportunity to bring decision processes into the 21st century, spurred by the pandemic and led by the ever-increasing expectations of their employees.

Ultimately, your company’s growth agenda depends on the people who execute it, and your maximum leverage comes from the decisions you and your people make. It will take time, energy, and a willingness to change in order to incorporate these results. And there is no time like the present.