Business leaders are paid to make decisions and to ensure that those decisions are implemented in an appropriate and timely manner. To do so, executives must clarify and determine their objectives, explore possible options, and evaluate which options are aligned with their goals. In our work with senior executives, we find that most of them are very good at decision making if the objectives are clear, and if the choice is between a set of specific, predefined options. However, when presented with complex decisions, executives tend to home in quickly on a couple of options, list what they see as the pros and cons, and spend the bulk of their time calculating — or deliberating about — how the competing courses of action stack up. (See “About the Research.”)
Executives rarely take the time to frame decisions thoroughly. Rather than exploring the full scope of options, they stick to the obvious ones and use a limited set of criteria. Unfortunately, once decisions are framed this way, the outcome is frequently suboptimal.
Many of the concepts and frameworks designed to help executives generate better choices are too complex or too specific to apply in day-to-day decision making. As a result, managers typically resort to a mix of intuition and analysis, often using a classic decision matrix — with options on one axis and criteria on the other — to test the relative merits of a few solutions.1 This type of decision matrix is a powerful tool; it allows for the comparison of different options using the same set of predefined criteria.
However, we have found that executives don’t exploit the decision matrix to its full extent. They use it primarily to provide quantitative support for one course of action over another, focusing their time and energy on evaluating a given set of options in the decision grid of the matrix. In our experience, though, the real value of the matrix isn’t just as an evaluation tool but also as a process tool that helps executives extend their decision frame beyond the obvious options and criteria and to think “out of the box.” (See “The Decision Frame and Out-of-the-Box Thinking.”)
1. J.S. Hammond, R.L. Keeney, and H. Raiffa, “Smart Choices: A Practical Guide to Making Better Decisions” (Boston: Harvard Business Press, 1999), 55.
2. H. Simon, “A Behavioral Model of Rational Choice,” Quarterly Journal of Economics 69, no. 1 (February 1955): 99-118.
3. P.C. Nutt, “Surprising but True: Half the Decisions in Organizations Fail,” Academy of Management Executive 13, no. 4 (November 1999): 75-90.
4. P. Rosenzweig, “What Makes Strategic Decisions Different,” Harvard Business Review 91, no. 11 (November 2013): 88-93.
5. A. Bryant, “There’s No Need to Bat .900,” New York Times, April 4, 2009, 2.
6. R. Rumelt, “Good Strategy, Bad Strategy” (New York: Crown Business, 2011).
7. P.C. Nutt, “The Identification of Solution Ideas During Organizational Decision Making,” Management Science 39, no. 9 (September 1993): 1071-1085.
8. Nutt, “Surprising but True.”
9. See J.E. Russo and P.J.H. Schoemaker, “Decision Traps: The 10 Barriers to Brilliant Decision Making and How to Overcome Them” (New York: Doubleday, 1989).
10. C. Bouquet and J.-L. Barsoux, “Denise Donovan: A Radical Proposal (B),” IMD case no. IMD-3-2104 (Lausanne, Switzerland, 2009).
11. Nutt, “The Identification of Solution Ideas.”
12. K.M. Eisenhardt, J.L. Kahwajy, and L.J. Bourgeois III, “How Management Teams Can Have a Good Fight,” Harvard Business Review 75, no. 4 (July-August 1997): 77-85.
13. S. Finkelstein, J. Whitehead, and A. Campbell, “Think Again: Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You” (Boston: Harvard Business Review Press, 2008), 117.
14. P.C. Nutt, “Expanding the Search For Alternatives During Strategic Decision Making,” Academy of Management Perspectives 18, no. 4 (November 2004): 13-28.
15. See discussion of the “vanishing options test” in C. Heath and D. Heath, “Decisive: How to Make Better Choices in Life and Work” (New York: Crown Business, 2013), 46.
16. As organizational theorist Karl Weick wrote, “How can I know what I think until I see what I say?” See K.E. Weick, “Sensemaking in Organizations” (Thousand Oaks, California: Sage, 1995).
17. I. Stigliani and D. Ravasi, “Organizing Thoughts and Connecting Brains: Material Practices and the Transition From Individual to Group-Level Prospective Sensemaking,” Academy of Management Journal 55, no. 5 (October 2012): 1232-1259.
18. P.W. Thurston Jr. and L. McNall, “Justice Perceptions of Performance Appraisal Practices,” Journal of Managerial Psychology 25, no. 3 (2010): 201-228.