Avoiding Decision Debacles by Business Strategy Review
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The document discusses common pitfalls in decision-making that lead to publicized failures, termed 'decision debacles'. Key mistakes include relying on failure-prone practices, making premature commitments, and misallocating resources, all of which can result in substantial setbacks. The author, Paul C. Nutt, emphasizes the importance of learning from failures and employing effective strategies to reduce the likelihood of similar mistakes in future decisions.
Avoiding Decision Debacles by Business Strategy Review
- 1. AVOIDING DECISION DEBACLES The pressure to act rapidly draws decision- makers to the conspicuous solution. If the first idea that crops up in a search seems workable, why not use it? © Copyright 2013 London Business School
- 2. BUSINESS STRATEGY REVIEW 1 When a leader decides to launch a major project that is sure to attract public scrutiny – such as opening a new amusement park or building a new international airport – the result is too often far from what was promised in the original press release. The resulting debacle often draws a great deal of attention to the decision-maker. Paul C. Nutt reveals why such debacles happen.
- 3. BUSINESS STRATEGY REVIEW 2 Decision debacles – decisions that go so wrong that they are reported in the media – involve three mistakes: faulty decision practices, premature commitments and misallocation of resources.
- 4. BUSINESS STRATEGY REVIEW 3 Relying on failure-prone practices There are several reasons why failure-prone practices are used and better ones ignored. Some decision-making practices with a good track record are commonly known, but uncommonly practised. Telling people the desired outcome – lower cost, for example – produces better results than finding the root cause of the cost problem. Indicating what is wanted, such as lower cost, liberates subordinates to look for answers. Yet, managers often default to practices that too often end in failure.
- 5. BUSINESS STRATEGY REVIEW 4 Making premature commitments Premature commitments are seductive and often deadly. Many of the decision-makers in my studies jumped on the first idea that came up and then spent literally years trying to make it work. This rush to judgement is a prime cause of failure. This often leads to unanticipated delays as retrofits are carried out and attempts are made to convince stakeholders that the company’s interests, not the decision-maker’s, are being served.
- 6. BUSINESS STRATEGY REVIEW 5 Investing in the wrong things Managers often fail to use their resources wisely. Blunders are made, for example, when decision- makers use their time and money for analytic evaluations and little else. Expensive analyses are undertaken in a debacle to demonstrate that the decision-maker’s idea was useful, feasible or both. The expenditure for evaluation grows as more and more justification is called for.
- 7. BUSINESS STRATEGY REVIEW 6 Failure traps The chain of events in which mistakes create traps – and traps bring about failure – is found in all debacles. One or more of the blunders point the unsuspecting manager toward seven traps that can ambush them: 1. Not taking charge by reconciling claims 2. Failing to appreciate barriers to action 3. Ambiguous aims 4. Limited search and no innovation 5. Misusing evaluations 6. Ignoring ethical questions 7. Failing to learn
- 8. BUSINESS STRATEGY REVIEW 7 Not taking charge by reconciling claims Disagreements about claims that never get resolved fashion the first trap. A decision can be hindered, if not derailed, when decision-makers assume that the concerns and considerations that motivated them are understood and agreed to by others. Decision-makers often react to criticism by acting in ways that imply they will have no patience with any more questions – and interpret the silence that follows as signalling agreement. Many debacles had hidden concerns that could be uncovered with careful probing.
- 9. BUSINESS STRATEGY REVIEW 8 Failing to appreciate barriers to action Taking steps to uncover the interests and commitments of key people usually pays dividends. Despite a reputation for being savvy, many decision- makers spend little of their time managing the social and political forces that can derail a decision. Dealing with the interests and commitments of key players increases the chance of success. Savvy decision- makers use participation, because it increases their chance of success.
- 10. BUSINESS STRATEGY REVIEW 9 Ambiguous aims • To head off real or imagined critics, decision-makers feel compelled to have a way to deal with a challenge claim soon after one is acknowledged. This triggers a rush to find a remedy. The urge to start with a concrete remedy sidetracks direction setting, and this rush to judgement sets the ambiguous aims trap. • Being clear about what is to be gained puts the best face on projects, which makes them potentially defensible. Overselling plans with bloated and unrealistic expectations often characterises a debacle. • Aims that are assumed by the decision-maker but never understood by key players create difficulties as well. • Being clear about what is wanted by setting an objective clears away ambiguity and conflict and helps the decision-maker find an appropriate course of action.
- 11. BUSINESS STRATEGY REVIEW 10 Limited search and no innovation The pressure to act rapidly draws decision-makers to the conspicuous solution. If the first idea that crops up in a search seems workable, why not use it? The quick fix is hard to back away from. Business practices are copied to provide a workable, if not ideal, solution. Adopting the business practices of others is thought to reduce decision-making time, cost and risk. This can work out when the other company’s circumstances are much like your own. When the companies lack compatibility, a retrofit is needed and costs quickly escalate.
- 12. BUSINESS STRATEGY REVIEW 11 Misusing evaluations Once a conspicuous solution is found, evaluation soon follows. Decision-makers take a defensive posture at this point, trying to justify their favoured course of action. More time and money are spent doing this type of analysis than all the other decision-making activities combined. Making a comparison to a norm – such as what other, successful, organisations do – provides a way to assess the benefits of the single option. Such a comparison gives insight into the merits of a possible action before commitments are made.
- 13. BUSINESS STRATEGY REVIEW 12 Ignoring ethical questions Tough decisions often pose ethical dilemmas. Concerns about ethics arise in many ways. But, though ethical issues can be clear they are often also ambiguous. Pushing a self-serving idea, opposing a good idea that presents a personal threat or engaging in conflicts of interest – most would agree that such behaviours display questionable ethics. Views of what is ethical seem to depend on who is being deceived. Deception is more likely to be tolerated or even encouraged when directed toward an ‘outsider’. At best, new insights can develop using such an approach. If not, one can at least say that he has taken steps to show that the views of critics were considered.
- 14. BUSINESS STRATEGY REVIEW 13 Failing to learn Without learning, decision-makers will go down the same failure-prone path over and over again. But, learning about what went wrong and what can be prevented in the future is thwarted when leaders show no tolerance for mistakes. People who can be held accountable for a failed decision find themselves caught in a no-win trap. Some failure is inevitable, but superiors and oversight bodies do not tolerate failure. Caught in such a bind you have only two options: own up or cover up. An environment in which decisions can be discussed that avoids this blame-finding mentality is essential if learning is to occur. After perverse incentives have been rooted out, managers can set learning in place by creating win-win situations in which everyone can benefit.
- 15. BUSINESS STRATEGY REVIEW 14 Reducing failure The key to reducing failure is to use decision- making practices or tactics that have a good track record and to avoid those that are failure- prone. Consider the seven traps that lead to failure – failing to take charge, ignoring barriers to making changes, ambiguous directions, limited search, defensive evaluations, ignoring ethical questions, and failing to learn.
- 16. BUSINESS STRATEGY REVIEW 15 Without learning, decision-makers will go down the same failure-prone path over and over again. Those who have had similar decisions turn to debacles can often trace their failure to the actions of those who made the original decision.
- 17. BUSINESS STRATEGY REVIEW 16 This article by Paul C. Nutt, Emeritus Professor at Fisher College of Business, Ohio State University was first published in Business Strategy Review, 2001 and republished Volume 24 Issue 1 - 2013 Visit our website www.london.edu/bsr