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McKinsey research shows that most companies struggle with this challenge: in a survey of executives across industries, just over half of respondents reported spending more than 30 percent of their working time on decision making—and for 60 percent of surveyed executives, most of that time … Select topics and stay current with our latest insights. Take the manufacturing company whose operations managers, faced with calls from the sales team to raise production in response to anticipated customer demand, had to consider whether they should spend unbudgeted money on overtime and hiring extra staff. Flip the odds. Valuable for many reasons – such as showing how you can coordinate, motivate and lead a successful team. Please use UP and DOWN arrow keys to review autocomplete results. On average, 61 percent say most of their decision-making time is used ineffectively. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. In this survey, we did not ask about this decision type, because ad hoc decisions are circumstantial by nature and vary too greatly. Unleash their potential. Please email us at: McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. We use cookies essential for this site to function well. Think about hiring somebody. That often means involving as many people as possible in the outcome—something that, paradoxically, in the end will enable the decision to be implemented more speedily. Big-bet decisions can be future-shapers for a company, the most important decisions leaders make. 4. 2. Effective decision making Topic Gateway Series 3 . Delegated decisions are generally far narrower in scope than big-bet decisions or cross-cutting ones. 5. This is not so surprising, given that cross-cutting decisions are broad in their scope and impact, and are made frequently. We strive to provide individuals with disabilities equal access to our website. In our experience, ensuring that responsibility for delegated decisions is firmly in the hands of those closest to the work typically delivers faster, better, and more efficiently executed outcomes, while also enhancing engagement and accountability. Classifying the problem.Is it generic? One of the survey’s most noteworthy insights is how much time decision making really consumes. Respondents who reported that decision making was fast were 1.98 times more likely than other respondents to say that decisions were also of high quality. For instance, exploratory and confirmatory factor analyses were used to identify related practices within each decision type, and logistic regression was used to determine the impact of each practice on the probability of being a decision-making winner. Here’s a variation of a conversation we have with some frequency: in talking with a manager about her work, we ask about a routine decision we would expect her to make—about hiring, for example, or pricing or marketing. But there are ample opportunities for organizations to increase their odds for success, including the practices that follow: The survey content and analysis were developed by Iskandar Aminov, an associate partner in McKinsey’s Perth office; Aaron De Smet, a senior partner in the Houston office; Gregor Jost, a partner in the Vienna office; and David Mendelsohn, an analyst in the New York office. Effective Decision-Making Decisions need to be capable of being implemented, whether on a personal or organisational level. Digital upends old models. The authors wish to thank Iskandar Aminov, Alison Boyd, Elizabeth Foote, Kanika Kakkar, and David Mendelsohn for their contributions to this article. Executives who get delegated decisions right are clear about the boundaries of delegation (including what’s off-limits and how and where to escalate what’s beyond an individual’s competence), ensure that those they entrust with decision-making authority have the relevant skills and knowledge to act (and if not, provide them with the opportunity to acquire those capabilities), and explicitly make people accountable for their areas of decision-making responsibility (including spelling out the consequences for those who fail to respond to the challenge). 1. 2 Respondents say the average speed of their organizations’ decision making is “about right” or “too fast,” as opposed to “far too slow,” “too slow,” or “far too fast.” For big-bet and cross-cutting decisions, this also includes respondents who say the average speed at which their organizations execute decisions is “about right” or “too fast,” as opposed to “far too slow,” “too slow,” or “far too fast.” Something went wrong. 3. We have also observed a fourth decision typ… Respondents “agree” or “strongly agree” that the decisions made by their organizations (or their senior executives, in the case of big bets) are consistently of high quality. 9 5 Flaws in strategic decision making Nov 2008 McKinsey Quarterly survey on strategic decision making McKinsey Global Survey Results Further, regardless of what type of decision a company was making or what the outcome was, the best practice cited least often is that of … Our sources for this estimate included fortune.com and the US Bureau of Labor Statistics (for salary data). Worst because organizational dynamics and digital decision-making dysfunctions were causing growing levels of frustration among senior leaders we knew. Capability building can help, too, for example, in learning to have difficult conversations or coaching leaders on how to influence outcomes without taking over control. The online survey was in the field from February 13 to February 23, 2018, and garnered responses from 1,259 participants in 91 countries, all of whom are members of McKinsey’s Online Executive Panel. The comedic timing of the line was perfect, but it wasn’t a joke. Before the interviews, you figure out what the most important dimensions are for the role. And while most organizations seem to make trade-offs between velocity (how fast was the decision made and executed?) 3 Make decisions at the right level. We asked about three decision types in particular: big-bet, cross-cutting, and delegated decisions. Then you put those in a simple spreadsheet with a scoring table so you can rate candidates on ea… Consistent with our earlier work, Assuming that at an average Fortune 500 company of 56,400 employees, 20 percent are managers who work 220 days per year: these managers spend an average of 37 percent of their time making decisions, and 58 percent of this time is used ineffectively. 1. These organizations have adopted a few foundational best practices that support good decision making across all three decision types: 1. The estimate of lost labor cost is based on the 2017 median salary of management occupations in the United States, which was $102,590. 2 People create and sustain change. of respondents say the same for cross-cutting decisions, and just 46 percent for delegated decisions (Exhibit 3). Clearly, it is important that these types of decisions happen at the appropriate level of the company (CEOs, for example, shouldn’t make decisions that are best delegated). And that’s not the only special attention big bets need. Ending each scenario, you would get a brief summary of your result. Our latest research confirms the importance of this approach, and it also highlights for each major decision category a noteworthy practice—sometimes stimulating debate, for example, while in other cases empowering employees—that can yield outsize improvements in effectiveness. Today, a typical session includes 40 to 50 of the company’s top 150 leaders. This analysis included only responses from those answering for big-bet or for cross-cutting decisions. Then assign someone to argue the case for, and against, a potential decision or the various options under consideration. Further, a majority say much of the time they devote to decision making is used ineffectively. The only way out of the logjam is to escalate it to the company’s senior-most executives, which wastes time and risks lowering decision quality. The meetings were purposely kept informal, but top management nonetheless established ground rules to ensure that the stories would be meaningful (not trivial) and that employees telling the stories would be protected. Worse, the lack of clarity makes it very difficult for colleagues further down in the organization to use their judgment to see past the silos and remedy the situation. Leadership. These decisions are effectively handled by a single individual or working team made accountable for the decision, and they usually require limited input from others. Given that McKinsey consultants operate as advisers, with government officials charged with making final decisions, it can be hard to identify the firm’s responsibility for any given decision. Good decision making will help you solve problems, build solutions, and build skills. At the … 1. The recent climate of unprecedented uncertainty requires even greater speed, agility, and decisiveness in decision making. High quality of decisions. The evidence of our survey—and our experience watching executives grapple with this—suggests that while the best practices for making better decisions are interrelated, there’s nonetheless one standout practice that makes the biggest difference for each type of decision (exhibit). Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. There are many reasons cross-cutting decisions go crosswise. In the survey, respondents were asked the extent to which they agree that their organizations—or their organizations’ senior executives, for big bets—consistently make high-quality decisions. McKinsey research shows that executives on average spend almost 40 percent of their time—that’s 40 percent—making decisions and believe most of that time is poorly used. This result is closely related to another finding: both high-quality decisions and quick ones are much more common at organizations with fewer reporting layers. Select topics and stay current with our latest insights. Specifically, the winners make good decisions fast, execute them quickly, and see higher growth rates and/or overall returns from their decisions. “Management occupations,” Occupational Outlook Handbook, US Bureau of Labor Statistics, 2018, bls.gov. Best because of more data, better analytics, and clearer understanding of how to mitigate the cognitive biases that often undermine corporate decision processes. And just 37 percent of respondents say their organizations’ decisions are both high in quality and velocity. Bet-the-company decisions require productive interactions and healthy debate that balance inquiry and advocacy. 1. What’s more, we found that the effects of these practices on success are cumulative. Why is decision making important at work? While fostering commitment can mean involving more people and getting more buy-in, that doesn’t mean companies have to compromise on speed. Respondents who reported that decision making was fast were 1.98 times more likely than other respondents to say that decisions were also of high quality. 8. Among C-levels, 57 percent say the same. Ineffective decision making has significant implications for company productivity. What’s more, the data suggest that respondents at winning organizations are twice as likely as others to say their most recent decisions have delivered financial returns of at least 20 percent (Exhibit 4). In the first act, the proposal is delivered in a snappy PowerPoint presentation that summarizes the relevant information; in the second, a few tough yet perfunctory questions are asked of the presenter and answered well; in the final act, resolution arrives in the form of an undramatic “yes” that may seem preordained. 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