Recent research by McKinsey & Company appoints the factors that determine the future success of an organization. Making decisions quickly and effectively, is one of the main characteristics of a future-proof company. First, a company has to grow awareness, argues Marc Gelissen. His 3-step plan ensures that companies make the right decisions fast and properly.
Organizations make hundreds of operational decisions every day: do we accept certain new customers, what price do different customers pay, do we give credit to customers? The board of the organization usually focuses on taking other more strategic decisions. The frequency of these decisions is often low, but the impact is high.
The reverse applies to operational decisions. Frequency is high and the impact of each individual decision is relatively low. However, due to the volume, the impact of consequently taking wrong decisions at an operational level can be high for the organization.
Yet most organizations prioritize strategic decisions. They should, but insufficient attention to operational decisions is a dangerous pitfall. Especially in a time when inconsistencies spread fast via social media, resulting in reputation loss. In addition, society is increasingly demanding transparency and speed of decision-making. On top of that, organizations must also be able to adapt operational decisions very quickly to changes in today’s dynamic world.
So it’s important to make the right and consistent decisions, preferably quickly. But how? According to McKinsey research, organizations should design a system that assigns decisions appropriately to the right executives, teams, individuals, or even algorithms. The board of directors should devote their time and energy to strategic decisions, like the initiatives that fit the core values of the company. Middle management must decide on the allocation of resources and talent for those initiatives. Ultimately, it is important that the policy formulated by management is implemented exactly as intended.
The following three steps will make companies aware of critical operational business decisions:
1. Discovery: map the operational decisions made within your organization.
Many organizations are not aware of how many decisions are made within the company. Map out all decisions made in the business processes. Look for verbs such as “determine”, “measure”, “decide”, “assess”. When those words pop up, there’s an indication of decisions. Try to collect them, you will be surprised how many there are. List all these decisions on a Decision Verb Canvas.
2. Analysis: determine the value of the decisions.
Not every operational decision has the same value for your organization. Therefore, attach a value to every decision defined in step 1, by using the Decision Value Canvas. Add a score per decision on factors such as: What is the consequence of a wrong decision? How important is consistency in this decision? How often is a decision made? How important is it to explain the decision to a counterparty? Assess each decision on nine different factors and then map out what value the decision has to the organization. This is the way to determine the priority of operational decisions.
3. Modeling: Model the most important decisions.
Now start working on the most valuable decisions and map out all the parameters that influence these decisions. A Decision Relationship Diagram makes these parameters and their relationship visible. Once the parameters are known, design the decision models that indicate exactly which decision is made based on the combination of the values of each parameter.
These steps will lay the foundation for making the right and fast decisions. The next step would mean automating the decisions. If decisions are made frequently, have a large impact and must be consistent, automation is worth considering. People are not consistent. We tend to judge the same situation differently, which can be disastrous for the strength, credibility and consistency of the organization.
This step-by-step plan will make any organization aware of the impact of its operational decisions. If only the most valuable operational decisions subsequently improve by a small percentage, the organization will quickly benefit. Fast decision-makers are twice as likely to be successful as slow decision-makers, McKinsey calculated. The fact that making the right and fast decisions quickly brings success, is not a clincher, but can easily become a reality.
Marc Gelissen is an expert in decision-making processes and founder of Bizzomate and Avola Decision
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