A new approach to group decision-making can lead to better outcomes.
With all the performance troubles at GE over the past couple of years, one problem stands out: Corporate executives were regularly making promises to shareholders about revenue and profits that operating managers knew were impossible. According to The Wall Street Journal, GE had developed “a culture that disdained bad news [and] contributed to overoptimistic forecasts and botched strategies.” Billions of dollars of value destruction might have been avoided had management’s decisions been better informed by the insights and expectations of its employees closer to the ground.
That may sound like a tall order, especially for such a large organization, given the logistics of wrangling staffers at multiple levels, recording the numbers they expect from upcoming projects, consolidating their input, and then meeting (sometimes repeatedly) to align forecasts and inform planning. But when we had to evaluate a potential partnership at Trefis (where one of us, Manish, is the CEO, and the other, Ken, consults), the team hit upon a surprisingly manageable method for recording and analyzing individuals’ expectations that has improved decision-making and risk management, and has even informed the central offering to clients. Granted, most companies — Trefis included — are not the size of GE, but the process we’re talking about is fairly straightforward for teams to implement, and it can be scaled from there.
Here’s how we stumbled on it: We knew the partnership we were considering had great potential to expand our customer base. But as we updated our investors and directors, we began to realize that our expectations were widely divergent. We had several different versions of how much growth was possible and of how to get there — and, of course, our views changed as we exchanged contrasting scenarios. This made it hard to tackle decisions such as how to price our service to the partner’s customers and how many support people to deploy on the account.
After about six months, to improve alignment, we developed a basic spreadsheet to capture everyone’s individual volume, price, and revenue expectations for the partnership. We entered the historical data from the first two quarters of pilot projects and allocated space to record projections for the business we might do over the next five quarters.