How to make a good decision in a large company

Decisions in a large company follow the same basic process as we have described for small firms. However many more people are involved large companies. There is critical need to communcate the choice to the organization that will carry out the decision. Without understanding, involvement, and motivation the people responsible for carrying out the task may just do something else than intended.

As a leader your first task is to think through what the crux of the issue is and how a decision like this should be made. Who shold be involved in analysis, in the choice, in communication, in detailed planning and in carrying it out?

When different persons are involved you need to structure the task by delegating responsiblities. Domain experts may be the only ones who have detailed knowledge about the criteria. They should be responsible for scoring the alternative solutions. The tactical or strategic direction is the responibility of you and the other leaders. You or the leader group should put weights on the criteria and thereby the goals.

Several frames
Before making the choice you as the leader should control the framing of the problem solving. Are you solving the right problem? Do the organization have the right perspectives? Do they use perspectives that complement each other? (For instance political, symbolic, human resource, and structural frames). Are the goals and criteria suitable? Have your decision process developed several solution alternatives? It is your responsibility as a leader to avoid frame blindness and lack of frame control.

Premortem
Just after the choice is made and before implementation, you as the leader should make sure that your organization does not have overconfidence in the judgements and does not take shortsighted shortcuts. According to Daniel Kahneman (2011) overconfidence is a consequence of features of System 1 that can be tamed - but not vanquished. The main obstacle is that it is determined by the coherence of the story one has constructed, not by the quality and amount of information that supports it. The Premortem is, according to Kahneman, a partial remedy for overconfident optimism. He advices that when an organization has almost come to an important decision but has not formally committed itself, the individuals who are knowledgeable about the decision should gather for a brief session. It should start with a short speech: "Imagine that we are a year into the future. We implemented the plan as it now exists. The outcome was a disaster. Please take 5 to 10 minutes to write a brief history of that disaster." The main virtue of this is that it legitimizes doubt. It enables search for threats, as Kahneman puts it.

Organizational learning
After the choice is made you have to be able to follow up the development and gain knowlede from the decision process. This means that the details must be structured and kept in a spreadsheet file or a database. As outlined in the book "Decision Traps" by Russo and Schoemaker you should avoid fooling yourself about feedback and not keeping systematic track. You should make sure that you audit your decision process.

Decisions is touched in most, if not every, business text book. Below you find some examples.

Change
Decisions are connected to a chosen action and thereby change. The decision must anticipate the consequences of the actions, but also future actions by other firms in the environment. Over short time periods even chaotic systems will usually approximate stable systems. Then you can think in terms of reasonably clear-cut links between causes and effects, and of issues and actions whose consequences can be forecast to a reasonably useful degree of accuracy. This is closed or contained change. (4) Then, problems and opportunities facing managers are reasonably clear. If there is conflict, it can usually be settled by rational argument, through hierarchical authority, or negotiation.

Strategic
Some decisions are strategic and long term. Then, you want to choose the option that works best at a more or less distant future, traditionally three to five years. Such decisions are difficult because of the uncertainty of the open-ended future. Stacey (5) argues that the future is not simply unknown, it is unknowable. Links between causes and effects are not clear. Most likely it is not possible to identify the dynamic relations.

Utter uncertainty
In times of utter uncertainty people find that they have to focus on the near future. Long time ago Dale Carnegie interviewed Arthur Hays Sulzberger, publisher of The New York Times. He told him that when the Second World War flamed across Europe, he was so stunned, so worried about the future, that he found it impossible to sleep. He was never able to banish his worries and find peace until he had adopted as his motto five words from a church hymn, One step enough for me:
Lead, kindly Light...
Keep thou my feet; I do not ask to see
The distant scene; one step enough for me.

Open-ended change
Professor of management Ralph D. Stacey writes that the essence of open-ended change is confusion and ambiguity leading to equivocal responses on the part of managers and provoking anxiety and conflict. The real problems of long-term control and development relate to identifying what the intention and the objectives should be, what the problems and opportunities are. Since an innovative organisation always faces open-ended change, its managers have continually to cope with these conditions ... (5).

Controlled behaviour
In summary to chapter 9.7 Stacey writes: "In general, controlled behaviour is the opposite of haphazard, meaningless behaviour on the one hand, and explosively unstable behaviour on the other ." In controlled behaviour "there must be a feedback loop connecting discovery, choice, and action. It is possible, however, to define choice and action in very different ways and still have control, provided that there is a feedback connection between them."

Stacey argues that innovative companies need to run the existing business with ordinary management, and innovation and open ended change with extraordinary management. In the latter, strategy is evolving, not planned because it is not possible to plan for an unknown future. Change should be incremental and decisions done after negotiation between informal groups in the company. The strongest arguments should decide the path forward.

A large company is charactized on this page as an organization where several persons or a large group makes the decisions. Smaller firms have less challenges. We would like to add that a framework for structuring the decision tasks does not substitute for sound judgement and even intuition for what is right. However, it gives clarity, illuminates the intuition, and enables learning. Read more about how calc3.com can be used as a decision support system.

(3) Carnegie, D. (1984). Live in Day-tight Compartments'. In: How to Stop Worrying and Start Living (p. 203). London: Cancellor Press.
(4) Stacey, R. D. (1993). Behaviour and change situations. In: Strategic Management and Organisational Dynamics (p. 255). London: Pitman Publishing.
(5) Stacey, R. D. (1993). Self-organising forms of control. In: Strategic Management and Organisational Dynamics (p. 288). London: Pitman Publishing.

 

Read more about this topic after registering and logging in at calc3.com. See the menus above.

Calc3.com provides a growing number of templates as you see after login. Please contact us if you would like a template that is not yet present.