How companies make good decisions: McKinsey Global Survey Results

http://www.mckinseyquarterly.com/How_companies_make_good_decisions_McKinsey_Global_Survey_Results_2282

The McKinsey Quarterly

How companies make good decisions: McKinsey Global Survey Results
Companies get a lot of advice about how to make good decisions. Which decision-making disciplines really make a difference?

JANUARY 2009

Extracts:

Do strong decision-making processes lead to good decisions? This McKinsey survey highlights several process steps that are strongly associated with good financial and operational outcomes. In the survey, we asked executives from around the world about a specific capital or human-resources decision their companies made in the course of normal business. We learned who was involved, what drove the decisions, how deep the analysis was, how unfettered the discussions, and how and where politics were involved. Respondents also described the financial and operational outcomes of the decisions.1

The results highlight the hard business benefits—such as increased profits and rapid implementation—of several decision-making disciplines. These disciplines include ensuring that people with the right skills and experience are included in decision making, making decisions based on transparent criteria and a robust fact base, and ensuring that the person who will be responsible for implementing a decision is involved in making that decision. Finally, although corporate politics sometimes seems to undermine strong decision making, some types of consensus-building and alliances apparently can help create good outcomes.

Unlike the external risks that accompany most strategic initiatives, the analysis of a project, its discussion, and the management of the internal politics lie entirely within the control of the top leadership team. Companies not using the best practices identified here should be able to improve their decisions simply by following these guidelines:

• Pay particular attention to the risks of the project, examined through a detailed financial model, sensitivity analysis, and the relationship of those risks to the risks of other projects in the firm’s portfolio. Learning from past comparable situations also is beneficial.
• Ensure that participants in the discussion about any decision are included on the basis of skills and experience, that decision criteria are transparent, and that the decision is discussed in relation to the organization’s other strategic decisions.
• Put organizational goals ahead of business unit goals, and encourage efforts to build consensus across business units.
  
• Read entire article: http://www.mckinseyquarterly.com/How_companies_make_good_decisions_McKinsey_Global_Survey_Results_2282

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This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.