Why Companies Fail to Make Good Decisions

Companies Fail to Make Good Decisions
Though our organizational culture assessment found that healthy and decisive decision making is one of the strongest indicators of an aligned organization, many companies fail to make good decisions. Observing how the leadership team makes decisions reverberates across the way a company allocates resources, thinks, and acts. We define effective decisions as those that deliver the intended outcomes and desired impact alongside the right levels of strategic alignment, cultural integrity, speed, quality, trust, and confidence. 

We know from our leadership simulation assessment and people manager assessment center data that consistently making good decisions is not easy. A recent study by McKinsey reports that almost three-quarters of executives reported that bad decisions were made as often as good ones. But there are guidelines that can help.

4 Reasons Company Decision Making Fails
Leaders and managers (especially new managers) wreak havoc on effective decision making because they:

1. Do Not Establish Agreed-Upon Decision Making Processes with their Team
   Certainly different types of decisions (e.g., tactical, operational, strategic) require different methods. Decision-making situations vary according to different levels of importance, urgency, and risk. In general, however, we have found that actively involving team members in decision making increases employee engagement and employee commitment to decision outcomes.
   
   Meet with your team to establish a decision making process for the various types of decisions you anticipate. Agree upon how you will make decisions, how you will share authority, and who will be accountable for the process and the results.  Invest in decision making training to get everyone on the same page.
   
2. Seek Perfection
   Too many leaders seek too much information and wait too long to decide. They report being uncomfortable with ambiguity and delay making decisions until they have almost all the information they feel they need to make the “right” choice.  When it comes to decision making, perfection should not be the goal.
   
   Decisions should be made when you have just enough context, background, and alignment to act — 70% is a reasonable guideline for most decisions. Then create a practical process to learn and course correct as you move forward.
   
3. Don’t Follow Their Own Rules or Evade Accountability
   We’ve all seen managers who advocate for transparency, accountability, and a participatory approach to decision making and then coopt the process and decide on their own behind closed doors. Even worse, they may blame the team for decisions that go sour.
   
   To improve decisions, create and model a culture of accountability and transparency.  Do what you say you will do and expect the same from others.  If you ask your team for their opinion, listen and explicitly integrate their thinking into the final decision.
   
4. Seek Consensus Rather than Alignment and Commitment
   Making good decisions does not mean attaining 100% agreement. It’s often too hard and takes too much time to have varied stakeholders from different perspectives agree upon complex and high stakes decisions.  That is OK.
   
   Instead of aiming for consensus, engage stakeholders enough to gain their full commitment to support the decision regardless of how much they agree. Lack of support is why most decisions flounder.  The goal is alignment and commitment, not agreement, once the decision has been made.

The Bottom Line
Sound decision-making is a cornerstone of high performing organizations. Does your company fall into the 75% of those that make as many bad decisions as good ones? If so, it’s time to take a close look at your decision-making process and improve it.

To learn more about why companies fail to make good decisions, download 3 Steps to Set Your Team Up to Make Better Decisions