Leaders have more data at their fingertips than ever as they try to make critical decisions, but considerable ambiguity and uncertainty remain. Dynamic markets and nimble competitors make it difficult to make accurate predictions and forecasts, even about near-term conditions. Some leaders struggle to overcome indecisiveness and become bogged down in analysis paralysis. Others find it challenging to evaluate ambiguous risks and threats to their business. Nevertheless, leaders must make crucial decisions that involve committing substantial resources, and they must do so in a timely manner to thrive in competitive markets.
The best leaders recognize that they don’t have all the answers. They acknowledge the limits of their expertise and understand the need to marshal the collective intellect of their teams. As Peter Drucker once said, “The most common source of mistakes in management decisions is the emphasis on finding the right answer rather than the right question.” So what can leaders do to gather input from a diverse array of sources? How can they generate and critically evaluate options? What does it take to uncover and assess hidden risks? In a recent issue of Amplify, we explored these questions in depth.
Several strategies form the foundation of sound decision-making in turbulent environments. These strategies involve creating a culture of candor, encouraging constructive conflict, fostering disciplined experimentation, and making systematic reflection a habit in the organization.
A safe climate is the foundation of all good decision-making. Too often, we discover organizational cultures in which middle managers and front-line employees are afraid to speak up. As a result, leaders do not hear concerns, fresh ideas, or dissenting views. Employees refrain from sharing bad news for fear of being blamed for the mistake or failure. As former US Secretary of State Colin Powell commented, “Bad news isn’t wine. It doesn’t improve with age.” The most effective leaders seek to build a climate in which people feel safe asking questions, challenging the conventional wisdom, and talking candidly about failures.
Building psychological safety is more than saying, “My door is always open.” Bad news is not likely to walk through that door. People self-censor for many reasons. They might worry about a shoot-the-messenger reaction from superiors, or they may simply be trying to find a plausible solution before informing others about a serious problem. Thus, leaders must become problem finders, not just problems solvers. They must be proactive in the hunt for hidden risks and alternative points of view. Asking for help and acknowledging what you don’t know is crucial. Team members will respond positively if leaders stress what they would like to learn from others and how others can assist them in building better situational awareness.
Building a climate of candor means that conflict will occur. Leaders should not shy away from rigorous dialogue and debate. Conflict avoidance only leads to larger problems down the road. However, teams must keep that conflict constructive. For instance, many leaders have found that assigning one or more devil’s advocates can be a powerful technique for enhancing critical thinking about tough issues. However, teams often struggle with dysfunctional interpersonal dynamics that emerge as contrarians point out flaws and risks. Personalities clash, tempers flare, and polarization occurs. Some devil’s advocates become like a broken record — people stop listening, and these chronic naysayers become marginalized. More effective teams rotate the role of the devil’s advocate. Moreover, the best devil’s advocates ask thought-provoking questions, rather than delivering stern lectures about the flaws in existing proposals. They also help the group generate alternative solutions, instead of only pointing out problems.
Sometimes, no amount of analysis or deliberation can resolve sufficient uncertainty surrounding a decision. The situation is simply too novel; historical data seems unhelpful. In these situations, leaders must encourage disciplined testing, prototyping, and experimentation. They must shift the team into learning-by-doing mode. We know that many organizations have a culture of perfection. People are reluctant to test out a new idea unless it has been refined carefully over many months. Consequently, they refrain from conducting useful experiments because they fear failure. In contrast, some teams do plenty of testing, but the activity resembles pure trial and error, rather than disciplined experimentation. Other teams test to validate and never really test to learn. In other words, they develop prototypes and seek to confirm what they already believe, rather than being open to discovering that their beliefs and assumptions might be invalid or outdated.
The most effective leaders build the capability to engage in thoughtful, carefully constructed experiments that generate learning quickly. Then they listen and adapt, rather than stubbornly remaining attached to preexisting positions. Rather than throwing good money after bad, they are willing to discard ideas that do not test well.
Finally, effective decision makers learn from both their mistakes and their successes. Leaders must develop the capability to reflect and learn systematically after each major decision, regardless of the outcome. We often hear people say that we learn more from our mistakes than our successes, but that’s not entirely true. We learn most effectively when we can compare and contrast decisions with varying results.
For after-action reviews to be valuable, leaders must avoid assigning blame. We must move beyond an exclusively individualistic explanation of failures. In other words, don’t just look for the bad apple that must be thrown out of the bunch when a failure occurs. Instead, we must think systemically about the underlying causes of poor performance. If we reflect and learn appropriately, we can improve our decision-making over time.