1: “In God we trust, all others bring data,” management scientist W. Edwards Deming once said.
“The best CEOs adhere to this mantra,” Carolyn Dewar, Scott Keller, and Vikram Malhotra write in their book CEO Excellence: The Six Mindsets That Distinguish the Best Leaders from the Rest.
“Our decision-making principles insist on evidence,” says former Intuit CEO Brad Smith. “One of the mottos is, ‘Because of (blank), I believe we should do (blank).’ If it’s not based in evidence, it’s an opinion, and we discount it. By pushing for evidence-based assertions instead of opinions, we’ve been able to sharpen our decision-making.”
Data measurement and analysis are critical to making sound management decisions.
However, the best leaders also understand the importance of dialogue.
“It’s certainly true that numbers don’t lie,” says TIAA’ CEO Roger Ferguson. “But also numbers don’t necessarily tell you exactly what they mean, which is why dialogue is awfully important.”
Carolyn, Scott, and Vikram cite a cross-industry study of thousands of major decisions made over five years in which managers were asked to report on the quality and detail of the data analysis, i.e., “Did they build a detailed financial model or do sensitivity analysis?”
These leaders were also asked if there was a robust dialog around the data, i.e. “Did the right participants engage in high-quality debate?”
The results? “It turns out that engaging in dialogue was more correlated to good decision-making than data—by a factor of six,” the authors write.
2: The best CEOs facilitate productive discussions amongst their teams while being on the lookout for biases and traps we can easily fall into.
Exhibit one: Groupthink. As humans, we tend to support “an idea based on how favorably we believe others will view that decision,” the authors note.
Exhibit two: Confirmation bias. “Where one accepts information that confirms one’s beliefs and resists any information to the contrary,” they write.
Exhibit three: Optimism bias. Which they define as “the assumption and expectation that the best possible outcome will emerge.”
At DBS, CEO Piyush Gupta includes a photo of a raccoon in his discussion documents as a reminder to himself and the team “to stop and reflect on questions such as: What are we not thinking about but should be? What could be wrong with the path we’re going down? What would have to be true for this to be a bad decision?
“You can tell people to dissent,” Piyush observes, “but when you create a small mnemonic, people remember, and it becomes easier. You start to see it happen more in practice, and decision-making gets better as a result.”
Ecolab CEO Doug Baker uses a different tactic to promote vigorous dialog. “Especially over time, as people start to perceive you as a successful CEO, your views are given too much weight. What you suggest as a thought-starter, they can take as a directive.”
So he exits the room. “If I’m there,” he reflects, “I might stifle the conversation, or they may not want to say anything bad about what they think is my idea.”
3: What is the final component of sound decision-making? Speed.
“Combining dialogue and data in decision-making is straightforward in concept, but, too often, is far from a panacea in practice,” Carolyn, Scott, and Vikram write.
Why? “Without the right balance, swift decision-making can be hindered and action can grind to a halt,” they observe. “Teams can quickly descend into analysis paralysis: the perpetual desire to see more and more data before a decision is made.”
Or “consensus coma,” where rounds of meetings are required so more people can participate.
“For the big decisions you have to make,” reflects Lockheed Martin CEO Marillyn Hewson, “you’re never going to have all of the information or consensus you want. If you get hung up waiting for more data, you may lose the opportunity. You trust in your team and the experience they have, and you pull the trigger and make decisions.”
ICICI CEO KV Kamath created a “90-day rule” across the organization: “if we do anything, we do it in 90 days or less, or we don’t do it at all.”
More tomorrow.
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Reflection: How would I rate my team’s decision-making capability with regard to (1) data, (2) dialog, and (3) speed? Where are we strong? Where could we improve?
Action: Discuss with my team.
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