Thursday, February 4, 2010

HBR Article - Making Better Decisions

Make Better Decisions, by by Thomas H. Davenport, appeared in the November 2009 issue of the Harvard Business Review.

The author, Thomas Davenport (author of Competing on Analytics: The New Science of Winning and Analytics at Work: Smarter Decisions, Better Results), argues that despite the abundant availability of tools and literature to leaders and corporations make better decisions, there is an abundance of ill-informed and wrong decisions. It is high time that decision making became more formal and provides a framework to help achieve that.

For example, academics defined “groupthink” the forced manufacture of consent, more than half a century ago – yet it still bedevils decision makers from the White House to company boardrooms. In the sixteenth century the Catholic Church established the devil’s advocate to criticize canonization decisions – yet few organizations today formalize the advocacy of decision alternatives.
The framework suggested by Davenport lists four steps to improving decision making:
Identification - of the decisions needed, Inventory - of the factors that go into each decision, Intervention - designing the "roles, processes, systems, and behaviors your organization should be using to make" the decisions, and Institutionalization - providing managers with the tools to help them decide when a decision should be made unilaterally and when through a consensus.

Davenport argues that analytics and decision automation are very powerful tools in decision making. However, these should be used by managers only after they have been understood. This then calls for an increasing need for managers to become familiar and knowledgeable with analytics.

A table in the article lists some of the newer approaches to decision making, like "small-group process", "Analytics", "Automation", "Neuroscience", Behavioral Economics", "Intuition", and "Wisdom of Crowds".

If more decision making can be formalized, and run through the rigor of a formal process, and institutionalized, the better the result of these decisions should be. From arbitrariness to a reasoned process.

Suggested Reading from the article:
Two books on analytical and automated decision making:
While decision making can probably not be submitted totally to machines and algorithms, what we can certainly do is take it out of the dungeons of individual arbitrariness and expose it to the light of reasoning and a logical framework.
    © 2010, Abhinav Agarwal. All rights reserved.