FROM Harvard Business School
THE JANUARY 1967 ISSUE
Effective executives do not make a great many decisions. They concentrate on what is important. They try to make the few important decisions on the highest level of conceptual understanding. They try to find the constants in a situation, to think through what is strategic and generic rather than to “solve problems.” They are, therefore, not overly impressed by speed in decision making; rather, they consider virtuosity in manipulating a great many variables a symptom of sloppy thinking. They want to know what the decision is all about and what the underlying realities are which it has to satisfy. They want impact rather than technique. And they want to be sound rather than clever.
Effective executives know when a decision has to be based on principle and when it should be made pragmatically, on the merits of the case. They know the trickiest decision is that between the right and the wrong compromise, and they have learned to tell one from the other. They know that the most time-consuming step in the process is not making the decision but putting it into effect. Unless a decision has degenerated into work, it is not a decision; it is at best a good intention. This means that, while the effective decision itself is based on the highest level of conceptual understanding, the action commitment should be as close as possible to the capacities of the people who have to carry it out. Above all, effective executives know that decision making has its own systematic process and its own clearly defined elements.
The elements do not by themselves “make” the decisions. Indeed, every decision is a risk-taking judgment. But unless these elements are the stepping stones of the decision process, the executive will not arrive at a right, and certainly not at an effective, decision. Therefore, in this article I shall describe the sequence of steps involved in the decision-making process.
1. Classifying the problem. Is it generic? Is it exceptional and unique? Or is it the first manifestation of a new genus for which a rule has yet to be developed?
2. Defining the problem. What are we dealing with?
3. Specifying the answer to the problem. What are the “boundary conditions”?
4. Deciding what is “right,” rather than what is acceptable, in order to meet the boundary conditions.. What will fully satisfy the specifications before attention is given to the compromises, adaptations, and concessions needed to make the decision acceptable?
5. Building into the decision the action to carry it out. What does the action commitment have to be? Who has to know about it? more
6. Testing the validity and effectiveness of the decision against the actual course of events. How is the decision being carried out? Are the assumptions on which it is based appropriate or obsolete?
Let us take a look at each of these individual elements.
The effective decision maker asks: Is this a symptom of a fundamental disorder or a stray event? The generic always has to be answered through a rule, a principle. But the truly exceptional event can only be handled as such and as it comes.
Strictly speaking, the executive might distinguish among four, rather than between two, different types of occurrences.
First, there is the truly generic event, of which the individual occurrence is only a symptom. Most of the “problems” that come up in the course of the executive’s work are of this nature. Inventory
decisions in a business, for instance, are not “decisions.” They are adaptations. The problem is generic. This is even more likely to be true of occurrences within manufacturing organizations. For example:
A product control and engineering group will typically handle many hundreds of problems in the course of a month. Yet, whenever these are analyzed, the great majority prove to be just symptoms—and manifestations—of underlying basic situations. The individual process control engineer or production engineer who works in one part of the plant usually cannot see this. He might have a few problems each month with the couplings in the pipes that carry steam or hot liquids, and that’s all.
Only when the total workload of the group over several months is analyzed does the generic problem appear. Then it is seen that temperatures or pressures have become too great for the existing equipment and that the couplings holding the various lines together need to be redesigned for greater loads. Until this analysis is done, process control will spend a tremendous amount of time fixing leaks without ever getting control of the situation.
The second type of occurrence is the problem which, while a unique event for the individual institution, is actually generic. Consider:
The company that receives an offer to merge from another, larger one, will never receive such an offer again if it accepts. This is a nonrecurrent situation as far as the individual company, its board of directors, and its management are concerned. But it is, of course, a generic situation which occurs all the time. Thinking through whether to accept or to reject the offer requires some general
rules. For these, however, the executive has to look to the experience of others.