How to avoid the 10 classic strategic decision making traps

This post is by ‘THE BUYER’ – an anonymous former senior manager in the procurement profession who offers an occasional perspective to the world from a procurement driven point-of-view.

The impact of business decisions

Decision making can be a tricky business. As most of us have surely experienced at some point in our career. Difficult decisions can be very difficult – and no brainers can sometimes prove to be anything but.

Strategic decision making

Rarely do we have all the data we need to make the best decision. Calling for more data is usually always an option. Yet at some point the analysis paralysis has to stop and a decision made – however perfect. Time is always the enemy of good decision making.

“In a moment of decision, the best thing you can do is the right thing to do.
The worst thing you can do is nothing.” -Theodore Roosevelt

A key element of what makes a decision good or bad is the impact of our business decisions. good decisions can sometimes lead to wondrous outcomes. Poor decisions can sometimes prove disastrous. Infuriatingly, the opposites can also be the case. There is little quite as frustrating as taking a good decision for the right reasons and seeing it go unrewarded – even punished by the winds of fate.

Business process is all about making better decisions. Investing in getting it right. In many ways “professionalism is merely the minimising of mistakes” said Patrick Robinson. An old pro will likely make less mistakes given a relevant task. They still might make a mistake, especially in the context of growing complexity. But they are less likely to make dumb mistakes, obvious mistakes or rookie mistakes. Because they have the edge of experience.

“Sir, What is the secret of your success?” a reporter asked the Chairman of a major bank ….
“Two words.”
“And, sir, what are they?” quizzed the reporter,
“Good decisions” he replied:
“And how do you make good decisions?”
“One word.”
“And sir, what is that?”
“Experience.”
“And how do you get Experience?”
“Two words.”
“And, sir, what are they?”
“Bad decisions.”
– Unknown author

Decision making is a skill

One thing most managers would certainly agree upon though is that, in business, decisions truly matter. They are a critical soft-skill in the business manager’s armoury. In fact, decision making could perhaps be the most critical soft skill that a manager can possess?

Yet we often try to run it into a hard skill by surrounding the decision making task with extensive process. But does this necessarily lead to better decisions?

Given our predilection for process, it is doubly surprising then that this tricky business of decision making – a process that all managers are at least involved in – is perhaps the most overlooked area of professional development and training for managers. Few skills can be as critical within the entire art & science of strategic business management – within the awesome range of skills it takes today to be an effective and successful business manager.

How many professional business managers have attended any sort of course or programme that includes the formal (or even informal) topic of decision making? Is there a way we can even learn to make better decisions? Can only leaders decide? Are good decision makers born and not made?

Surely if we studied decision-making, learnt its processes, understood it components and could identify good and bad decision practices we could make better decisions?

Many in professional procurement would say that is really what they do. That they are professional decision makers. But that both diminishes what they do and flatters what they do at the same time. They certainly do far more than facilitate a decision. They rarely make decisions entirely themselves in isolation, but more as part of a decision making unit (DMU) within their organisation. They certainly enable decisions. Hopefully better ones than would otherwise be the case.

Surprising also then that so few Procurement professionals study decision-making. As a subject it is almost completely absent from the MCIPS syllabus …. the ubiquitous professional standard in the procurement discipline and even a degree level standard at that.

Even worse, so few business degrees or MBAs seem to even address the subject at all. Yet the essence of business is always to work to only one thing really – better decisions (whether large or small) in the essential business task of simply weighing risk versus return.

Decision making as a process

By the year 2014 we should certainly expect as learned human beings and business professionals to know enough about decision making to distill the key components of a good decision. Enough to even codify them and to be able to teach them as part of the process of making a decision. Certainly a basic business decision.

So how can this corporate memory of good decision making help us choose the right marketing agency in 2014?

What key lessons can we incorporate into our process to make better decisions in selecting marketing agencies? Or, even, to pressure test the decisions we want to make … to make sure that they are also good for business as well as being (hopefully) good marketing decisions?

How can strategic decision making be a better process than the process we all know so well?

1. Define objectives
2. List options
3. Weigh pros & cons
4. Decide
5. Implement

This is our beloved pitch process of course. What procurement might call a tender process. But at their core such processes are based, usually, on fairly obvious lists of pros and cons of each option. And a deeply rational evaluation of said pros and cons as weighted, analysed and scored by our balanced committee of fine, upstanding managers.

The role of the corporate decision making unit (DMU)

Companies do not buy from companies of course – people do. All sales professionals know this. Influence the people – influence the decision. Which explains why so many sales reps (suits) simply try to woo a new customer to get a new sale.

But, latterly, this obvious, limited and blunt sales strategy is undone by the force of the DMU, demanding more rationale for their largesse.

The response of the sales profession was the devastating strategic selling approach (Miller & Heiman 1986). It taught salespeople to divide and rule. To cover their bases, identify the different buyers and their motivations, isolate the red flags, pitch to the decision drivers, overcome the objections and work from the inside-out to drive the purchase decision their way.

The famous IBM spin technique from 1975 onwards has a similar philosophy and describes the approach of solution selling – a buzz phrase of all B2B suits working in a sales role.

These two examples illustrate how professional sales has always been ahead of professional procurement in the past, in terms of understanding and development of the B2B sales process. Although the balance is shifting it seems nowadays with the rapid development of the fastest growing profession in business (Procurement) – certainly over the last twenty years or so.

The helpful role of RASCI in making the DMU work

Many PROCUREMENT teams now proactively use a RASCI type framework quite proactively to better ensure DMU and that the team each does their job within the DMU and all players buy in to key decisions.

It also prevents the derailing of procurement projects, when big-cheese managers or chief technocrats object to a corporate choice; or even to the Procurement team’s involvement in the DMU!

Many in a corporate DMU have the power to say no, few have the power to say yes. Our tame sales rep always tries to spend their time in front of the people that can say ‘yes’. So if your colleague sees the supplier reps more often than you, chances are the vendor thinks they have the power balance in the forming DMU.

RASCI is an acronym that stands for responsibility/approval/supportive/consultation/influence.

It is a matrix that assigns responsibility to each person in the DMU individually. It defines their role in the DMU.

Importantly it also pushes out hangers-on to the DMU. People who are not needed to make the best decision possible. Those that need not have input, need not have input.

The real point is that each person within the DMU has a role to play in contributing to a better business decision. Unfortunately, human nature being what it is, and corporate egos being what they are, many in a typical DMU think it is solely their decision to make. That yes or na depends on just the almighty them. They forget their role, and take on the role of Caesar. They can grow to feel that they are the decision maker, not the team.

Yet very few in business have such omnipotence. Even CEOs take advice and recommendations from minions down the food chain – those with greater detailed knowledge or relevant experience. Though CMOs might know best – certainly if their career is on the line!

Procurement have recognised this. RASCI is the tool they use to manage this scenario. It is widely used in developing procurement teams to identify each member of the DMU and the role they must play. Procurement managers are getting very proactive in isolating objections and keeping people within the DMU to their responsibility and not mission-creeping into others’ patches.

RASCI is a process to give buyers control within their own organisation – to help buy the right solution for the right reasons. Any typical old school CMO would hate it.

The helpful role of insight in seeing the truth

Many decisions we take in business are based upon insight. That is the idea that we have an edge of understanding of the real truth of a scenario that escapes our competitors. That we have an eye for the business that they do not.

Insight is defined in many ways. The Microsoft (Encarta) dictionary defines it as:

“INSIGHT is the ability to notice and understand a lot. That is the ability to notice and understand a lot about people or situations” English dictionary (Microsoft version 10)

Ultimately, as one manager said, insight is the gift of great managers – the ability to see between the lines. Inventing a management process to develop this seems improbable.

(The application of good insight, by the way, is incisive …. Not ‘insightfulness’ as so many wrongly describe it).

It is ironic then, really, that agencies upon whom we often rely for profound insight are chosen by people using their own insight perhaps deemed insufficient to apply to their beloved product’s cause.

So, how important it proves to be in any decision process is only a factor to two things;

1. The influence with in the DMU of the person with the most accurate (or inaccurate) level of insight
2. The outcomes resultant of the decision that was so influenced by said insight

Unfortunately, as George Bernard Shaw once said, (in 1934 actually), “all great truths begin with blasphemy” – which can often marginalise those with genuine insight working within a typical corporate DMU.

Perhaps the greatest “automatic” insight to the skill in choosing a new marketing agency is the TrinityP3 maxim…

… that efficiency always leads to effectiveness. Use the right process to define your objectives, align your choice with your strategy and roster, then ensure your marketing process is as efficient as possible. Inevitably this will lead you to greater marketing effectiveness.

Herein lies the real secret of good decision making when choosing a new agency – to select the right agency, not the best one.

The importance of setting CLEAR objectives

When it comes to the quintessential business project, in a typical large company, we can’t always have it all – however much we try. It is rare indeed for any option to offer simply the bestest, cheapest, fastest, greenest option. Indeed, it is rarely obvious who the best agency truly is.

Certainly not before clear criteria for success and clear objectives of the purchase decision have been set. Preferably passing the test of being succinctly written down.

The full art and science of decision making demands that first essential requirement of clear objectives. So often in the business world we seem to leap headlong into process before setting those essential clear objectives. Yes. Really. We do.

Perhaps the most essential (and most evaded) challenge of the test of clear objectives is the challenge of ensuring strategic alignment. That is, the alignment between what you are trying to do today, and the overall aims of your organisation’s strategy to achieve their mission and goals.

Aligning your marketing strategy with your vendor selections makes obvious sense. So why do so few marketing managers seem to proactively ensure this? Maybe because every agency says they can do everything. “Can you do digital too?” you ask, “sure, of course, says your old DM agency.”

Avoiding the 10 most common business decision traps

Whether an individual with a weighty choice to make, or a humble member of a corporate DMU, perhaps the best way to make a good decision is not to make a bad one.

Avoiding the not-quite-so-obvious traps lying in front of key decisions might be a good start: One seminal work on decision making is by Russo & Schoemaker 1989 called “Decision Traps – The ten barriers to brilliant decision making & how to overcome them.

Although not written in a procurement context, nor directly in a marketing one, it is written in a business context.

And their work is entirely relevant to decision making by the corporate DMU – and offers these ten decision traps to best avoid in any corporate decision process; with interpretations on the pitch process helpfully added by The Buyer – for absolute clarity:

1. Tendency to plunge in – impulsive decisions favouring the favourite agency we have to have; it’s obvious isn’t it?

2. Frame blindness – not identifying the options; one track decision making. They said they did digital as well.

3. Lack of frame control – solving the wrong problem; the new agency is cheaper.

4. Overconfidence – using assumptions not facts; they’ll be able to do that as well, surely?

5. Short-sightedness – what could possibly go wrong? What indeed ….

6. Shooting from the hip – that feels right, surely? The chemistry works well, they must be right ….

7. Group failure – everybody wants this; nobody dissents, it will be best for everyone (no need to ask them, we know best)

8. Fooling yourself about feedback – the customer is wrong; stoopid customer, what do they know ….

9. Not keeping track – I think we did, didn’t we? Or did we we not? Does it matter though, I mean, really?

10. Failure to audit your decisions – that was a great success, wasn’t it? Everyone says so …..

The thing is, sometimes it is just as important how you make a decision than the final decision you eventually come to. As professional Procurement processes try to teach us almost every day, and the RASCI process amplifies.

In fact, all procurement people should be pretty good at making business decisions. Their ethics drive objectivity, their probity ensures oversight and they bring good decision process to bear which results in a number of options to consider with full knowledge. Though critics might argue that their lack of product or market knowledge may, on occasion, rob them of insight.

Maybe decision making is one thing other business managers could best learn from procurement sometimes? Otherwise they could just Google the words ‘decision traps’….

Interested to hear your thoughts – please leave a comment.

 

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About The Buyer

THE BUYER is an anonymous former senior manager in the procurement profession who offers an occasional perspective to the world from a procurement driven point-of-view. Formerly, The Buyer posted weekly blogs on the premier news site for the procurement profession throughout Australasia at PP Online Over 400 postings of ‘The Buyer’s Blog’ are still listed online covering all sorts of procurement related topics and opinions on matters related to professional procurement.
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