How to make and then measure an “effective” decision?

What is a rational method for making trade-offs?

Amplify’d from
This review is from: Harvard Business Review on Decision Making (Paperback)
First, decide which decisions are most important rather than merely urgent.
Much of the contextual material in this volume is out-of-date, given the fact that the eight articles originally appeared in the Harvard Business Review years ago (1965-2001). However, I think the core concepts remain sound and provide a valuable frame-of-reference for understanding the advances in decision making that have occurred during the last five years. For example, Peter Drucker suggests a sequence of six steps: classify the problem, define it, identify possible answers, determine which is “right” rather than acceptable, build into the decision the action(s) necessary to implement it, and then test the decision’s validity and effectiveness. Yes, these are obvious steps. However, but the number of well-publicized bad decisions that have been made in recent years (e.g. Adelphia Communications, Arthur Andersen, Enron, Kmart, and Tyco) suggests the implications and consequences when decision-makers ignore one or more of these steps.

No brief commentary such as this can do full justice to the rigor and substance of the eight articles. It remains for each reader to examine the list to identify which subjects are of greatest interest to her or him. My own opinion is that all of the articles are first-rate. One of this volume’s greatest benefits is derived from the fact that a variety of perspectives are provided by a number of different authorities on the same general subject. In this instance, “advances [to date] in strategy”

Readers will especially appreciate the provision of an executive summary that precedes each article. They facilitate, indeed expedite frequent review of key points which – presumably – careful readers either underline or highlight. Also of interest is the “About the Contributors” section that includes suggestions of other sources to consult. Here are questions that suggest key issues to which the authors of these articles respond:

How to make and then measure an “effective” decision? (Peter Drucker)

Comment: Effective executives do not make a great many decisions. They concentrate on what is most important.

What is a rational method for making trade-offs? (John S. Hammond, Ralph L. Keeney, and Howard Raiffa)

Comment: Making wise trade-offs is one of the most important and difficult challenges in decision making. Needless to say, the more alternatives you are considering and the more objectives you’re pursuing, the more trade-offs you’ll need to make.

Why is humility essential to effective decision-making? (Amitai Etzioni)

Comment: Only fools make rigid decisions and decisions with no sense of overarching purpose, whereas the most able executives practice more humble decision making that offers the benefits of flexibility, caution, and the capacity to proceed with partial knowledge.

What are the most common interpersonal barriers to decision making and how to overcome them? (Chris Argyris)

Comment: One of the most common observations in company studies is that executives lack awareness of their own behavioral patterns as well as the negative impact of their behavior on others.

How to analyze the nature and extent of the given problem? (Perrin Stryker)

Comment: Even veteran managers are likely to be very unsystematic when dealing with problems and decisions, and their hit-or-miss methods often produce bad decisions based on erroneous conclusions.

What are the hidden traps in decision making? (John S. Hammond, Ralph L. Keeney, and Howard Raiffa)

Comment: Bad decisions can often be traced back to the way the decisions were made – the alternatives that were not clearly defined, the right information was not collected, and the costs and benefits were not accurately weighed.

When to “trust your gut”? (Alden M. Hayshi)

Comment: Our emotions and feelings might not only be important in our intuitive ability to make good decisions but may actually be essential because they can help us to filter various options quickly.

Those who share my high regard for this volume are urged to check out the recently published Harvard Business Review on Making Smarter Decisions as well as other titles in the Harvard Business Review Paperback Series such as those on Becoming a High-Performance Manager, Change, Corporate Strategy, Decision Making, Effective Communication, the Innovative Enterprise, Leadership, Leadership at the Top, and Measuring Corporate Performance.



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