Senior leadership teams and Boards make important decisions everyday. Some are strategic and long-term; others are operational, financial or people-centred. Some are taken with considerable time and analysis; others need to be made quickly in the face of uncertainty.
Yet the quality of a decision is not determined simply by the intelligence, experience or commitment of the people around the table. Even highly experienced Boards and senior teams can fall into familiar decision-making traps. These are rarely obvious at the time.
The challenge, therefore, is not to eliminate judgement or uncertainty. It is to create an environment in which important decisions are more likely to be properly framed, appropriately challenged and clearly owned.
Here are nine traps that are particularly common:
1.Solving the wrong problem
One of the most fundamental failures is to move into discussing solutions before agreeing precisely what problem or decision is actually being addressed.
A Board may, for example, spend considerable time debating whether to invest, acquire, restructure or enter a new market without first checking they agree on the underlying question. What are we actually trying to achieve, and what problem are we trying to solve?
This can result in extensive analysis and debate without actually much genuine progress.
Better to start by defining the decision. What exactly needs to be decided? What is in and out of scope? What would a successful outcome or result look like?
2. Unclear decision rights
This is about ambiguity about whether or how much a particular leadership group in an organisation’s hierarchy has relevant authority to make a decision, or whether it perhaps has merely a contributory role. This can be an issue on matters where the Board, Chair, CEO, executive team and Board committees all have legitimate roles. Consultation can gradually become confused with decision-making, and accountability can become blurred.
A decision where everyone is involved but nobody accountable is rarely a good decision process.
Better practice: Be explicit at the start about who is accountable for making this decision. Who owns the decision, who provides advice or challenge, who needs to be consulted and who ultimately needs to be informed?
3. Groupthink and excessive consensus
Boards and senior teams rightly value constructive relationships and collective responsibility. However, a desire for harmony can unintentionally discourage challenge.
Sometimes, consensus emerges because everyone genuinely agrees. At other times, though, people agree because the preferred answer appears obvious as a senior individual has expressed a strong view, or because nobody wants to re-open a difficult discussion. The risk is that apparent alignment is mistaken for robust decision-making.
Better practice: Invite challenge before seeking consensus. Make it legitimate to disagree. Consider asking one person to take the role of constructive challenger or to articulate the strongest case against the emerging decision. Or ask the open question: What might we be missing here? What would someone who disagreed with us say on this?
4. Confusing information with insight
More information does not necessarily mean better decisions.
Board papers can become increasingly detailed whilst the underlying decision becomes less clear. Large quantities of data may obscure the few assumptions, risks or judgements that actually matter.
It is vital to distinguish between facts, assumptions, judgements and unknows. They should not all be presented and treated as though they carry the same weight or degree of certainty.
Best practice: Focus information on what could materially change the decision. Make critical assumptions visible and distinguish evidence from management judgement.
5. Anchoring on the first proposal
Once an initial recommendation, forecast, valuation or proposed course of action has been presented, subsequent discussion can become anchored around it.
Instead of asking, “What is the best answer?”, the group starts asking, “How can we make this particular proposal look or work better?”
This is particularly serious when the first proposal comes from a senior or influential executive, adviser or subject-matter expert.
Better practice: Where practical, encourage independent thinking before the preferred option is presented. Ask what the realistic alternatives are and what evidence would cause the group to change its initial view. Ask perhaps “If this proposal had not been put in front of us, what other options would we be considering?”
6. Overconfidence and false certainty
Experience is invaluable, but it can also create a sense that the future is more predictable than it really is. Forecasts can gradually become treated as facts. Management assumptions can become embedded in Board thinking. Risks can be described in reassuring language without sufficient examination of their implications.
The objective should not be to become paralysed by uncertainty. It is to recognise it and make it explicit.
Best thing to do is to identify the key assumptions on which the decision depends and consider what would need to be true for the decision to succeed.
7. Allowing short-term pressure to distort long-term decisions
Boards and executives inevitably face immense pressures: financial performance, stakeholder expectations, regulatory deadlines, market events or operational problems. The danger is that these pressures can dominate decisions whose consequences extend well beyond the immediate horizon.
Equally, however, organisations sometimes overcorrect in the other direction and allow long-term considerations to obscure urgent realities.
Best practice: Make the time horizon explicit. Consider separately the immediate, medium-term and longer-term consequences of the decision being made. It is also useful to distinguish between decisions that are reversible and those that are difficult or expensive to unwind.
8. Failure to consider genuine alternatives
A decision is not necessarily a choice simply because there are several options in Board paper. Sometimes one option is developed in considerable detail while the alternatives are little more than ‘straw men’. “Do nothing” may also be dismissed without properly considering its consequences.
This creates the illusion of choice rather than genuine choice.
Best thing to do is to require a small number of credible alternatives. These might include doing less, doing more, delaying, taking a different route or deliberately accepting the status quo. The aim is not to create unnecessary analysis but rather to to establish that the chosen course is genuinely preferable.
9. Making decisions without learning from them
This trap is very easily overlooked. It involves, once a decision has been taken, seeing everyone’s attention moving to implementation and then on to the next issue. Few organisations systematically revisit whether the assumptions behind significant previous decisions proved to be correct.
This creates a missed learning opportunity. Without reflection, organisations can repeatedly make similar mistakes without recognising the pattern.
Best practice is – especially for significant decisions – to define in advance what success would look like, which assumptions are critical and when the decision will be reviewed.
The overall aim: a better decision-making discipline
None of the above traps can be eliminated completely. Nor should Boards or leadership teams try to find a mechanistic process that removes uncertainty or judgement from leadership. Of course, no senior team can guarantee that every decision it will take will be successful. Good governance recognises that some decisions will inevitably turn out differently from expectations.
The real role – and test – for a Board or exec team is to create the most conducive conditions, discipline and process for making good decisions. The aim is not certainty or perfect decisions. It is rather to enable enough disciplined judgement to improve the odds of reaching a good, later outcome.
In summary, a strong, disciplined decision-process will generally involve asking at least the following questions:
- Are we clear exactly what the issue is / what we are deciding on?
- Are we clear on what role/authority we have in this decision?
- Do we have the right information / evidence?
- Are we considering a decent set of alternatives?
- Have we surfaced and considered key assumptions, risks and uncertainties?
- Has there been enough constructive challenge in our group (of options and ideas)?
- Are we all clear on what we are agreeing and what action happens next?
- Thinking ahead, how will we know whether the decision was right, and what will we do if circumstances change?