The Principles of Decision Making

The need for speed places a premium on efficient decision making. But effective strategic moves also require organizational buy-in, which is best achieved through time-consuming consensus building. Harvard Business School assistant professor of general management Michael Roberto reveals some mechanisms for achieving both in his working paper, “Strategic Decision-Making Processes: Beyond the Efficiency-Consensus Tradeoff.” Broad-based consensus on decisions to launch a new product line, for example, or to pursue a major contract, facilitates the resulting implementation of the strategy. But a trade-off emerges because along with more seats at the table comes more time required to build consensus, and a greater risk of the analysis paralysis that typifies large organizations. Indeed, scholars have long noted the difficulties a trade-off presents for companies and policymakers alike.

Roberto describes a set of do's and don'ts to maximize chances of attaining both efficiency and consensus emerging from his 1999-2000 field study of 10 major decisions at a respected aerospace company. First, the do's. “[Good groups] embark on a gradual structuring process instead of putting all the options on the table and trying to make a decision,” says Roberto. “Through a series of intermediate agreements, you can manage conflict and debate effectively.” The paper describes three strategies: having a clear decision criteria defined early on; using a winnowing process to narrow down a set of alternatives; and determining contingent options, that is, defining criteria by which to eliminate options as the process unfolds.

Such a rational approach seems foolproof, but pitfalls remain. Even the best-structured analysis can be neutralized by a poor political approach that delegit-imizes the process. That's where the don'ts figure in. “The poorly performing groups want to make the process look legitimate,” says Roberto, by making an analysis seem comprehensive when it is not. But when steps are perceived as political rather than analytical, it subverts the perceived role of participants. And that undermines buy-in, one reason for bringing disparate individuals to the table in the first place. The danger is when, as Roberto points out, “you do them purely for legitimacy reasons, and they aren't authentic. Then you harm both speed and consensus,” because others see through the artifice.

For example, it's advantageous to analyze a number of alternatives. But if some alternatives are presented as tokens — they are discussed solely to increase the number of options on the table — then others perceive the process as flawed.