A 4-Step Process to Help Senior Teams Prioritize Decisions

Leaders and their teams often pride themselves on their ability to deal with an onslaught of decisions. But the reality is they often end up making rapid-fire calls on issues big and small and wasting their time. They and their organizations would be better served by an approach that treats decisions as a deliberately structured workstream. Consider the experience of one of the world’s largest footwear manufacturers, whose leaders engaged in an exercise that others can use to revamp the way they make decisions. In its fast-changing industry, big challenges loomed on many fronts. Computer-driven, automated manufacturing that could make reshoring of factories feasible threatened to redraw the supply-chain map. Advanced materials and new construction methods were bringing far greater complexity to manufacturing processes. Product innovations (such as sensors in athletic shoes to detect incipient injury) could add additional layers of complexity. And like all organizations, the manufacturer also faced a steady stream of more mundane challenges: how to comply with product specifications from customers, improve yields at underperforming sites, or refurbish corporate headquarters. All such issues require decisions — and in some cases, a series of decisions — that differ in magnitude, urgency, and complexity. But in the culture of firefighting that had developed at the company, decisions were treated in isolation or in response to day-to-day developments in the business. Moreover, managers and teams were unsure who owned what decisions, constantly kicking them upstairs and putting more demands on the senior team. As a result, the team found itself handling everything from big-picture questions like how much to invest in the “factory of the future” to far-less-momentous issues like equipment purchases to improve the throughput of a single production line. Recognizing that ensuring high-quality decisions would require a disciplined process, the executive team embarked on an exercise designed to create a repeatable process for prioritizing decisions and determine the right methodology for each. It consists of these four steps: 1. Compile a list. Create a list of the decisions likely to arise in coming months, without regard for their significance — everything from major capital investments to promotions to when to hold the next all-hands meeting. Although most large organizations may have defined processes for this, rapidly-changing situations, short-term crises, and urgent needs from customers can overwhelm the team’s agenda. Often they also fail to consider the behavioral aspects of team dynamics — for example, how various members exert their power to get their issues on the agenda. Dynamics between teams can come into play as well: For example, how does a senior regional team interact with the global team? For the footwear manufacturer, the exercise turned out to be less straightforward than it initially appeared. Using a time horizon of 12 months, members of the senior team offered lists that differed widely. Disagreement emerged about which decisions fell within the specified time frame. Many members listed numerous issues that they expected to bubble up from within their functions. And it soon became clear that little agreement existed about who owned which decisions in the company. But once the team had compiled the list and become aware of all the decisions members felt needed to be addressed, they could remove duplications and combine similar decisions into more coordinated, larger decisions. For instance, the list included a decision about embarking on a process-innovation strategy and one about bringing the production process closer to the customer. The process-innovation question was then rolled up into a larger decision about a broader customer-centric strategy. 2. Understand their characteristics. Ultimately, some 26 decisions emerged from the first step. The team then characterized them according to four criteria — magnitude, organizational complexity, analytical complexity, and subject-matter challenge — and used a point system to assign each decision a score. For magnitude, the metrics included size of capital investment or operational expenditure and time to expected benefits; the greater the investment or longer the time-to-benefit, the higher the point score. Measures of organizational complexity included number of stakeholder groups involved, their degree of alignment, degree of power, and the degree of effort required to achieve alignment, with point scores escalating accordingly. Measures of analytical complexity included quality of relevant data, degree of uncertainty, number of alternatives, and degree of clarity in measures of value, again with escalating point scores. Measures of content challenge included the team’s degree of familiarity with the business or technical issues involved; the less familiarity, the higher the score. 3. Sort them into three categories. Based on the scores that resulted, the team could assign each of the 26 decisions to one of three categories, each of which requires a distinct decision-making process: Strategic. These highest-scoring decisions, entailing a great deal of both organizational and analytical complexity, are usually the relatively small number of decisions that will determine the long-term direction of the company. For the footwear manufacturer, these strategic decisions included where and how to deploy automation and the location of factories for proximity to customers. Such decisions require addressing complex organizational challenges such as multiple, often-conflicting stakeholders with differing values, experiences, or cultural needs. Further, these decisions also have considerable analytical complexity such as large, often-incomplete data with considerable ranges of uncertainty. Strategic decisions usually require the most time and attention of senior teams as well as a rigorous, comprehensive, and uniform decision-making process. Such a process frames the question accurately, generates multiple alternatives (including hybrids of two or more alternatives), generates a wide range of information from experts inside and outside the organization, identifies values and trade-offs, uses sound reasoning (not “gut feel”) that takes uncertainty and risk into account, and concludes with a commitment to action. Significant. These decisions score in the middle range, require a sound business case, and together can add up to considerable investment. Typical significant decisions include such issues as sourcing, new products, and make-or-buy IT investments. The decision-making process may not require an in-depth application of each step in the strategic-decision-making process. Rather the process should be tailored, depending on the nature of each significant decision. For significant decisions that are organizationally complex but involve little analytical complexity, the process should focus on the best means for bringing people along and getting buy-in. For the footwear manufacturer, choosing an approach to ERP implementation represented such a decision. Significant decisions characterized by a high degree of analytical complexity but low organizational complexity require leading-edge data capture and cleansing, as well as the right value-focused analytics. For the manufacturer, that included decisions about energy and water solutions as part of the company’s drive for sustainability. Quick. These decisions score low on both organizational and analytical complexity and may be addressed by defining procedures that describe the approach needed or that have well defined rules, regulations, checklists, and the like. How to deal with a production process that is drifting out of spec falls into this category. These quick decisions can often be delegated to lower levels in the organization, freeing time for the senior team to focus on strategic and significant decisions. All upper-tier teams face all three categories of decisions. The kind of decision doesn’t necessarily correlate with where in the organization it should be addressed but with the appropriate way to solve it. 4. Understand the timing. Once the decisions were defined and categorized, the footwear manufacturer’s senior team could see clearly when each needed to be addressed. By defining time horizons of three, six, and nine months, the team could defer decisions that were not immediately needed and address them at the appropriate point. For example, the team determined that key promotions, which would take into account the change-management abilities of candidates, needed to be addressed ahead of ERP implementation strategy. *** When teams consider and score the decisions they face in terms of organizational and analytical complexity, the majority of decisions usually turn out to be classified as significant. Further, with a mechanism in place for characterizing decisions in terms of organizational and analytical complexity in the future, the team can treat decisions as a workflow, which they can periodically review and update. And by defining the most efficient and effective process for dealing with them, the team can free more time for attention to strategic, high-impact decisions. The appropriate delegation of decisions can free even more time. In the case of the footwear manufacturer, the CEO could assure team members that a whole cluster of decisions could be comfortably taken at the departmental level instead of requiring the approval of the entire senior team or him. Understanding where to focus and when is one of the most important things a senior team can do. As the leadership team of the footwear manufacturer learned, creating and managing a decision agenda is one of the fastest and most efficient ways to do it.

A 4-Step Process to Help Senior Teams Prioritize Decisions

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