Organisations today have access to more data and better analytics. So why is there a growing level of frustration and dissatisfaction among senior decision makers?
A recent study by McKinsey found that managers at a typical Fortune 500 company may waste more than 500,000 days a year on ineffective decision making, equivalent to some $250 million in wages annually. In the study, decision makers complained of lack of real debate, convoluted processes, an overreliance on consensus and death by committee, unclear organizational roles, information overload (and the inability to separate signal from noise), and company cultures that lack empowerment. One healthcare executive told McKinsey that he sat through the same 90-minute proposal three times on separate committees because no one knew who was authorized to approve the decision.
So what is the answer?
Big-bet decisions shape the future of corporations and are the most important decisions that leaders can make. Yet McKinsey’s study suggests that these decisions receive much less scrutiny than they should, and the dynamic inside many business meetings doesn’t help. In some organisations, meetings consist of simply sharing a snappy PowerPoint presentation summarising relevant information, followed by quick question and answer session. This, however, does not provide nearly enough insight to allow decision makers to make big-bet decisions. Instead, you need a rigorous and well-coordinated process that helps clarify objectives, measures, targets and roles.
So, what does a well-coordinated process look like?
In the world of new product development, the Stage-Gate Process developed by Dr Robert Cooper, (the world’s top innovation management scholar and co-founder of Stage-Gate Inc.) has been the accepted best practice for new product development for the past 20 years. The structured method of progressive new product development and project deployment has been tested on thousands of new product launches and is recognized worldwide as the best approach to accelerate new products to market, successfully. Stage-Gate processes are increasingly important to successful innovation and helping to make those big-bets decisions. Technology consultancy Booz Allen Hamilton recently highlighted the fact that every organization listed in its ‘Global 1,000 Innovators’ report has a disciplined Stage-Gate process in place.
Although having the right process is incredibly important, the key to making better and faster decisions is how well you deploy it. Good decision making also requires discipline, effective communication, collaboration and the right organisational structure.
Let’s start with good meeting discipline – poor decision making can still be related to the lack of rigor with which executives ran important meetings. McKinsey found that in some companies, the members of the executive team only speak up if their particular area is being discussed, whilst other stay silent, even if they’ve had years of experience and input. Yet, involving more people in this process, and doing so effectively, is one of the best ways to improve quality and accelerate the pace of a project. Alan Mulally, former Executive Vice President of Boeing and then CEO of Ford Motor Company said when describing the development of the company’s new 777 aircraft, “We can’t make a better airplane unless we can figure how to get everybody’s knowledge included in the design.” Product innovation is very much a team effort, and the lack of a true cross-functional project team is one of the reasons many new-product projects fail. There is a strong correlation between an effective cross-functional team and a faster cycle time. McKinsey found that the presence of high-quality interactions and debate were the factor most predictive of whether companies make good, fast, big-bet decisions. They also noticed that, “Minimizing the numbers of debate participants to speed up decision making could harm decision quality. As many studies show, greater diversity brings greater collective wisdom and expertise, along with better performance.”
McKinsey also suggests that companies need to overcome the “conspiracy of approval” approach to group discussions. It’s helpful for senior participants to ask questions instead of expressing opinions, and to actively encourage dissenting views. Stephen Bridge, a Senior Consultants at GenSight commented, “My observation is that in some organisations, a senior Gatekeeper (e.g. the Chief Executive) may express their own view first, and this frames the debate and sets the tone for the discussion. This can be problematic – if the Chief Executive or general manager expresses their opinion before anybody else, then others may feel obliged to go along with the same opinion, no matter what they think. Often, if the CEO approves, everyone else feels like they must also approve. This is something organisations and CEOs should be mindful of.”
McKinsey points out that “Productive debate is essentially a form of conflict – a healthy form – so senior executives will need to devote time to building trust and giving permission to dissent, irrespective of the organisational hierarchy in the room.” The climate of trust and openness these sessions encourage has translated into better ideas, including practical lessons that have helped companies speed up its release of new products. For a Stage Gate process to work well, it is necessary to encourage objectivity, realism and the open-ness to discuss issues that may well invoke opposing views. Meetings should involve proper discussion and should not just be some box ticking exercise.
It is also imperative to have a clearly assigned team of players, all with clearly assigned roles and commitments to the project, with a team leader who oversees the project from beginning to end. It is also imperative to make the project team ultimately accountable for their achievement. According to the Harvard Business Review, “Decisions are the coin of the realm in business. Every success, every mishap, every opportunity seized or missed stems from a decision someone made or failed to make. Yet, in many firms, decisions routinely stall inside the organization, hurting the entire company’s performance. The culprit? Ambiguity over who’s accountable for which decisions.”
Dysfunctional project teams, a lack of cohesiveness and poor organizational design and leadership is one of the reasons many new products fail. Instead, you need the right organizational structure with clearly assigned and accountable team members, on the team from beginning to end, and led by a highly visible team leader. It is vital to ensure that the right people are assigned as team leaders or Gatekeepers. This calls on looking closely at the organisation structure, and where the right people are that must be engaged at each stage / gate in the process. This needs to be done for all of the major cross-functional aspects that need to be addressed – finance, marketing, technology, legal/regulatory, business units, sales functions and so forth.
McKinsey noted that in their 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”.
The Project Management Institute describes good project governance as the secret weapon of effective project-based organizations: “A key element of project governance addresses how decision rights and accountabilities are disseminated and assigned between the project team and executives. Poor governance can put the organization at risk of commercial failure, pecuniary and regulatory problems, or allow the organization to lose sight of its objectives and responsibilities to its stakeholder, who benefit from its success. Project governance extends the premise of governance into both the management of individual projects via governance structures and the management of projects at the business level through coordination, planning, and control.”
Right from the start, you need the right process and leadership to make the project work and reach the right decisions quickly. Collaboration and communication are key to this, along with accountability and commitment for these decisions, not just consensus. Those with the decision-making authority need to have the relevant skills and knowledge to act, whilst encouraging collaboration and debate within the team. Decisions need to be fully and effectively implemented and this requires commitment and accountability.
For more information on implementing a Stage Gate process that works for you, please get in touch. We are happy to discuss your needs and arrange a product demonstration.
De Smet, A. Jost, G and Weiss, L (2019). Three keys to faster, better decisions. Available at: https://www.mckinsey.com/business-functions/organization/our-insights/three-keys-to-faster-better-decisions (Accessed July 2019).
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Stage Gate and Decision Making