Decision Process Optimization
It can be shocking to realize that decision making is one of the only critical business processes NOT widely treated with transparency, structure, or a central system of record. Given its impact on business outcomes, more and more executives view the management of decision process as part of their fiduciary responsibility - particularly those decisions that most directly impact the P&L of the business. Decision process optimization (DPO) is a strategic, step-by-step approach to taking on the challenge of managing decision process. The following whitepaper intends to overview the business case for DPO initiatives as well provide a 3-part framework for implementation.
Note: Let’s define what we mean by “decision.” For our purposes, we are referring to the process of answering an important business question. This broad definition tends to encompass a wide range of varied activity. For example, developing a strategy is a “decision” in that it is an attempt to answer the question, "what should we try to do and how will we do it?" Similarly, many problem-solution exercises are an attempt to answer the question "what’s the cause of the problem and how should we fix it?" Talent acquisition is the search for the answer to the question "who should we hire?" and so on. DPO therefore is a systematic approach to continuously getting better at answering important and often complex business questions.
The Business Case: Why focus on decision process?
“Decision process… impacts each of the elements required for a decision to be on target and executed successfully.”
Like most business functions, decisions have their own “process”. This includes what data is analyzed, whose input is sought out, which criteria are prioritized, how alternatives are considered, what risks are assessed, etc. This process can be “formal” as in clearly structured from the beginning, or “informal” as in made up along the way. In either case, the way in which organizations make decisions is tightly tied to business outcomes.
The process used in making a decision, solving a problem, or building a strategy is important because it impacts each of the elements required for a decision to be on target and executed successfully. But the impact goes even further. A focus on improving decision processes throughout the organization should clearly pay off in a number of critical areas:
Strategic Alignment: Executive managers should not be involved in each step of the operational decisions involved in executing on strategy. A (better) alternative is to focus on ensuring that operational decision processes are aligned with strategic objectives. In this way, executives essentially provide the guardrails for execution decision making to stay on track, lessening the need to run to each meeting.
Employee Engagement: Nearly every negative employee engagement survey has at least one common denominator - the desire to better understand HOW key decisions are made. Interestingly, you can’t optimize a business process without making it visible. And visible, fair process is tightly linked to gaining commitment to management decisions - even ones they disagree with. Transparent, fair process has a positive effect on the attitudes and behaviors critical to high performance and successful execution.
Speed of Decision: According to McKinsey, most managers believe that their decision making is inefficient. Often, a key reason is simply a lack of defined decision process leading to a lack of clarity, doubt and indecision and/or re-decision. Decision making takes too much time, too many resources and results in too many lost opportunities. By designing clear processes with time and resource boundaries we can increase decision confidence and cut down on wasted time and resources.
Business Continuity: Defined, clear processes deliver transparency. Yet the reverse is true as well. When decision processes are opaque, colleagues have a hard time recognizing and applying best practices from each other. This is also true for future employees. While a senior manager may argue that he/she has no need to document / optimize their decision making process, as soon as that person leaves, they often take much of that institutional knowledge right out the door. Optimization is as much about building continuity around best practices as it is ensuring improvements are being made where needed.
Delivery of Results: Bottom line… clear, structured decisions incorporating best practices get better business outcomes. In nearly every study in the last hundred years that have compared formal, structured decisions to informal “make it up as you go along” approaches, the structured decisions consistently achieve better results. This isn’t the opinion of a single person, or the results of a single analyst or researcher… this has been established in study after study. Investing in decision process is one of the most effective (and under-leveraged) tools at our disposal in managing overall business results. Case in point: When the McKinsey researchers compared whether process or analysis was more important in producing good decisions—those that increased revenues, profits, and market share—they found that “decision process mattered more than data analysis—by a factor of six.” Often a good process led to better analysis—for instance, by ferreting out faulty logic. But the reverse was not true: “Superb analysis is useless unless the decision process gives it a fair hearing.”
As each of these critical business capabilities are directly tied to the quality of decision making process, the next question is - how do we manage/optimize this process? With your organization making hundreds of decisions, how do you prioritize where to focus? How can you ensure new processes are being followed? What is needed to make a focus on decision best practices an intrinsic part of your organization’s culture?
To answer these questions we will address three key facets of successful DPO initiatives:
Framework: A Consultative Approach
Technology: A Single System of Record
Leadership: Setting New Expectations
1. Framework: A Consultative Approach To DPO
“Many times decision processes - even the most critically important ones - have never benefited from deliberate process design. Thus, these activities could often be called Decision Process Design, rather than process optimization.”
Decision process optimization (DPO) - similar to business process optimization (BPO) - is the act of discovering past workflows, intentionally designing / optimizing improved processes, and enabling the successful launch and ongoing improvement of new processes. However, DPO is very different from traditional business process optimization in some key ways. Primarily, BPO is most often focused on gaining efficiency, while DPO is focused on increasing the effectiveness of decision making - specifically in terms of delivering more positive outcomes over time. Whereas BPO seeks to eliminate unnecessary / redundant steps, DPO is making sure the right elements are included. This encompasses ensuring that the right people, data, heuristics and other best practices are leveraged within the right time, resource and strategic parameters. Note: These services can be led by internal resources or by a 3rd party consultant, but in either case, objective facilitation adds significant value to the initiative.
A consultative approach to DPO often looks something like the following:
Audit - Decision audits across an organization (or business unit) are often an important starting point to make sure the efforts of all involved are focused on the areas of highest priority. Priority is determined by a range of factors including impact on both financial (and non-financial) KPI’s as well as recognized opportunities for improvement. The specific criteria and approach will vary by organization, but the end result should be a clear, prioritized plan of attack that focuses optimization efforts on driving the most value.
Optimization - Many times decision processes - even the most critically important ones - have never benefited from deliberate process design. Thus, these activities could often be called Decision Process Design, rather than process optimization. In either case, we proceed through the following steps for each decision:
Discover - Interviews designed to understand how this decision (or similar) have been made in the past.
Design - Facilitated sessions to intentionally design the process - often for the first time, and with broad stakeholder input.
Launch - The new process is announced, executed and retrospectively reviewed with handholding from the consulting team.
Monitor / Improve - At regularly (pre-scheduled) intervals, the archived decisions are reviewed for opportunities to improve outcomes and efficiency.
2. Technology: Enabling DPO With A Single System of Record
“HiveWise turns DPO initiatives into the new standard operating procedure for your organization.”
While DPO initiatives are not dependent upon a dedicated technology platform, new decision making platforms are emerging specifically designed to make the targeted benefits of DPO far easier to achieve. The leader in this space is HiveWise, a decision making platform based on more than a decade of research and development at the MIT Center for Collective Intelligence. Among other benefits, HiveWise delivers:
Scalable input gathering: Leveraging proven collective intelligence tools, HiveWise is able to scale the number of stakeholders that can add input to key decisions. This means you can gather broader perspectives during audits, discovery and design steps as well as broader participation decision processes going forward. This means more inclusion, broader idea collection, more thorough analysis and risk identification and better understanding of stakeholder perspectives.
Decision Process Template Library: Pre-defined decision processes can be picked up, customized, and leveraged by managers at any time. The templates make it easy for even younger, inexperienced managers to leverage best practices in leading business decisions. As the business environment changes and new approaches are developed, these templates can be updated, refined and/or replaced with ease.
Real Time Visibility: You can’t manage what you can’t see. And it’s nearly impossible for executives to run around attending meeting after meeting in order to keep their eyes on every key decision process. HiveWise provides an efficient alternative by providing a real-time view into the who, what, how and why of each in-process decision.
Advanced Reporting: One of the ways HiveWise is able to efficiently scale participation in decision input is by surfacing clear metrics clearly illustrating which ideas are most / least supported by which groups of stakeholders - and why. Use of these metrics is also a key part of how HiveWise enables decision “explainability” after the fact.
Results Tracking: Another key aspect of transparency is the ability to connect decisions with measurable business results. For each decision managed in HiveWise, managers have the ability to identify KPI’s, set baseline and targeted results and assign the future date for capturing the actual results to be compared back to the baseline and target.
Decision Archiving: Managing decisions in HiveWise create a clear, efficiently accessible record of the entire decision process from beginning to end. These records not only deliver a new level of decision governance, they represent an entirely new source of highly valuable intellectual property. Not only can managers quickly refer back to related past decisions to inform their current thinking, these records can be analyzed on an ongoing basis to identify and share new and improved best practices across the organization.
Taken together, this feature set brought together into a unified decision making platform creates a single system of record for key decision making across a business unit and/or entire organization. HiveWise is designed to turn DPO initiatives into the new standard operating procedure for your organization.
3. Leadership: Setting New Expectations
“It should be clearly understood that if managers are entrusted with leading decisions that materially impact the key outcomes for the organization, they have the responsibility to show they are using optimized processes in doing so.”
The act of addressing decision process is a powerful investment in better leveraging the collective intelligence of your organization to consistently deliver better results with less risk and greater efficiency. The most commonly voiced push back against a focus on decision process is about time. “We simply don’t have time to go through a process like this,” managers say. “We are far too busy,” or “we have other more pressing priorities.” Yet DPO is specifically about helping your teams better manage those very same pressing priorities.
Rather, the real pushback is often a matter of politics and culture. A lack of definition, transparency and accountability is often much more comfortable than its opposite. Yet it is rarely more effective or efficient. The most effective BPO initiatives are those that begin with a strong leadership support. Like most initiatives requiring culture change, leaders are most effective when they draw a line in the sand that the organization is committed to the principles of structured, transparent and participative decision making. In these cases, it should be clearly understood that if managers are entrusted with leading decisions that materially impact the key outcomes for the organization, they have the responsibility to show they are using optimized processes in doing so. Internal presentations are expected to clearly show not only the final decision/recommendation but also to clearly provide visibility into the who/how/and why behind the conclusion. DPO and HiveWise make that possible across every key decision in the organization.
A note on accountability. Managers often shy away from attaching KPI’s (including actual baselines and project targets) to key decisions when possible. Beyond the fact that not everything is easily measured, the reason is simply a matter of comfort. By avoiding specific targeted numbers, they leave room for ambiguity. As JFK famously said after the Bay of Pigs, ”victory has a thousand fathers and defeat is an orphan.”
One great byproduct of looking at decision making as an optimizable process is that we shift the focus from assigning full praise or blame on the decision maker, to a focus on ensuring the process keeps getting better. Something screwed up and we didn’t get the results we wanted? Fine. Let’s look back on how we made the key decisions involved and figure out what we could have done differently to have put us in a better position. What data should we have looked at, stakeholders we should have listened to, risks we should have identified and planned to mitigate? Decision making as a process shifts a culture of credit and blame to a culture of learning and sharing those learnings. Of course, we all ideally would want to foster a culture like this, but DPO provides the framework to make it a reality.
Case Study: National Telecommunications Provider
“The DPO team was able to deliver key wins early on by reducing the time-to-decision on targeted cross-cutting decisions by 50-75%.”
Discussions with a telecommunications client began with a focus on data-driven decision making. After massive investments in business intelligence, the organization had many questions. Was this new level of available reporting viewed as “informational only” or was it actually translating into action and impact? Which managers and teams were doing a great job leveraging these tools and what best practices could be learned and shared with the rest of the organization? Which teams were struggling and needed more support? A decision process optimization initiative was launched to bring clarity, best practices and results tracking to the way the organization turned data insights into business results.
Rather than diving in to focus on a particular dashboard or team, the DPO initiative surveyed key executives to understand overall priorities. This broader review of decision making at the organization uncovered a range of pressing issues - most not directly related to business intelligence. At the top of the list were a number of important business strategies that required participation across functions and business units. The complexity and sheer number of stakeholders left many key decisions floating in uncertainty for far too long.
The DPO team was able to deliver key wins early on by reducing the time-to-decision on targeted cross-cutting decisions by 50-75%. The team was able to take this momentum into its next phase as it focused on addressing BI-centric optimization.
Conclusion: Getting Started on Your DPO Journey
“Consciously optimizing how your organization makes decisions is one of the highest ROI activities any management team can do.”
Some of the most important work your organization does is decision making. And yet the majority of this work is largely inefficient, lacking transparency, governance and best practices. When an organization recognizes decision making as a critical - and optimizable - business process, it has taken the major step forward in improving overall performance.
According to Ruben Ugarte, a data and decision consultant and author of The Data Mirage: Why Companies Fail to Actually Use Their Data and Bulletproof Decisions: How Executives Can Get it Right, Every Time, says investments in decision process have significant returns. “Consciously optimizing how your organization makes decisions is one of the highest ROI activities any management team can do,” says Ruben. “The improvements made today will pay back dividends for years in the future.”
In order to help your organization get started on your DPO journey, we’ve outlined a three dimensional framework for approaching decision process optimization based on our research and experience. This includes taking a formal, consultative approach, enabling new decision processes via a single system of record, and active expectation setting by engaged leaders.
