From the boardroom to the frontline, decisions determine what gets built, what gets funded, what gets sold, what gets prioritised and ultimately, what succeeds.
It consumes management time, compromises profit, erases EBITDA and, in extreme cases, can contribute to billion-dollar losses.
equivalent to the cost of inefficient decision making for a typical Fortune 500 company.
McKinsey ●days of managers’ time potentially squandered each year by inefficient decision making in a typical Fortune 500 company.
McKinsey ●say that at least half the time they spend making decisions is ineffective.
McKinsey ●of executives’ time, on average, is spent making decisions and they believe most of that time is poorly used.
McKinsey ●From pricing and production to capital allocation and customer service.
Decisions determine nearly every aspect of business performance, from pricing and production to capital allocation and customer service.McKinsey ●
As organizations grow, meetings, review cycles, and governance requirements multiply, making decision-making one of the largest but least visible operating costs.
McKinsey ●of business decision makers report an increase in the volume of operational decisions in the last 3 years.
Gartner ◆say operational decisions materially impact profitability.
Gartner ◆of a company’s profit is compromised by poor operational decision-making.
Gartner ◆Potential EBITDA erased by 430–860 decisions about capacity utilization.
Gartner ◆Potential EBITDA erased by 430–720 decisions by sales teams.
Gartner ◆The leakage from poor decisions costs businesses millions, even billions, every year.
Gartner ◆Decision makers can be highly confident in their own logic while missing information, overlooking financial implications or failing to seek input from others.
don’t consider a single financial implication.
Gartner ◆don’t consider 2 of the 6 considerations considered critical to making financially sound decisions.
Gartner ◆Business managers tend to be highly confident in their own operational logic, may be disinterested in new information and rarely seek the input of finance proactively.Gartner ◆
Front-line staff make critical decisions every day, millions of decisions that top management never sees.
Bain & Company ■Front-line employees are ultimately the people who make things happen. They play a vital role in determining the success or failure of strategies devised in the boardroom.
Bain & Company ■A company’s vision should contain enough guidance to help employees on the front line make concrete decisions every day about what they should do.
Bain & Company ■A number of strategic errors in decisions eventually led to accumulated trading losses for the bank of more than $1 billion.
Wharton ▲Decision makers have great difficulty in evaluating low-probability high-risk events before disaster strikes.Wharton ▲
They tend to underprotect themselves before disaster strikes.
They tend to overprotect themselves after disaster strikes.
We all fall prey to cognitive bias, no matter how we try to guard ourselves against it.
Cognitive and organizational bias undermines good decision making.
McKinsey ●One of the most common traps organizational decision makers fall into.
McKinsey ●Individuals buy into herd mentality because there’s safety in the herd.
McKinsey ●Executives frequently hold onto underperforming business units or projects because of emotional or legacy attachment.
McKinsey ●Uncomfortable information can be overlooked when making decisions.
McKinsey ●The tendency to make specific judgments based on general impressions.
McKinsey ●Faster decisions improve the use of existing assets. Better asset utilisation creates flexibility. Greater flexibility improves an organisation’s ability to capture opportunities.
Faster decisions improve an organisation’s ability to respond to problems and opportunities.
Better decisions help companies get more from the assets they already own.
Better asset utilisation creates flexibility.
Greater flexibility improves an organisation’s ability to capture opportunities.
Faster decisions improve the use of existing assets. Better asset utilization creates flexibility. Greater flexibility improves an organization’s ability to capture opportunities. Over time, the gains compound.McKinsey ●
Learn from your own past experience.
Learn from the past experience of the company or organisation you work for.
Learn from others’ experience - the step people rarely take.
The question is whether organisations can systematically improve the quality of those decisions.
What is decision making?
Three keys to faster, better decisions
The decision dividend: How AI creates economic value
Drive Financially Sound Operational Decisions Source report hosted by Finance Training Academy
Organizing the Front Line for Business Success
The Barings Bank Collapse: How Bad Decisions Can Lead to Billion-Dollar Mistakes