Quality of Decision-Making Cause for Alarm

Quality Of Decision-Making Cause For Alarm
By: Joyce Au-Yong

THE act of decision-making may be at the core of all business activity, but the quality of it leaves much to be desired, according to a recent survey by the Economist Intelligence Unit (EIU).

The survey report titled “In search of clarity: Unravelling the complexities of executive decision making”, found that 61% describe management decision-making at their companies to be moderately efficient of worse. At large organisations, 72% of executives shared this view. The EIU said that the executives’ perception of the mixed quality of decision-making at their companies was “cause for alarm”. Almost one in five North American executives who took part in the study believes management often got its decision wrong.

The research is based on a survey of 154 executives from Europe, North America and the Asia-Pacific in March this year. It was funded by Business Objects, the world’s leading business intelligence software company. Another key finding of the study is that poor data plagues decision-making at many companies. Executives surveyed identified poor data as the most important input into decision-making but said the timeliness and quality of the data leave mush to be desired. Fewer than one in 10 executives has the information when they need it, and almost half (46%) said wading through huge amounts of data slowed decision-making.

While solid data is a prerequisite for good decision-making, at a more advanced stage, the human ability to weigh intangibles and clear ambiguities needs to take over, and decision-making is still as much an art as a science. The EIU report quoted Tobias Becker, head of strategy at engineering conglomerate, ABB, as saying. “You need to leave in intuition and gut feeling-mechanised decision-making squeezes out the entrepreneurial spirit.”

At over half the companies surveyed, decision-making at senior management level was mostly informal, and executives tended to consult each other on an ad hoc basis.

Interestingly, Asian executives are more likely to trust their own intuition and judgement whereas Europeans look more strongly to the opinions of their peers. Six in 10 of the Asian executives surveyed say that personal intuition is critical in making strategic decisions. They also make greater use of technology to support decision-making. For multinational companies, this means that “detailed, uniform decision-making processes may be hard to apply across different cultures, and that broad frameworks describing missions and values may work better”, said the EIU release.

“What you try and share internationally are the fundamental principles and values of your business, its basic mission and vision. After that you need to be flexible because of the cultural differences. You have to allow teams to get on with it,” said Lord Karan Bilimoria, the founder of Cobra Beer which has offices in several countries including India, South Africa and the UK, in the survey report.

The study also found advantages to being small. Executives at smaller firms are more confident of their decision-making efficiency than their counterparts at larger ones, rely more on people than process, and worry less about data overload.

Technology can, however , help improve decision-making by making it easier to access and organise large amounts of information. But according to the EIU, many executives are uncomfortable using dashboards and other IT tools. These need to become more reliable and user-friendly to appeal to the less technology-savvy members of the management team, and also to the entire workforce, added the EIU in its report.


5 Ingredients of Good Decision-Making

ACCORDING to the EIU report titled “In search of clarity: Unravelling the complexities of executive decision making”, the five prerequisites are:

1. High-quality data“The greater your understanding of your company, your competitors and your environment, the more you can move from guesswork to making strategic choices.”

2. Employees need access to good technology and training
“There is no point in spending on new technology if people do not use it.”

3. Sound judgement“Decision-making processes, whether formal or not, need to leverage the strengths of human intuition. Data does not run companies; people do.”

4. Trust“To gain employees’ confidence in management decision, establishing transparency and trust is at least as essential as a good track record.”

5. Flexibility“Approaches to decision-making, and even to the use of data, need to reflect the fact that the world is a diverse place, and one size does not always fit all.”

Source: FinancialDaily, October 1, Monday 2007
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