Decision-making is the single most important function of a management team, yet few spend any time thinking about the ruthless pursuit of effective decisions. Sarah, the CEO of a mid-market specialty packaging and distribution firm, contacted us when attempts to organically scale failed to deliver the desired results two years in a row. Five years into her tenure as the 2nd generation (G2) CEO-owner of the firm she had succeeded at improving profit margins, but failed to grow top line sales and improve customer concentration issues. Over the preceding two years she had completely transformed customer service, order processing, purchasing, sales pricing, and increased the skill of her external sales team, yet the top line didn’t change. She was thinking about exiting the business.
Her presenting problem: Top line sales are not growing. After using the 5 Why’s approach to explore inhibitors to success she realized that a number of key decisions had not been well tested resulting in the firm not getting traction with sales and marketing. After conducting initial assessments and interviews to test her assumptions, it became clear that two common decision-making biases (group think and overconfidence) consistently dominated management meetings. In addition, the group engaged in artificial harmony and avoided conflict at all costs, but they were all deeply committed to seeing the firm succeed.
Here are the 7 things we challenged them to do differently:
- Agree to be ruthless about making effective decisions. Challenge existing mental models and refuse to entertain thinking errors and decision bias.
- Engage in pre-mortems. Game theory is a concept that uses conflict and cooperation to test a variety of scenarios. Applying game theory concepts to business decisions forces the team into divergent critical thinking processes that acknowledge sub-optimal outcomes at least some of the time.
- Assign a “devil’s advocate” to challenge assumptions and avoid group think errors. (Sarah chose to rotate this role, but some assign a person who is particularly skilled at the devil’s advocate function.)
- Trust your gut, but verify. Intuition and experience are important (this is where gut feelings come from), but left unchecked they lead to overconfidence errors. Every member of the management team is responsible for combatting over confidence. Doing so requires challenging expert knowledge and positional power. This is initially an uncomfortable experience for many leaders and their management teams, but it is fundamental to ruthless decision-making.
- Stay in the conflict. Steps 2 and 3 are designed to create healthy conflict. You cannot make ruthlessly effective decisions without it. As odd as it sounds, conflict is the very thing management teams need to create buy-in and achieve results. Healthy conflict occurs by actively and openly exploring a range of ideas and perspectives through dialogue by all parties. Moving to decision-making involves a convergent discussion that eliminates some items and selects others. Once the decision is made all management team members must commit in both word and action.
- Engage in ruthless post-mortems. Regardless of whether an initiative was successful or unsuccessful there is always something to learn and apply. Standardizing the post-mortem process allows for comparison between initiatives that enhance the effectiveness of future decisions.
- Have the courage to be decisive and remove management team members that can’t or won’t play by rules 1 – 6. It only takes one rotten apple to spoil a barrel. For management teams to be effective they must operate from the same set of rules. Rogue individuals either change by aligning their personal agenda/goals with those of the team, or they must exit the team. There is no middle ground.
Looking back over the year, Sarah is able to see the positive impact these new behaviors had on the topline as well as on the interpersonal dynamics of her management team. But, there is more going on than simply making decisions differently. Without even realizing what they were doing this firm successfully transformed aspects of their organizational culture that were holding them back. Instead of Sarah exiting next year, they are planning to grow through acquisition. Thanks to the hard work they have done this year they are likely to succeed.