Decision Quality

Value Creation from Better Business Decisions

Carl Spetzler, Hannah Winter, Jennifer Meyer

• Publisher: Wiley
• Year: 2016
• ISBN:
  9781119144694
• Edition: 1
• Topic: Business
• Subtopic: Decision Making
• Index: Business

Add value with every decision using a simple yet powerful framework

Few things are as valuable in business, and in life, as the ability to make good decisions. Can you imagine how much more rewarding your life and your business would be if every decision you made were the best it could be? Decision Quality empowers you to make the best possible choice and get more of what you truly want from every decision.

Dr. Carl Spetzler is a leader in the field of decision science and has worked with organizations across industries to improve their decision-making capabilities. He and his co-authors, all experienced consultants and educators in this field, show you how to frame a problem or opportunity, create a set of attractive alternatives, identify relevant uncertain information, clarify the values that are important in the decision, apply tools of analysis, and develop buy-in among stakeholders. Their straightforward approach is elegantly simple, yet practical and powerful. It can be applied to all types of decisions.

Our business and our personal lives are marked by a stream of decisions. Some are small. Some are large. Some are life-altering or strategic. How well we make those decisions truly matters. This book gives you a framework and thinking tools that will help you to improve the odds of getting more of what you value from every choice. You will learn:

• The six requirements for decision quality, and how to apply them
• The difference between a good decision and a good outcome
• Why a decision can only be as good as the best of the available alternatives
• Methods for making both "significant" and strategic decisions
• The mental traps that undermine decision quality and how to avoid them
• How to deal with uncertainty—a factor in every important choice
• How to judge the quality of a decision at the time you're making it
• How organizations have benefited from building quality into their decisions.

Many people are satisfied with 'good enough' when making important decisions. This book provides a method that will take you and your co-workers beyond 'good enough' to true Decision Quality.

Part I
The Decision Quality Framework

Part I provides an overview of the entire decision quality (DQ) framework. Chapter 1 answers the question, “Why is DQ needed?” It explains why decision-making skills are important, and how improving those skills can contribute to better lives and fortunes. It also describes the fundamental difference between a decision and its outcome. Chapter 2 discusses the question, “What is decision quality?” It introduces the six requirements for DQ. Having quality in all six requirements is the key to reaching the destination of a high-quality decision. Chapter 3 addresses the question, “How can we achieve DQ?” We begin by declaring which decisions should be made. Next, we diagnose the nature of the decision, and then select a process that fits the decision.

1
The Power of Decisions

Life is a sum of all your choices.

—Albert Camus

Our life trajectories are driven by our decisions: the schools we attend, the careers we pursue, the work projects we take on, the investments we make, the people we hire, and the friends and acquaintances with whom we keep company. Small and large, trivial and transformative, decisions shape our lives and organizations for better or worse.

We see decisions being made all around us, and we are quick to judge those we perceive as poor. We marvel at how leaders in powerful positions make decisions—when they cross ethical boundaries, make heroic assumptions based on wishful thinking, or shoot from the hip, trusting their intuition without serious deliberation. Of course, it is always easier to criticize failures out there, when we observe the decisions made by others—especially those that impact us.

When we make decisions ourselves, however, we usually think that we make them well. The truth, though, is that we probably don't make good decisions. Our brains are actually not wired to make good decisions naturally, especially when decision situations are unique and consequences uncertain. We are wired to “satisfice,”¹ to settle for good enough—and there is a big gap between satisficing and making the best choices we can make.

As we will see in later chapters, humans have many biases and dysfunctional habits that cause our decisions to fall far short of decision quality (DQ). To name a few: we rely on advocacy, fail to consider alternatives, neglect uncertainty, oversimplify, jump to conclusions, seek confirming evidence to bolster our position, dismiss disconfirming evidence, confuse agreement with achieving a quality decision, and the list goes on. We waste time and money focusing on things that don't really matter to the decision. We fail to be systematic and act impatiently. And then, with hindsight bias, we rationalize our decisions to reassure ourselves they are good—but that is an illusion.

We leave a tremendous amount of value on the table, value that could be ours, if only we had the discipline and skill to reach DQ. The gap between decisions that are good enough and those that are best is big in business, society, and our personal lives as well. When decision makers are told about this gap and the opportunity for improvement, they are surprised and frequently offended:

Decision maker:	Are you telling me that I am not already making good decisions?
Decision advisor:	Well, yes. If you are like other human beings, you believe that you are making good decisions when you are far from the making the best decisions possible.
Decision maker:	Prove it!

The evidence is real. When businesses use DQ to make quality decisions, the resulting best strategy is frequently twice as valuable as the good-enough strategy that would have been chosen otherwise. On top of that, the cost of applying DQ is minimal compared to the resulting added value. The good news is that no one has to accept good enough. It is possible to learn to make better decisions.

Decision Quality: A Framework for Better Decisions

Fortunately, a useful body of knowledge is available to anyone who seeks it. The skills and methodologies of the DQ framework have reached a high level of effectiveness and can be embraced by all decision makers. The knowledge is highly practical and applicable to a wide variety of decisions, allowing us to get much more of what we truly want in business and other aspects of life.

The central purposes of this book are to help readers recognize that their decisions can be improved, and to impart the decision skills needed to apply the DQ framework and capture value that would otherwise be lost.² The DQ framework includes the six requirements for a quality decision and the necessary processes to meet them. When the knowledge of DQ is shared with managers and executives, frequently the reaction is: “I wish that I had learned this much earlier in life.”

Decision Skills Can Be Learned

Because decisions are so important in shaping our lives and futures, learning to make them well should be a priority. And, yes, making decisions well is something we can learn to do. Yet among business and public sector leaders—people responsible for making the big, consequential choices—few receive formal training in decision making. The same can be said of managers who make decisions day in and day out. Consider how today's managers—tomorrow's executives—are trained. Business students are instructed in accounting, finance, statistics, marketing, and management, but few MBA programs offer rigorous courses in decision making. There is an assumption that smart people will pick up good decision-making skills on the job or through case studies, but learning on the job, through trial and error, can be a long and painful process, punctuated by costly mistakes. Even learning from other people's mistakes does not measure up to the benefits of explicit training in the art and science of decision making.

The six requirements for DQ are consistent with common sense and can be learned. Many DQ tools and processes are straightforward and can be directly applied by decision makers. When facing a complex and important choice, leaders with DQ skills will become astute customers of decision support staff who have advanced analytical tools and facilitation. All of the tools and processes introduced in this book can provide the insights necessary to guide decision makers to decision quality in the face of uncertainty and complexity.

Decisions versus Outcomes

When making decisions that involve uncertainty, we must be clear about the difference between a good decision and a good outcome. Many observers, including those providing commentary on business, politics, and even sports, don't separate decisions from their outcomes and act as if a good decision is one that produces a good result. Confusing a decision with its outcome is a common mistake that can negatively impact our choices.

In the face of uncertainty, we must judge the quality of a decision at the time it is being made, not after the outcome becomes known. Why is that? Because we control the decision; we do not control the outcome. Therefore, we want to put our effort into making the best choice we can make. Decision makers cannot use hindsight—that's a luxury for observers.

We can get better at making quality decisions by applying the DQ framework: We must choose the alternative that, based on our information and analysis, has the best chance of delivering the value we want in the decision situation we have defined. Of course, choosing the best alternative doesn't guarantee a good outcome. But outcomes, which may not be known for days, months, or years in the future, don't determine the quality of the decision anyway.

Consider this example. A drug company's executives decided to invest heavily in a newly discovered compound. After years of research and development (R&D) and testing, the compound was approved and released as a drug—a breakthrough cancer treatment. It also produced substantial profits for the company.

So had management made a good decision? Considering the outcome, it might appear so. In the years immediately following the drug's release, sales were huge. Company executives and the R&D team congratulated each other. Wall Street analysts and shareholders developed greater confidence i...