Surprising but True : Half the Decisions in Organizations Fail

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Surprising but True Half the Decisions in
Organizations Fail

• Paul C. Nutt
• Ohio State University
• USA

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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.

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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

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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

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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)

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Organizational Decision Making
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Tactics Used to Set Direction

• Generating Ideas
• Problem Solving
• Setting Objectives
• Intervening in the Process

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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

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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 44of 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

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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

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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

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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
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Tactics Used to Identify Option

• Benchmarking the Best Practices of Others
• Searching For Solutions
• Designing Options

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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

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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

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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

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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
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Tactics Used to Implement Decision Stages

• Intervention
• Participation
• Persuasion
• Edicts

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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

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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)

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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

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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

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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.

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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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Thank You