Solid decision making builds on speed, information and co-creation

10 May 2016

The rapidly changing business environment is transforming the way businesses can, and need to, support decision making, according to a new report. Engaging with key stakeholders, and having access to a wide array of information, considerably improves decision outcomes. Particularly manufacturing and retail are behind the pack, in terms of enabling strong decision making environments.

The impact of new technologies, and something akin to Moore’s law in their rapid evolution, are having a marked effect on the turnover of some of the world’s largest organisations. Recent years have seen a considerable number of casualties from innovation, with past giants like Kodak and Blockbuster almost obliterated by innovative competitors. Between 2003 and 2013, for instance, 712 companies fell out of the Fortune 1000 while the average lifespan of a company within the S&P 500 has dropped from 90 years in 1935 to an average of 18 years in 2011.

Surviving in the new environment requires not merely correct judgement, but the capacity to make those judgements rapidly in line with constantly changing variables. In a new report, titled 'Rewiring the corporate brain, BearingPoint considers a number of features that the firm regards to be imperative in quality decision making.

Decision making by size

The research highlights that large organisations are more error prone that smaller ones. Organisations with personnel in excess of 100,000 are 1.2x as likely to make an error, while organisations of less than 1,000 employees are 0.9 x as likely to make an error. Further factors that increase the risk of poor decision making include decisions that are dependent on other decisions, decisions subject to compliance issues and decisions made under time pressure.  

According to the consultants, a number of factors are correlated with improved decision quality. In particular, unilateral decisions – where staff are not involved – are considerably less likely (0.5x) to result in a better decision compared to when staff are directly involved (2.2x). In decisions that affect customers, having those customers involved in the decision making process is 2.5x as likely to result in a better decision that a unilateral decision. In most instances, involving the stakeholder group that the decision affects, is correlated with better outcomes. 

A further factor disclosed by the research is that information is a key ingredient in the decision making process. Access to a wide variety of information, which is structured – but not biased – provides a strong background against which to make informed and quality decisions. The research found that bad decisions were often the resulted of, among others, slow decision making processes; lack of executive commitment; lack of workflow tool support; lack of consideration of alternatives; and complicated decisions. Particularly having information for the decision is correlated with a 1.5x better decision outcome, while digital information access is correlated with a 2.3x better decision outcome.

The decision making process in different industries differs considerably. The likelihood of having an enabling environment was considerably more likely in utilities at 1.7x, public services at 1.3x and financial services at 1.3x. The areas least conducive to enabling better decision making include manufacturing at 0.5x, life science at 0.8x and retail at 0.9x.