AN EFFECTIVE DECISION IS EQUAL TO ITS QUALITY MULTIPLIED BY ITS ACCEPTANCE (ED=QXA)
On September 23rd, Liz Truss, the new Prime Minister of Great Britain, and her Chancellor, Kwasi Kwarteng, announced their ‘mini-budget’, including £45 billion in unfunded tax cuts. As far as decisions go, the budget contained some really big ones. In the days since, the markets have gone into freefall, the British pound has fallen to a record low, the International Monetary Fund has questioned Truss’ logic, and some Conservative MPs are already talking of replacing her, just four weeks after she was elected by them to replace Boris Johnson!
In subsequent interviews, Truss has defended her decisions but conceded that she could have “laid the ground better.” When pressed on a key aspect of the mini-budget, the cutting of the top tax rate from 45% to 40%, Truss admitted that the decision was made by Kwarteng and that he did not consult the rest of the cabinet before announcing it. Then, in an embarrassing U-turn forced by their Conservative Party colleagues, Truss and Kwarteng abandoned this particular tax change, saying “we get it, and we have listened.”
There are wildly differing views on the quality of Truss and Kwarteng’s economic decisions, and time will tell whether they were visionary or vacuous, but there is surely no debate on just how poorly they were implemented.
Decisions are at the core of any issue or opportunity that leaders face. There are few things more important than effective decision making; especially when the stakes are high. And yet, very few leaders employ a consistent and coherent approach. Of course, Truss and Kwarteng are making their decisions in a highly politicised and public context; one which business leaders would rarely face, but their failure is instructive.
In my experience, business leaders tend to focus heavily on the perceived quality of a given decision, for obvious reasons, but as Truss and Kwarteng found out, quality is only half of the equation. To state the obvious, if you need your stakeholders to embrace, implement or at least not reject your decisions, then some form of involvement is critical.
Ultimately, an effective decision equals the quality of the decision multiplied by the acceptance of that decision; ED=QxA. The implications of this equation are clear;
- If a leader makes a high-quality but unilateral decision, it will likely have lower levels of acceptance which, in turn, will reduce its overall effectiveness (e.g., Q9xA5=45% effective).
- If a leader or team use a consensus approach to try and make everyone happy with a decision, it will likely have high levels of acceptance but lower levels of quality. Once again, overall decision effectiveness will suffer (e.g., Q5xA9=45% effective).
An effective decision, therefore, must address both the quality of a decision, and its acceptance, in equal measure. Through our work with hundreds of leadership teams, we have found that seven key principles can help to strike this balance.
1. A SINGLE OWNER IS THE START POINT
All important decisions have multiple stakeholders, but must have a single owner. Before you do anything else, you must identify the person who will take ultimate responsibility for the consequences of a given decision; that’s the owner. An effective decision is not possible without this most basic of principles in place.
2. ALL RELEVANT FACTS AND STAKEHOLDERS ARE CONSIDERED
To make an effective decision, all key facts must be on the table, and all key stakeholders must be considered. When people undermine a decision, more often than not it’s because they believe key stakeholders were excluded from providing input (including themselves) and key facts were ignored. Like politicians, business leaders need to make unpopular decisions from time to time. As Truss and Kwarteng found out though, the more unpopular a decision is likely to be, the more support you need to cultivate for it.
3. COLLABORATION FOR CROSS-FUNCTIONAL, CLEAR COMMUNICATION FOR THE REST
In a counter-point to #2 above, some leaders can over-collaborate in an effort to build consensus on decisions that merely require clear communication. Generally speaking, decisions relating to strategic or cross-functional priorities benefit most from a more consultative process with key stakeholders, while those that fall within a person’s regular ‘day-job’ do not.
4. USE A ‘BEST FOR THE ORGANISATION’ MINDSET
It may be a cliché, but effective decisions are only possible when all of your stakeholders put aside their functional allegiances, and approach the decision like an owner of your organisation.
5. RESPECT FOR THE OWNER’S DECISION IS PARAMOUNT
The role of stakeholders is to improve the quality of a decision, not to sulk, criticise or undermine it if they don’t like it. Assuming the owner has genuinely considered all relevant inputs and stakeholder views, once a decision is made, the consultation process is over. At that point, each stakeholder must be expected to support the decision, by explaining it, defending it where necessary, and ensuring that it’s implemented to the highest standard.
6. CORRIDOR CONVERSATIONS ARE TOXIC
Nothing undermines a decision faster than ‘corridor conversations’, or does more damage to team trust, harmony and mutual respect. For any team to make effective decisions, let alone achieve high-performance, all conversations of significance must be had ‘in the room’. As such, a decision owner should push back strongly when stakeholders endeavour to undermine a decision in the shadows, and the team leader must eliminate this behaviour as a cultural imperative.
7. EXCELLENCE AS A WAY OF LIFE
No matter how good a decision is, and how well it’s accepted, at some point new data and insight will come to light; particularly if the decision is implemented fully and widely. If decision owners embrace this new data as an opportunity, then not only will you improve the quality of a particular decision, but you will encourage a culture of learning, innovation and excellence.
Effective decision making is critical for leaders and leadership teams. I hope this blog will help you in that endeavour.
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