Decision Making – Real Life EXAMPLE

Once hailed as the paragon of a modern corporation, ABB was on the verge of bankruptcy in 2002. The Zurich-based power technology mammoth had created such a complex, unwieldy organisational structure — 5000 profit centres, 65 business units — that every decision it was taking seemed to go awry, sinking it further into the quagmire.

In line with the thinking of the 90s, ABB’s factories were encouraged to compete with each other. In bidding for global power projects, participating business units would each put forward a price that would be so high as to make the final bid untenable. The organisation had a matrix structure where the average manager had at least three bosses, but that didn’t seem to provide the co-ordination required to optimise overall performance.

ABB, which eventually bounced back under the chairmanship of Jurgen Dormann, is one of the main examples. You can’t improve decision making and execution in a company without looking at the entire organisational system. ABB is one of the best examples of it.

Four years ago, in an article titled Who Has the D? In Harvard Business Review, Rogers coined the acronym RAPID, where D is for ‘decide’, standing at the centre of a diagram surrounded by R (recommend), A (agree), P (perform) and I (input). Together, they make for RAPID, a term registered by the consulting firm as a ‘tool for allocating decision roles in an organisation.’

RAPID is a way of looking at the who’s who of big-time decision making. The recommender is the one responsible for gathering and analysing all the information required for big strategic decisions and this role often goes to consultants like Bain. The job of inputting to the recommender belongs to employees down the line and sometimes to lesser consultants like market research firms. The people who must agree to a recommendation — the legal department, for example — have veto power, but are not the ones who decide.

And finally, there are the performers, responsible for executing the decisions, without whom the big D is helpless indeed.

Indeed, the nature of today’s organisations is such that it can no longer be taken for granted that a decision taken by managers higher up in the hierarchy will be readily executed by those below — especially if the decision involves major changes that people don’t fully understand or believe will affect them negatively. A lot of companies still look to the organisational chart when they think about decisions, but it’s no longer adequate. Things are more complex now.

  • The first step is that there are tools to measure corporate decision-making capabilities in terms of quality, speed, effort and execution.
  • The second step is to look at the corporate’s decision architecture as separate from the organisational chart.The crucial ongoing decisions here are of two types. The first is to do with what to offer in each business in terms of range of services, pricing, lead times. The second is to do with optimal use of dock space between businesses. It’s not just the big, one-off strategic decisions taken at the board level that are critical. There are also every-day decisions taken in departments and divisions and on the front lines that are crucial and need to be explicitly identified.
  • The third step is better management of the individual decision making process and this includes tips like designing meetings around decisions and limiting the number of participants to seven or less. A recommendation is separating the decision from the discussion of choices, a practice followed by pharma company Roche, where a two-part system is followed for major decisions.Participants first consider the facts and alternatives (including whether more are needed) and whether everyone agrees on the criteria for making the ultimate choice. In a second, separate session, they choose from among the alternatives and plan execution. Decision making is so intrinsic to management that it’s impossible to see it in any way as a new-new thing.
  • The fourth step, works through the decision making prism. For example, “is our structure aligned with our strategy?” is rephrased as “does our structure support the decisions most critical to creating value?” and the trite “are we winning the war for talent?” is restated as “do we put our best people in jobs where they can have the biggest impact on decisions?”

While the major decisions requiring RAPID and such may take place at the top, corporates need to embed decision capabilities down the organisational hierarchy. Practices that work for the top management committee can and should be replicated in individual divisions and departments and in other geographical locations so that tomorrow’s leaders experience how they work.
In its transformation, ABB involved not just executive committee members but future committee members and senior country managers from around the world. CEO Jurgen Dormann, who set a new style for decisions and actions, composed weekly e-mail newsletters that went to all employees, explaining the priorities, the challenges and what the company was doing about them. It started to build like a wave. It was one quarter after another of delivering what we promised and exceeding external expectations.

If you don’t know what’s behind the change, such improvements may seem like magic. But there’s no magic to it, only discipline, commitment and a relentless focus on decisions.