06/26/2017

Untangling Your Organization’s Decision-making

by Aaron De Smet, Gerald Lackey and Leigh M. Weiss

It’s the best and worst of times for decision makers. Swelling stockpiles of data, advanced analytics, and intelligent algorithms are providing organizations with powerful new inputs and methods for making all manner of decisions. Corporate leaders also are much more aware today than they were 20 years ago of the cognitive biases—anchoring, loss aversion, confirmation bias, and many more—that undermine decision making without our knowing it. Some have already created formal processes—checklists, devil’s advocates, competing analytic teams, and the like—to shake up the debate and create healthier decision-making dynamics.

Now for the bad news. In many large global companies, growing organizational complexity, anchored in strong product, functional, and regional axes, has clouded accountabilities. That means leaders are less able to delegate decisions cleanly, and the number of decision makers has risen. The reduced cost of communications brought on by the digital age has compounded matters by bringing more people into the flow via email, Slack, and internal knowledge-sharing platforms, without clarifying decision-making authority. The result is too many meetings and email threads with too little high-quality dialogue as executives ricochet between boredom and disengagement, paralysis, and anxiety (Exhibit 1). All this is a recipe for poor decisions: 72 percent of senior-executive respondents to a McKinsey survey said they thought bad strategic decisions either were about as frequent as good ones or were the prevailing norm in their organization.

The ultimate solution for many organizations looking to untangle their decision making is to become flatter and more agile, with decision authority and accountability going hand in hand. High-flying technology companies such as Google and Spotify are frequently the poster children for this approach, but it has also been adapted by more traditional ones such as ING (for more, see our recent McKinsey Quarterly interview “ING’s agile transformation”). As we’ve described elsewhere, agile organization models get decision making into the right hands, are faster in reacting to (or anticipating) shifts in the business environment, and often become magnets for top talent, who prefer working at companies with fewer layers of management and greater empowerment.

Please click here to read the complete article from McKinsey & Company's McKinsey Quarterly June 2017 edition.