The highly integrated digital world of today’s businesses is more dynamic than ever. Consequently, executives need to make decisions more quickly than in the past. However, business decisions are often difficult to make; thus, executives often delay making decisions well beyond when action is necessary. Or they make decisions quickly because action is necessary, but the decisions may not be good because there was not enough time to build consensus and alignment. This phenomenon can be particularly acute in a recession. Why are decisions hard to make under pressure?

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Let’s consider first what companies use as the basis for their decisions. Then we’ll look at an effective decision process.

Are Decisions Data-Driven?

Many companies say they are data-driven and make all or most decisions based on data. But in actual fact, decisions are not data-driven. They are based on confidence in a conviction (a belief).

It is important to understand this reality. Good executives are rigorous in examining what they believe and holding data up to those beliefs, looking for either data to support the conviction or to refute or weaken the conviction. However, typically executives must make decisions well in advance of having a complete data set. Lacking complete data, they must use their intuition, which is basically what they believe at that point in time (a conviction about which they have confidence).

However, what is right for one organisation or for one individual may be completely wrong in a different context. Context is vital in business decisions. Executives’ perspectives must consider what environment the organisation is in and how that context affects what the organisation does.

Best Practices

For example, the idea of best practices sounds wonderful. What are the best practices, and how should an organisation emulate those? The problem with that kind of decision-making is that best practices are often shaped in the specific context of a company’s unique situation. And those situations can vary widely from company to company.

Best practices can be provocative and suggest direction. But the actual consequences within a company’s environment, and its context, can make best-practice decision-making difficult, clumsy, and often highly ineffective.

Consequently, mature executives develop their own beliefs or convictions and use those to anchor their decision-making.

When The Decision Process Moves Beyond Executives

After context, the next problem involved in decision-making is gaining institutional conviction. Although an executive has an individual conviction, that tends to be insufficient in a complex organisation. The process must move from individual conviction to institutional conviction.

In other words, the executives must get the rest of the company (or enough of the company) to understand the rationale and plan to support that decision.

It doesn’t really matter whether the decision-maker is the CEO or an executive further down in the organisation. If the organisation does not align with the decision, then execution will be subpar, and the initiative or action likely will fail.

Moving from individual executive conviction to collective or institutional conviction requires facts. It also requires building a case and showing why that case is important.

Business schools teach the importance of modelling the case through an ROI or other model. But increasingly, it is clear that the ROI model is unhelpful in decision-making because it rests on so many assumptions, most of which are not shared across the organisation.

In most decisions, ensuring they will be effective and executed requires the hearts and minds of the rest of the organasation. They must understand the rationale for the decision and the imperative and why the decision needs to be made and acted upon. There needs to be agreement in a broader set of the organisation that the decision is both important and necessary for taking action.

Often, companies also need to align their customers with the necessity for a decision. Gaining their agreement requires analysis, data, and a persuasive argument. The need for data to support the decision is very critical, but it tends to be most helpful in helping individuals and organisations build confidence that the direction and the decisions they make are well-founded.

The decision and initiatives will set off a cascading set of actions that ripple through the organisation with many unintended consequences that people need to understand and process. Therefore, executives need to make alignment arguments to the broader institution or to customers over time. People need time to reflect and need to understand the implications of the decision to themselves and their working environment. Often, they come back with questions, or they push back.

The Fallacy Of Independent Decisions

It is a fallacy to think that decisions stand independent of one another. In reality, they are related. We can best understand decisions as part of a journey against direction on some broad goal. The decisions have cascading implications that sort of wash backwards and forwards through organisations and evolve over time. Decisions don’t stand up in isolation. They can be a catalytic mechanism that sets off a chain reaction.

I think this is particularly important to understand as firms move into the new stage of digital transformation, where they invest in their tech stack by building software-defined operating platforms. Platform technology inevitably requires that the organisation change, and that inevitably requires that the tech stack evolves. The tight bond consequently forming in the relationship between the technology decisions and the organisation structure decisions drives change that can deliver extraordinary customer experiences (and company growth) through the platforms.

Implementing a technology does not create value. Instead, it enables changes in how a company operates. Some people tend to perceive new technology and changed processes as a threat to their status quo and subsequently push back or engage in passive resistance. Thus, implementing an effective decision-making process is more important than ever before in today’s quick-moving and quickly evolving shift to software-defined operational platforms.

This article was written by Peter Bendor-Samuel from Forbes and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

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