Surprising but True : Half the Decisions in Organizations Fail

1. Surprising but True : Half the Decisions in Organizations Fail Paul C. Nutt Ohio State University USA

2. Overview Half the decisions in organization fail. Studies of 356 decisions in medium to large organizations in US and Canada reveal that these failure can be traced to managers who impose solution, limit the search for alternatives, and use power to implement their plan. Managers who make the need for action clear at the outset, set objectives carry out unrestricted search for solution, are more apt to be successful.

3. Why Decisions Fail ? Managers employ poor tactics Why tactics prone to fail used so often ? • Some tactics with a good track record are commonly known but uncommonly practiced • Decision makers take short cuts when they feel pressure • Subleties. Telling people you want to lower costs is much more powerful than finding the root cause of the problem

4. Inventory of Managerial Decision Cases a based on 356 decisions made by senior managers in medium to large organization across the USA and Canada The managers face day-to-day managerial decision in new products, equipment purchases, staffing, pricing, marketing, controls, planning, personnel policy, construction and customer service About a quarter were made in public agencies, about a half in private sector profit-making companies, and the remainder in third-sector organizations

5. Inventory of Managerial Decision (contd.) The steps managers followed were uncovered and classified into tactics that are used to: • Set directions • Find solutions • Implement solutions The indicator of successful tactics : • Long term use (sustained for two years) • Degree of use (decision/tactic still in full use after two years)

6. Organizational Decision Making

7. Tactics Used to Set Direction • Generating Ideas • Problem Solving • Setting Objectives • Intervening in the Process

8. Generating Ideas • The most common way of establishing a direction (37%) • Managers find what seems to be a useful idea in the signal motivating action and fashion it into a ready-made solution • The idea tactic prompts managers to focus on a single solution.Managers saw the idea as a pragmatic way to take decisive action, and made no effort to find another option • Solutions derived in this way were fully used in only 42% of the cases and only 56% were used for the entire two years

9. Problem Solving • Used in more than 26% of the cases • Managers defined a problem and then analyzed its distinctive features with the hope of quickly uncovering clues that would suggest a remedy • Only 44%of the solutions were fully used and 55% were sustained as long as two years • The low sustainability occurred because it became increasingly obvious over time that more important things had been overlooked

10. Setting Objectives • Used in 30% of the cases • The objective indicates the results that a manager wants to realize, such as lower cost or increased market share • Resulted in a 70% sustained use and 58% full use • Objectives are commonly known, but uncommonly practiced because managers often have bias toward action and fear being seen as indecisive • Setting objectives can prompt failure if the objective is too demanding

11. Intervening in the Process • Used in just 7% of the cases • It was the most successful (sustained in 96% and fully used in 92% of the cases) • To intervene, a manager demonstrates the imperative to act by comparing current performance to norms that discredited it. This demonstration justifies the new norm by benchmarking the performance levels of respected organization.Managers compare current performance to the new norm and over some ways to improve performance

12. Lessons for Establishing Direction • The most successful tactics are infrequently used, and the least successful frequently used • Avoiding idea and problem-solving tactics and using objective or intervention tactics will improve the chance of success • Problem solving tactics fail because the search for solutions is narrowed and the defensiveness is evoked • Intervention and setting objectives are effective because they encourage learning and development ODM

13. Tactics Used to Identify Option • Benchmarking the Best Practices of Others • Searching For Solutions • Designing Options

14. Benchmarking the Best Practices of Others • Managers often benchmark practices that are being uses by respected organizations to uncover a solution • A single-benchmark (from single source) cropped up 7% of the cases and had both sustained and full use rates of 59% • Integrated benchmarking (amalgamate ideas from multiple sources) observed in 6% of the cases and had sustained rate 71% and full use rate 78%

15. Searching For Solutions • 12% of the cases used search aids, such as a request for proposal, to find prepackage solutions from vendors or consultants. • Managers who feel that they are aware of the standards by which to judge a proposed option carry out a single search (9% of the cases) • Others prefer to learning from sequential searches /multiple search (3% of the cases) • Single search had sustained in 63% and fully used in 51% • Multiple search had sustained and fully used in 100%

16. Designing Options • Managers apply design to develop innovative options in response to the need or the objective guiding the decision-making effort • Design tactics were found in 12% of the cases and produce 63% sustained decisions and 53% fully used decisions • Managers were reluctant to use design because it seemed quite risky, compared with the benchmarking or the searching tactics

17. Lessons for Identifying Option • Managers who impose just one idea (single benchmark, single search) should spend considerable time trying to make the idea work. • Single searches opened up the search process but allowed little opportunity for learning • Design produced good results under certain condition such as for important decisions and when multiple alternatives were sought • Nearly every discussion of decision making calls for developing multiple options ODM

18. Tactics Used to Implement Decision Stages • Intervention • Participation • Persuasion • Edicts

19. Intervention • Implementation by intervention occurred in 7% of the decision studied, with 98% sustained and 92% fully used • Intervention showed stakeholders that performance has improve and that performance now meets agreed upon norms

20. Participation • Managers started other decision-making efforts by creating task force with key individuals as members. Authority was delegated to the task force to oversee important aspects of the effort. • Implementation by participation occurred in 18% of the decision studied, with 80% sustained and 73% fully used • There were 4 types of implementation (token, delegated, complete, and comprehensive)

21. Persuasion • Manager use persuasion in nearly 40% of the cases with 56% sustained use and 47% full use rate • Managers combined the rational arguments provided by experts with salesmanship to convince people to go along with decision • Failure occurred when the experts’ arguments were unable to sway people

22. Edicts • Some managers use their power to issue a directive that announces a decision through such as a memorandum, conducted job training, and administrator hiring. • Edicts was observed in 40% of the cases with 53% sustained use and 35% full use rate

23. Lessons for Implementing Decisions • Managers should become more involved in decision making • Substitute intervention for edicts and persuasion • Involve people affected by a decision • Issuing edicts calls for reward, legitimate, expert, informational or referent power.

24. Successful Decision Making Managers can improve their chances of making successful decisions Suggestions: • Personally manage your decision-making processes • Search for understanding • Establish direction with an intervention and objective • Stress idea creation and implementation. A decision-making process should guide thinking about action and taking action • Identify more than one option • Deals with barriers to action

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