How decisions are made in your business will make a vital difference to its performance. But the decision-making process is typically left in the hands of the individual no matter what position they may hold in the organisation. There is, however, a right and wrong way for decisions to be arrived at and guidance that can be set to underpin good decisions.
Active Knowledge Question:
How do you know whether you are making the right decision for the right reasons?
Many Decisions
On any given day, there will be many decisions made by people at all levels of an organisation. And you can be guaranteed that they will all be made on a different basis and for different reasons.
Very few of these decisions will be visible to leadership, and what seems to be the most inconsequential decision at the time can have the most profound effect on a business and its performance, for good or bad.
It is impossible to establish a process that will allow all critical decisions to be reviewed or undertaken in a specific manner. Such attempts are likely to be counter-productive in that they will lead to poor decision-making. Locking people into fixed processes typically does not create best practices nor competitive behaviour. And many decisions, which in retrospect were critical, may not have seemed so at the time.
But leaders can set guidelines and boundaries that will significantly enhance decision-making, mitigate risk and generally enable good decisions no matter who is making that decision.
Nine Actions
There are nine actions that leadership should take within a business that will underpin and enable good decisions. These actions should apply universally, no matter who is making the decision or what the decision is about.
Here they are:
1. Goal Posts
The starting point for sound decision-making is to know where the goalposts are and what outcome the organisation seeking. So often, this is expressed, if not just assumed, to be profit, ROI or some other financial metric. ‘Profit’ is a weak goal as it is an outcome and not a catalyst.
It’s vital that the right goals be set, known and unwavering across the organisation. The right goals strengthen the catalysts in the business that lead to better performance. Profit as a goal typically produces self-interest, politics, short-termism and a poorer level of performance than otherwise would be possible.
I use the language of ‘capital value’ to define the overarching goal of an organisation. And that is not market value; it is the ability of the organisation to endure and grow in its competitiveness and performance.
You always want to strengthen your organisation’s competitive fitness, and you may measure that by profit. Still, profit is merely one outcome of that fitness and not causational.
Our goal is to improve the competitive fitness of our organisation.
2. Customer-Centric
In today’s marketplace, all organisations compete around the value that they can deliver to their customers. But, again, that value is not solely around cost or price, but it is how well the product can meet their customers’ needs as defined by the customer.
All decisions should be made in a customer-centric manner, which simply means, ‘what will be the impact of this decision on the value we deliver to our customer?’
All decisions should improve the customer value delivered. And if a decision will not improve the value as the customer sees it, it should not proceed.
To do otherwise is to invite decisions that reduce the competitive performance of a business and weaken the catalysts that underpin its capital value.
The simplest example I can provide is automated telephone answering systems where the customers hear a range of choices and press their selection to be advanced through a channelling system. For me, this system has nothing to do with customer value but is driven by cost reduction strategies, which typically trade-off customer value for short-term profit gain.
All decisions must lead to improved customer value as defined by the customer.
3. Competitive Posture
A competitively fit business is one that has clearly set how it is going to compete in its chosen marketplace to deliver a greater customer value than anyone else in that market – outcompete all others.
This posture is an outcome of the market in which they have chosen to compete (boundaries), who else is competing in that market (competitive landscape) and how they believe they can position themselves so that their strengths come to the forefront (positioning). It also recognises the changes that are and will occur in that market in setting its position.
Their competitive posture is set to allow them to deliver more customer value than anyone else and is dynamic and not static. For example, a boxer moves around the ring and adapts to their opponent’s strengths and weaknesses.
All decisions must reinforce our competitive posture.
4. Competitive Engine
In every organisation, at its core, is a competitive engine. A dynamic that will determine how successful it can be. The engine creates energy throughout the entire organisation, impacting its strength to compete and thrive.
No matter how young or old, no matter how large or small the organisation is, even if you’re not aware of its existence, this competitive engine sets the floor and ceiling to success. It holds the answer to your organisation’s performance and performance problems.
The output of this competitive engine is determined by the dynamics that exist between each of its ten elements, some of which are the:
- Worthiness of your leadership team.
- Clarity and strength of your purpose.
- Glue and passion created through your organisation’s culture and vision.
- Alignment between customer value and capability.
A strong resilient engine creates an organisation that is competitively fit and tactically alive. An organisation that can move, adapt, shift, outpace and outperform its competitors. Your markets and your customers may change, but the competitive engine will ensure your organisation predicts, adapts, and continues to grow.
All decisions must have regard to their impact on our competitive engine and only be made if they will strengthen that engine.
5. Purpose
Purpose is the cornerstone and reference point for the existence of your business. Real competitive strength lies in that purpose, and everything else builds upon it.
Purpose reveals opportunities, ensures alignment, and a compounding of effort.
A purpose founded in customer need is the most powerful as it creates a tangible meaning to your organisation’s existence and, therefore, prompts everyone to search out new opportunities.
Purpose, well-framed and conceived, allows your organisation to connect with the real needs of your customers. It allows you to see the value that they experience in using your product. Therefore, it allows you to see into the future and understand how all the changes that are occurring in our world will impact the experience of that need.
It allows you to grow from a core purpose and remain connected with your customers. It allows you to continually enhance the value you deliver and to see new opportunities before your customers and the market. All of this whilst remaining true to your purpose and stepping out from your core strength.
Without purpose, you will be centred in a transactional relationship rather than a value relationship with your customers. For purpose to have that enduring quality, and the benefits that go with that, it must be focused on customer need and not outcomes.
All decisions must be consistent and aligned with the purpose for which we exist as an organisation.
6. Simple Guiding Principles
Imagine the competitive strength your organisation would have if there were a resource that all your employees could refer to, at any time, to find the right answer to any question they had. No, it’s not the latest Artificial Intelligence, just simple guiding principles.
Simple guiding principles are the unique tailored ‘basic laws’ that every organisation requires to be great.
Simple guiding principles represent a real-time strategy. They allow the person to make the right decision on the spot. They provide a freedom of choice that is based on how that organisation has chosen to compete in its marketplace. They allow customer value to be maintained as relevant to the circumstances that are emerging. They address the expected and the unexpected.
A few points on simple guiding principles, they:
- Are not rules or instructions.
- Are simple but give rise to complex and sophisticated behaviour.
- Are the ‘basic laws’ against which every choice can be measured.
- Represent a link between the competitive posture of the organisation and the event that is emerging at that time.
- Should be few and clear and taken as a set.
- Should seem just like common sense, but common sense in relation to your competitive posture.
- Underpin the performance of any great organisation.
Simple guiding principles must be set to support decisions. And then, all decisions must be consistent with and reinforce these simple guiding principles.
7. Delivery
Your well-crafted and articulated strategy is only words until put into action successfully.
There are two capabilities that are required to deliver strategy effectively. The first is the ability to deliver, and the second is the ability to adapt. Note that both are essential capabilities in building and sustaining great organisations and must be continually developed, reinforced and enhanced.
Delivery reflects the ability to set the right goals accurately and quickly and to deliver on them. This is no mean feat as most would recognise that the ability to get things done efficiently and effectively is a skill that most organisations lack. Most leaders do not invest in this critical skill but wonder why key projects just seem to never get done. Remember the quintessential goal of strategy is to create and maintain a organisation that is capable of crafting and delivering on any strategy.
Adaptability is the ability to recognise changing circumstances in the marketplace. Whether they be through a greater understanding of customer needs, changing marketplace conditions or competitor behaviour, or to shift your positioning to maintain your strength of customer value. Adaptability reflects the continuous and dynamic nature of strategy, and the fact is often the strategies that work are not formulated, but are unrealised or emergent, or simply needed to move as the marketplace changed.
Any decision made must have regard to the ability of the organisation to deliver it and resource that ability. It also must recognise that emergence and discovery may mean that the decision will evolve once it hits the marketplace.
Decisions must only be made when the ability and resources to deliver exist and are made available.
8. Self-Interest
Self-interest is the one action that is most likely to undermine your personal success. In business, in leadership, and often in life, putting yourself first can be a dire mistake.
As a business leader, you must be concerned with how every key person in your business views success and, in particular, their individual success. It’s not sufficient that they seem to be doing a good job. You must understand what gets them out of bed every morning.
Remember the impact of centripetal leadership on your ability as a leader to influence the performance of your organisation. You must have the right people in the right places with the right attitude. How they view and achieve personal success is the underpinning of that attitude.
As a business leader, would you prefer to have a business full of people who are driven by a ‘me-first’ belief system who want to advance and get out as quickly as they can? Or perhaps you would prefer a team of people who actually view success in another way, one that is centred on the fulfilment they find in working in your business? Which would you prefer? And which are you?
Consider the impact of having successful people throughout your organisation and how they may influence culture and performance.
No decision can be made where self-interest or bias is influencing your decision. You must pass that decision off to another person.
9. Recognition
The fuel of any organisation is its rewards program. It feeds the needs of its people. And their needs extend well beyond financial. Belonging, contribution, achievement, growth, self-worth – are just a few of the needs that can far outweigh the dollars.
The rewards and incentives you offer to all those who work within and with your organisation form a vital part of your competitive engine.
It is the fuel for energy and engagement. It must be carefully crafted and monitored to uplift the good and block the bad actors and bad behaviour.
I know it may seem like a strange notion to some, but there are many talented people who will put the opportunity to contribute to something with meaning and purpose ahead of financial reward alone. Great organisations are built by leaders – worthy leaders – who contribute far more than they take home.
Pride, self-interest, politics, paradigms, managerial frames, and bureaucracy are examples of agents that prevent an organisation from becoming all it can be. They form barriers to growth and success and must be removed if your organisation is ever to achieve its potential.
All decisions must fairly recognise and reward those persons who contributed to our success.
Good decisions bring the real competitive potential of the organisation to the forefront and strengthen it on an enduring basis.
An entirely new level of performance.
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All the best in the success of your business,
Richard Shrapnel
