Rational Decision-Making

With a plethora of books, videos, podcasts, TED and similar talks, seminars, coaching sessions, and other services, why are leaders' decisions still not moving more organizations to success? McKinsey & Company reports that leadership development is consistently less than desired - in a 2016 survey of 510 executives, only 11 percent said that their leadership development programs achieve and sustain the desired results.

But is leadership development the be-all and end-all to effective decision making?

As rational beings (and great leaders), the expectation is that we reason from the general to the specific. A frequently cited example of this is: "All men are mortal; Socrates is a man; therefore, Socrates is mortal." This deductive logic (or syllogism) is an ideal model because it does not depend on context, social situations, or everyday interactions. But corporate decisions are not made using pure logic. 

Corporate decisions involve interactions that include addressing beliefs or attitudes of employees and other stakeholders. For example, consider a commercial for cosmetics aimed at a Western audience. The commercial does not follow typical deductive logic. For example, the commercial does not explicitly state its major premise: "We admire youth and beauty," but it does play on a minor premise implying that the product will make you look and, possibly, feel beautiful. As a result, viewers buy the product because they feel that they will be more youthful and beautiful, even though the commercial did not make those explicit claims.

Corporate decisions include logic (or logos - the logical and substantive aspects of the situation). They also include ethos (credibility of the persuader) and pathos (the emotional aspect of the stakeholders including the decision maker).  

The changing landscape of decision making and its impact on an organization's success means that leaders are no longer the key source of decisions. What we are also seeing is that leadership development is ineffective and organizations are not as successful as they once were. Perhaps it's time to eliminate the pathos from decision making and rely on logos for success. Ethos is also not always an organization's friend.

Decision Audits

To become more successful and meet the needs of the changing business environment, some organizations embark on reorganization. The reorg's intent is to effectively channel corporate decisions and realize success. However, reorganizations are not always successful. Take the case of Chrysler. They reorganized their operations three times in the three years preceding their bankruptcy and eventual combination with Fiat (source: Harvard Review).

There is an incongruence between organizational structure and performance. Reorganizations can lead to slower decision making which impedes performance. In The Decision-Driven Organization, the authors recommend that organizations undertake a decision audit before embarking on restructuring.

This requires a "re-thinking" of the traditional approach involving analysis of strengths, weaknesses, opportunities, and threats. Instead, it requires an understanding about the process for strategic decision making and execution.

Aligning the company's structure with its decisions ensures that its structure will work better. This leads to improvements in corporate performance.