Making and Implementing decisions in an uncertain environment

There is no question that Covid-19 has created a great deal of uncertainty throughout the world. Questions remain about how restrictions will be eased, what life will look like in the ‘new normal’, if and when a vaccine might be found and whether further lock downs will be required.

All this makes predicting the future very difficult. There are many possible outcomes, all of which seem equally likely at present and all of which will require very different responses from business and society.

With such uncertainty traditional approaches to decision making and implementation become ineffective. How can you decide on a course of action and pursue it, if circumstances could dramatically change within a week?

However, sitting back and waiting to find out what will happen is not an option either.

To meet the demands of the current situation, a different approach to decision making is required. One that is more experimental than definitive, more intuitive than analytical.

To understand why, we need to consider the different attributes of simple, complicated and complex environments.

Simple, complicated or complex

Most organisational operating environments can be categorised as either simple, complicated or complex. Each has its own attributes and each requires a unique approach to decision making (as encapsulated in the cynefin framework developed by David Snowden and Mary Boone).

A simple environment is one where there is a high level of stability and certainty. Information is clear, consistent and easily understood. The future can be accurately predicted and planned for. In simple environments there is a single solution to any problem and decision making can be very definitive and implementation directive.

As the environment becomes more complicated, the number of possible outcomes increases. Information is harder to find and interpret and a greater level of knowledge is required to make reasonable predictions about the future. In such environments, decision making can be reasonably definitive, however it must also be open to the fact that there are many possible ‘right’ decisions. Implementation may take many forms and may also require specialist skills or knowledge.

In complex environments information is often unclear, uncertain or ambiguous. The future state that emerges can often only be understood in hindsight and not predicted. Whilst there are many possible approaches, the outcomes only emerge from the collective actions of many. In such environments successful decision making takes on a much more experimental form. Small tests are conducted to see what works. Successes are pursued vigorously whilst failures are quickly stopped.

The environment that is emerging post the crisis stage of the Covid-19 pandemic is one that will be complex. This will require a much more experimental and intuitive style of decision making.

Intuitive decision making

The concept of using intuition or ‘gut feel’ in decision making can seem a bit foreign, particularly in the modern data driven business context. However, it is more common than many realise. A number of neuroscience studies have concluded that our decisions can be greatly influenced by ‘feel’ long before our rational analytical brain has taken over.

Similarly, a number of studies have shown that this intuitive part of our decision making can be highly effective in leading to good decisions. We have all had the experience where the data tells us to go one way but our gut instinct tells us something different. It is only in hindsight that we discover our instinct was right.

This doesn’t imply that we should only trust our gut. There needs to be a balance between the intuitive and analytical decision-making processes. Getting this balance right is critical to making good decisions, and it will change with context.

In a simple context, where there are only one or two possible outcomes, the balance can be much more toward data and analysis. Whereas in a complex context, intuition will play a much more important role.

Shifting the balance also has a number of practical benefits beyond making better decisions. In a complex environment the data is much less clear. There is likely to be much more available data and the interactions between sets of data become much more important. This makes analysis much harder and more time consuming. Including a greater level of intuition in decision making helps to avoid the ‘paralysis by analysis’ trap.

The complex and uncertain Covid-19 context makes obtaining and analysing reliable data much more challenging and time consuming. Yet at the same time the world is moving forward and decisions need to be made.

Directors, senior executives and organisations need to shift the balance toward intuitive decision making in order to get the speed and responsiveness required in this environment.

Speed versus quality

Making decisions with a greater level of intuition can deliver faster results, but does speed impact quality?

As noted above, intuitive decision making, if done correctly, can improve the quality of outcomes. Studies have also shown that speed of decision making can also impact quality – but not in the way most might think.

Often organisations, boards and executives attempt to make a trade off between the speed of the decision and the quality. Believing that if they can take more time, gather more data and undertake further analysis, that the decision will be better. Unless the decision needs to be made now or is considered of low importance, it gets put off in favour of more analysis.

However, this is a false trade-off. Further analysis usually just delays the decision and makes little or no difference to the quality of outcome.

This is particularly true in complex and uncertain environments. Further data gathering and analysis will simply confirm the environment is complex and that no clear solution exists.

Rather than seeking to make perfect decisions based on comprehensive analysis, boards and executives should be making faster decisions based on best available information, hypothesis and intuition. The key then is to monitor the outcomes – vigorously pursue the successes and rapidly cut off the failures.

This much more experimental, intuitive type of decision making requires a different approach not just to how decisions are made, but also how they are implemented.

Implementation

Making and implementing decisions in complex and uncertain environments requires a different approach across the whole organisation.

The traditional approach to decision making and implementation, which is more suited to simple or moderately complicated environments, requires ideas and analysis to filter up through the management structure. Ultimately these ideas make their way to the CEO or board to make a decision.

This approach is time consuming and ineffective in a complex environment. In such an environment, decisions need to be made quickly and much closer to the point of impact. There needs to be close monitoring of the outcomes with poor decisions rapidly corrected and good decisions well resourced.

To achieve this requires a different approach to governance, organisational structure, risk, resourcing, strategy and culture. The 6C Framework provides a structure to help boards and executives review their organisations and make them ‘fit for purpose’ in a modern complex. It helps ensure that not only are the right approaches being taken, but that there is alignment across the organisation.

The post-crisis phase of the Covid-19 pandemic is complex and uncertain. Like all such environments, decision making and implementation needs to change, however this requires a whole of organisation transformation. Using a structured approach, this can be easily achieved and the organisation can take advantage of the opportunities this next phase will offer.

About the author … Dr Jason Talbot is a Chartered Accountant and the Managing Director of Graphite i2i, a specialist boutique management consulting firm which provides business transformation, performance improvement, M&A, strategy and governance services to medium and large organisations. The company’s highly innovative business assessment and transformation methodology, 6C Framework, provides CEOs and Boards with a holistic view and understanding of their businesses capabilities, allowing them to readily identify areas in greatest need of attention or determine where future opportunities lie.

Should you require assistance dealing with an uncertain future:

Call Jason on 0450 049 444

Email: jason.talbot@graphitei2i.com.au

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