Making Better Management Decisions

At least 50% of major decisions by top managers fail to meet their objectives, according to recently published results of a 20-year study of more than 400 strategic decisions in larger organizations [1].

For most businesses, this finding means that huge amounts of time, energy and resources are being spent each year without achieving intended outcomes. Some substantial portion is spent correcting problems created by the flawed decisions.

The study suggests that the problem frequently lies within the decision-making process itself, rather than in poor execution or weak management. Even the best managers and executives, who are usually very effective implementers, often face daunting odds against achieving success in the many of their decisions because of management decision process deficiencies. The good news is that many of the process deficiencies identified in this study can be readily corrected.

Even better news for managers who are reaching the limits of efficiencies that are available from technology and best practices is that this study opens a whole new arena for improving organizational performance. By eliminating even a fraction of flawed decisions from your organization, you will have the opportunity to dedicate freed-up resources to high-potential areas that are currently resource-constrained.

How can 50% or more of top management decisions be regarded as failed? The study's primary criterion of failure is: Were the decision results put into long-term use? This criterion eliminates rejected results, such as costly customer relationship management systems that, a year later, no one uses. It also rejects warm-and-fuzzy results, such as "better understanding", "empowerment", and "improved communication" unless these were part of the explicit objectives.

Failed decisions are those that are not implemented successfully, are abandoned after implementation, or that just create substantial new problems. Components of the decision study's success metric are listed in Table 2 ("A Dynamic Approach").

Anything with a 50%+ failure rate is systemic or process-related. Failure rates of a few percentage points are more likely to be caused by individuals or events. This finding is truly stunning.

By far the greatest value to top managers from this study is the tracing of flawed decisions back to credible root causes. Excuses such as surprise events and customer behavior are wisely set aside to allow probing for the real causes. The findings may surprise you. Decision failures commonly develop from just three primary sources:

¥ Using failure-prone practices. Two-thirds of failed decisions relied upon commonly-used tactics that turn out to have a poor track record.

¥ Rushing to judgment. Premature commitment to a decision can lock managers into a flawed decision, even after evidence of the flaw begins to surface.

¥ Failing to use resources wisely. Resources are focused on defending a flawed decision rather than on developing a sound decision. This problem is often accompanied by premature commitment to a course of action.

Many managers and executives believe that decision processes at management levels are inherent in the individuals making up the management team, along with organizational culture. To change the process, you have to change the people.

If you look carefully at the sources of decision failure identified by the study, however, you will see that the majority can be addressed by process changes that are readily implemented. Changing the people is not necessary.

Many of the suggested remedies involve nothing more than disciplined, systematic decision-making that almost any experienced manager or executive can learn and practice.

Before we outline how management decision processes can be strengthened without tearing up the organization, we should go through the process deficiencies to be addressed, along with some related issues.

[1] Nutt, P. C. (2002). Why Decisions Fail: Avoiding the Blunders and Traps That Lead to Debacles. San Francisco: Berrett-Koehler. Paul Nutt is professor of management sciences at Ohio State University's Fisher College of Business.

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