Mint

Making good decisions, and making them happen

Decisions are the coins of the realm in business. Every success, every mishap, every opportunity seized or missed is the result of a decision that someone made or failed to make.

Par Ashish Singh, Vivek Gambhir and Marcia Blenko

First published on avril 21, 2007
min


Decisions are the coins of the realm in business. Every success, every mishap, every opportunity seized or missed is the result of a decision that someone made or failed to make. In many companies, decisions routinely get stuck inside the organization like loose change. But it's more than loose change that's at stake, of course; it's the performance of the entire organization. No matter how clever your company's strategy, if the right decisions aren't made effectively—and executed quickly and consistently—your business will lose ground. Indeed, making good decisions and making them happen quickly are the hallmarks of high-performing organizations. A Bain & Company survey of more than 350 global organizations suggests that only about 15% of companies practise effective decision making. Many score well on the big decisions—which markets to enter or exit, which businesses to buy or sell, where to allocate capital and talent. But the high performers shine truly when it comes to critical operating decisions requiring consistency and speed-driving product innovation, positioning brands or managing channel partners. Even in companies respected for decisiveness, however, ambiguity about who is accountable often stalls the decision-making process, usually at one of four common bottlenecks: global versus local, centre versus business unit, function versus function or inside versus outside partners. The most important step in unclogging decision-making bottlenecks is assigning clear roles and responsibilities. Good decision makers recognize which decisions really matter to performance. They think through who should recommend a particular path, who needs to agree, who should have input, who has ultimate responsibility for making the decision, and who is accountable for follow-through. They make the process routine. The result: better coordination and quicker response times. Companies have devised a number of methods to clarify decision roles and assign responsibilities. We use an approach we call RAPID-Recommend, Agree, Perform, Input and Decide—to help companies develop clear decision-making guidelines. As you'll see, the roles aren't carried out lockstep in that order; we took some liberties in creating a useful acronym. Nor is the process a panacea—an indecisive decision maker can ruin any good system—but it's an important start in clearing bottlenecks. To see how it works, consider what happened at Wyeth Pharmaceuticals when it looked to establish a leading position with a promising new drug called Enbrel. Competitors were also working on the same class of drugs, and Wyeth needed to move quickly to expand production capacity by building a plant in Ireland. By any standard, the issues were complex. Input typically filtered through a gauze of overlapping committees, progressing slower than what the competitive situation demanded. Eager to find a better way, company executives turned to RAPID. They started by identifying the people best suited to recommend a course of action—either by making a proposal or offering alternatives-and pushed certain responsibilities down to the business units, where knowledge was greatest. Others then were asked to agree to a recommendation before it moved forward. In this case, Wyeth's top executives retained veto power (they had to agree) over many important proposals. With RAPID, however, if someone exercises a veto, they must offer an alternative or escalate the issue to the person with the "D". And only a few should have such veto power: legal counsel, for certain decisions, or the head of an affected unit. Those with input responsibilities provide relevant information- effective decisions, after all, are grounded in evaluating facts rather than seeking opinions. The recommender has no obligation to act on the advice, but should take it into account, since the people who will implement a decision are typically among those providing input. Consensus is a worthy goal, but can be an obstacle to action or a recipe for lowest-common-denominator compromise. In the end, it comes down to one person who must decide-the single point of accountability that commits the organization to action. The person with the "D" needs good business judgement, a grasp of the trade-offs and an awareness of the group that will execute the decision. Many decisions about Enbrel, for instance, lay with Cavan Redmond, executive vice-president and general manager of Wyeth's biotech division, after he and his team gathered inputs from other managers. Finally, responsibility for executing Wyeth's plan rested firmly with the business unit. The people who perform have a crucial role: A good decision executed well often beats a brilliant one implemented poorly. No single lever turns a company that struggles to make and execute good decisions into a decision-driven organization, of course, and no blueprint can provide for all the contingencies and business shifts a company is bound to encounter. But you'll know your company is on track when managers realize they're spending less time in meetings, wondering why they are there. And when one person has the "D", bottlenecks will disappear. By taking some practical steps, any company can become more effective, beginning with its next decision. Ashish Singh is the managing director of Bain & Company India. Vivek Gambhir is a partner in Bain's Delhi office. Marcia Blenko is a Bain partner in Boston and the leader of Bain's North American organization practice. www.livemint.com

Decisions are the coins of the realm in business. Every success, every mishap, every opportunity seized or missed is the result of a decision that someone made or failed to make. In many companies, decisions routinely get stuck inside the organization like loose change. But it's more than loose change that's at stake, of course; it's the performance of the entire organization. No matter how clever your company's strategy, if the right decisions aren't made effectively—and executed quickly and consistently—your business will lose ground.

Indeed, making good decisions and making them happen quickly are the hallmarks of high-performing organizations. A Bain & Company survey of more than 350 global organizations suggests that only about 15% of companies practise effective decision making. Many score well on the big decisions—which markets to enter or exit, which businesses to buy or sell, where to allocate capital and talent. But the high performers shine truly when it comes to critical operating decisions requiring consistency and speed-driving product innovation, positioning brands or managing channel partners.

Even in companies respected for decisiveness, however, ambiguity about who is accountable often stalls the decision-making process, usually at one of four common bottlenecks: global versus local, centre versus business unit, function versus function or inside versus outside partners.

The most important step in unclogging decision-making bottlenecks is assigning clear roles and responsibilities. Good decision makers recognize which decisions really matter to performance. They think through who should recommend a particular path, who needs to agree, who should have input, who has ultimate responsibility for making the decision, and who is accountable for follow-through. They make the process routine. The result: better coordination and quicker response times.

Companies have devised a number of methods to clarify decision roles and assign responsibilities. We use an approach we call RAPID-Recommend, Agree, Perform, Input and Decide—to help companies develop clear decision-making guidelines. As you'll see, the roles aren't carried out lockstep in that order; we took some liberties in creating a useful acronym. Nor is the process a panacea—an indecisive decision maker can ruin any good system—but it's an important start in clearing bottlenecks.

To see how it works, consider what happened at Wyeth Pharmaceuticals when it looked to establish a leading position with a promising new drug called Enbrel. Competitors were also working on the same class of drugs, and Wyeth needed to move quickly to expand production capacity by building a plant in Ireland.

By any standard, the issues were complex. Input typically filtered through a gauze of overlapping committees, progressing slower than what the competitive situation demanded. Eager to find a better way, company executives turned to RAPID. They started by identifying the people best suited to recommend a course of action—either by making a proposal or offering alternatives-and pushed certain responsibilities down to the business units, where knowledge was greatest.

Others then were asked to agree to a recommendation before it moved forward. In this case, Wyeth's top executives retained veto power (they had to agree) over many important proposals. With RAPID, however, if someone exercises a veto, they must offer an alternative or escalate the issue to the person with the "D". And only a few should have such veto power: legal counsel, for certain decisions, or the head of an affected unit.

Those with input responsibilities provide relevant information- effective decisions, after all, are grounded in evaluating facts rather than seeking opinions. The recommender has no obligation to act on the advice, but should take it into account, since the people who will implement a decision are typically among those providing input. Consensus is a worthy goal, but can be an obstacle to action or a recipe for lowest-common-denominator compromise.

In the end, it comes down to one person who must decide-the single point of accountability that commits the organization to action. The person with the "D" needs good business judgement, a grasp of the trade-offs and an awareness of the group that will execute the decision. Many decisions about Enbrel, for instance, lay with Cavan Redmond, executive vice-president and general manager of Wyeth's biotech division, after he and his team gathered inputs from other managers.

Finally, responsibility for executing Wyeth's plan rested firmly with the business unit. The people who perform have a crucial role: A good decision executed well often beats a brilliant one implemented poorly.

No single lever turns a company that struggles to make and execute good decisions into a decision-driven organization, of course, and no blueprint can provide for all the contingencies and business shifts a company is bound to encounter. But you'll know your company is on track when managers realize they're spending less time in meetings, wondering why they are there. And when one person has the "D", bottlenecks will disappear.

By taking some practical steps, any company can become more effective, beginning with its next decision.

Ashish Singh is the managing director of Bain & Company India. Vivek Gambhir is a partner in Bain's Delhi office. Marcia Blenko is a Bain partner in Boston and the leader of Bain's North American organization practice.

www.livemint.com