Topic 6 Continuous Decisionmaking and problemsolving the value

Topic 6. Continuous Decision-making and problem-solving: the value of interpersonal skills Effective decision-making Implementing a solution and feedback

Definitions of effective decision making the process through which alternatives are selected and then managed through implementation to achieve business objectives result from a systematic process, with clearly defined elements, that is handled in a distinct sequence of steps

An effective decision-making process includes the following steps: Enterprise governance. Select alternatives. Context/mindset. Decisions. Frame the issue. Manage implementation and impact. Assemble information. Feedback.

Enterprise governance The board provides the overall enterprise governance of the organisation. This means that it exercises effective oversight of both the conformance and performance aspects of the organisation. The formal planning process provides the strategic context, brand values and budgetary constraints in which decisions are made. Context/mindset Decisions are taken in the general context of the organization's overall strategic direction, ethics and culture by individuals with their own prejudices and attitudes in the context of the issue being considered. The potential impact of prejudice in the organizational culture and people’s attitudes and behavior cannot be underestimated. Management accountants can help to ensure that alternatives are considered properly and decision making is evidence based.

Frame the issue This is a key step. Issues must be properly framed to balance a broad view with efficient focus. Appropriate parties must be engaged. Stakeholders’ interests are taken into account in determining the objectives at this stage. In businesses that are managed for value, the main criterion will be the impact on shareholder value. Assemble information This involves the provision of insightful information to describe the business’s current financial and competitive position. Information is also assembled for a business proposal(s), the value for customers and the impact on the organization's value chain. The risks involved require close co-operation or partnering with the business.

Select alternatives Alternatives should be selected on the basis of evidence and analysis rather than personal opinions. Risks must be identified as either ‘dealbreakers’ or issues to be managed. Management accountants can facilitate unbiased, evidence based decision making. They can provide consistent quantitative and qualitative analysis of the situation and proposals. Decisions The decision maker(s) should have the authority to take the decision. Role clarity and understanding is important here so that decisions are reached efficiently and not delayed or swayed by other interested parties.

Manage implementation and impact Managing implementation through to impact requires that the decision should be clearly communicated and the expected outcomes reflected in performance management metrics. Quantifying or describing potential outcomes and, if appropriate, the potential next steps after each outcome, will enable implementation to be managed and appropriate action taken promptly. This will ensure that goals are achieved. Feedback Trial and error may be allowed as tactical experiments within acceptable risk parameters, but repeating past mistakes should be inexcusable. The decision and matters considered should be properly documented for post audit or learning purposes. The outcome of past decisions should be captured as part of the corporate memory to ensure that lessons are learned.

Problems that can prevent effective decision-making: Not enough information. Too much information. Too many people. Vested interests. Emotional attachments. No emotional attachment.

Not enough information If you do not have enough information, it can feel like you are making a decision without any basis. Take some time to gather the necessary data to inform your decision, even if the timescale is very tight. If necessary, prioritise your information-gathering by identifying which information will be most important to you.

Too much information The opposite problem, but one that is seen surprisingly often: having so much conflicting information that it is impossible to see «the wood for the trees» . This is sometimes called analysis paralysis, and is also used as a tactic to delay organizational decision-making, with those involved demanding ever more information before they can decide. This problem can often be resolved by getting everyone together to decide what information is really important and why, and by setting a clear timescale for decision-making, including an information-gathering stage.

Too many people Making decisions by committee is difficult. Everyone has their own views, and their own values. And while it’s important to know what these views are, and why and how they are important, it may be essential for one person to take responsibility for making a decision. Sometimes, any decision is better than none.

Vested interests Decision-making processes often founder the weight of vested interests. These vested interests are often not overtly expressed, but may be a crucial blockage. Because they are not overtly expressed, it is hard to identify them clearly, and therefore address them, but it can sometimes be possible to do so by exploring them with someone outside the process, but in a similar position. It can also help to explore the rational/intuitive aspects with all stakeholders, usually with an external facilitator to support the process.

Emotional attachments People are often very attached to the status quo. Decisions tend to involve the prospect of change, which many people find difficult.

No emotional attachment Sometimes it’s difficult to make a decision because you just don’t care one way or the other. In this case, a structured decision-making process can often help by identifying some very real pros and cons of particular actions, that perhaps you hadn’t thought about before. Many of these issues can be overcome by using a structured decision-making process. This will help to: reduce more complicated decisions down to simpler steps; see how any decisions are arrived at; and plan decision making to meet deadlines. Many different techniques of decision making have been developed, ranging from simple rules of thumb, to extremely complex procedures. The method used depends on the nature of the decision to be made and how complex it is.

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