6: The Elements of Decision-making
Only executives make decisions. Indeed, to be expected - by virtue of position or knowledge - to make decisions that have significant impact on the entire organization, its performance,and results defines the executive.
Effective executives, therefore, make effective decisions.
Effective executives do not make a great many decisions. They concentrate on the important ones. They try to think through what is strategic and generic, rather than "solve problems."
TWO CASE STUDIES IN DECISION - MAKING
Vail built the organization into the largest private business in the world and into one of the most prosperous growth companies.
The explanation lies in four strategic decisions Vail made in the course of almost twenty years.
A. The business of the Bell Telephone Company must be anticipation and satisfaction of the service requirements of the public.
B. A nationwide communications monopoly could not be a free enterprise in the traditional sense - that is, unfettered private business.
C. Vail's third decision led to the establishment of one of the most successful scientific laboratories in industry, the Bell Laboratories.
Even today few businessmen understand that research, to be productive, has to be the "disorganizer," the creator of a different future and the enemy of today.
D. Vail invented the mass capital market.
Vail's as well as Sloan's ... They all tackled a problem at the highest conceptual level of understanding. They tried to think through what the decision was all about, and then tried to develop a principle for dealing with it. Their decisions were, in other words, strategic, rather than adaptations to the apparent needs of the moment. They all innovated.
THE ELEMENTS OF THE DECISION PROCESS
The truly important features of the decisions Vail and Sloan made are neither their novelty nor their controversial nature. They are:
- The clear realization that the problem was generic and could only be solved through a decision which established a rule, a principle;
- The definition of the specifications which the answer to the problem had to satisfy, that is, of the "boundary conditions";
- The thinking through what is "right," that is, the solution which will fully satisfy the specifications before attention is given to the compromises, adaptations, and concessions needed to make the decision acceptable;
- The building into the decision of the action to carry it out;
- The "feedback" which tests the validity and effectiveness of the decision against the actual course of events.
These are the elements of the effective decision process.
Strictly speaking, one might distinguish between four, rather than between two, different types of occurrences.
- There is first the truly generic of which the individual occurrence is only a symptom.
- Then there is the problem which, while a unique event for the individual institution, is actually generic.
- Next there is the truly exceptional, the truly unique event.
- The early manifestation of a new generic problem, is the fourth and last category of events with which the decision process deals.
By far the most common mistake is to treat a generic situation as if it were a series of unique events.
Equally common is the mistake of treating a new event as if it were just another example of the old problem to which, therefore, the old rules should be applied.
Almost as common is the plausible but erroneous definition of the fundamental problem.
Or the definition of the problem may be incomplete.
The effective decision - maker, therefore, always assumes initially that the problem is generic.
I was taught this when I started in 1944 on my first big consulting assignment, a study of the management structure and management policies of the General Motors Corporation. Alfred P. Sloan, Jr., who was then chairman and chief executive officer of the company, called me to his office at the start of my study and said: "I shall not tell you what to study, what to write, or what conclusions to come to. This is your task. My only instruction to you is to put down what you think is right as you see it. Don't you worry about our reaction. Don't you worry about whether we will like this or dislike that. And don't you, above all, concern yourself with the compromises that might be needed to make your recommendations acceptable. There is not one executive in this company who does not know how to make every single conceivable compromise without any help from you. But he can't make the right compromise unless you first tell him what ‘right' is." The executive thinking through a decision might put this in front of himself in neon lights.
It is fruitless and a waste of time to worry about what is acceptable and what one had better not say so as not to evoke resistance. The things one worries about never happen. And objections and difficulties no one thought about suddenly turn out to be almost insurmountable obstacles. One gains nothing in other words by starting out with the question: "What is acceptable?"
In sharp contrast is the recent failure of a brilliant chairman and chief executive to make effective a new organization structure and new objectives in an old, large, and proud American company. Everyone agreed that the changes were needed. The company, after many years as leader of its industry, showed definite signs of aging; in almost all major fields newer, smaller, and more aggressive competitors were outflanking it. But to gain acceptance for the new ideas, the chairman promoted the most prominent spokesmen of the old school into the most visible and best - paid positions - especially into three new executive vice - presidencies. This meant only one thing to the people in the company: "They don't really mean it."
If the greatest rewards are given for behavior contrary to that which the new course of action requires, then everyone will conclude that this contrary behavior is what the people at the top really want and are going to reward.
Not that he distrusts the subordinate; he has learned from experience to distrust communications.
This is the reason why a battalion commander is expected to go out and taste the food served his men. He could, of course, read the menus and order this or that item to be brought in to him. But no; he is expected to go into the mess hall and take his sample of the food from the same kettle that serves the enlisted men.
With the coming of the computer this will become even more important, for the decision - maker will, in all likelihood, be even further removed from the scene of action. Unless he accepts, as a matter of course, that he had better go out and look at the scene of action, he will be increasingly divorced from reality. All a computer can handle are abstractions. And abstractions can be relied on only if they are constantly checked against the concrete. Otherwise, they are certain to mislead us.
-- From "The Effective Executive" (Peter Drucker)
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