Tagged: Decisionmaking

Which Decision-making Model are you using?


When I entered the business world, the flavor of the month decision-making model was the Kepner Tregoe problem solving & decision-making model.

Soon that was replaced by a model from a book, that is if I can remember its name– something like the 1001 things I did not learn at Harvard Business School. And, just when I got my breath back, De Bono came along with his 6 Hats.

And so it went on…De Bono…..to various techniques involving linear and creative thinking methods. Just read Michalko’s Thinkertoys as an example.

In my own consulting experience in reputation management I have found that the MISTRUST that is created in companies or by companies today is a direct cause from a lack of stakeholder understanding and misperceptions that is created when decisions are made. (For more information on this, read this blog’s archives)

Perhaps the following information can add to your decision-making model that you wish to develop. Perhaps you could even develop a model that will grace the charts worldwide (Please quote me…)

This is my theory.

Every decision that an organisation must make has four broad sets of implications. The obvious three sets of implications are operational, financial and legal.

The fourth set of implications is generally ignored, delegated or included in the process only on the basis of the "gut instinct" of one of the participants. This fourth set of implications is reputational.

The reputational implications of a business decision can be defined as those that impact the way in which an organization is regarded by those with whom it interacts, including shareholders, customers and employees, as well as suppliers, government regulators, the media and even competitors (and any other stakeholder).

This fits in well with the ecology model of organisational effectiveness.

The New Collins Concise English Dictionary defines ecology as: "The study of the relationships between living organisms and their environment, the set of relationships of a particular organism with its environment."

This means that the ecology model is concerned with the organisation’s ability to deal with internal and external contingencies, and its ability to manage interrelationships between stakeholders in the context of its environment.

Any organisation is dependent on its stakeholders for support and the strategic importance of any stakeholder depends on how dependent the organisation is upon it. And this relationship can change over a period of time or due to indiscretions. It is thus important to realise that any decision has reputational implications if it has the potential to affect the relationship between the company and any of these stakeholders. In other words, it is difficult to think of a decision that does not have reputational implications.

Reputation, most managers today would agree, is an asset, even if only a perceptual asset (or, if mismanaged, a liability). It certainly is not optional. Every corporation, organization, institution, individual has a reputation. The only option is whether to manage it or allow it to be inferred.

If it is to add value, it should be managed with the same care and attention as any asset. It should be obvious that if a decision has four broad sets of implications, and only three are formally and routinely considered, the potential exists for flawed decision making. After all, the role of a manager is to manage all the assets under his or her control effectively.

It is certainly conceivable that financial considerations are often deemed more important than reputational impact, but even that is not to say that they should not be considered and factored into the process. There is mounting evidence though that as general rule reputational implications is important to sustained corporate success. The scrutiny under which business operates today (Witness the success of investigative TV programs), the amount of information in the hands of consumers and other publics, make reputation a vital asset, and in some industries the most important.

And, interestingly if this was not important, how come it is specifically included in the new recommended King Code 3 of Corporate Governance (Section 8). For more information, go to the website of the Institute of Directors and check it out for yourself.

Unless decisions are scrutinised through a stakeholder lens, problems are due to erupt.

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Flawed Decisionmaking is Dangerous


Every decision that an organisation must make has four broad sets of implications. The obvious three sets of implications are operational, financial and legal.

Namely:

  • Is it legal?
  • How much will it cost?
  • Can we implement it?

The fourth set of implications is generally either ignored, delegated or included in the process only on the basis of the "gut instinct" of one of the participants.

This fourth set of implications is reputational.

The reputational implications of a business decision can be defined as those that impact the way in which an organization is regarded by those with whom it interacts, including shareholders, customers and employees, as well as suppliers, government regulators, the media and even competitors (and any other stakeholder).

Any organisation is dependent on its stakeholders for support and the strategic importance of any stakeholder depends on how dependent the organisation is upon it. And this relationship can change over a period of time or due to indiscretions.

It is important to realise that a decision has reputational implications if it has the potential to affect the relationship between the company and any of these stakeholders. In other words, it is difficult to think of a decision that does not have reputational implications.

Reputation, most managers today would agree, is an asset, even if only a perceptual asset (or, if mismanaged, a liability). It certainly is not optional. Every corporation, organization, institution, individual has a reputation. The only option is whether to manage it or allow it to be inferred.

If it is to add value, it should be managed with the same care and attention as any asset. It should be obvious that if a decision has four broad sets of implications, and only three are formally and routinely considered, the potential exists for flawed decision making.

After all, the role of a manager is to manage all the assets under his or her control effectively. Tangibles and Intangibles.

Research has clearly shown that risk increases in patterns of decisionmaking. Those patterns can often easily observed in a boardroom situation. This risk increases when there is a lack of asking these types of questions:

  • Who are our stakeholders? (This is not a given. Stakeholders change position based on interest or need)j0426621
  • What are our stakeholders’ stakes? (Is it legal, moral, economic, public interest or self – interest?)
  • What opportunities and challenges do stakeholders present?
  • What economic, legal, ethical, and social responsibilities does our organisation have?
  • What strategies or actions should we take to best manage stakeholder challenges and opportunities?
  • Do we have a system for managing relationships with stakeholders?
  • How do we measure results? What metrics do we use to assess and gauge stakeholder relationships?
  • In a crisis how quickly can we communicate with our relevant stakeholders?
  • Do we know the various methods to engage with stakeholders and when not to use it?
  • Do we know how much we are spending on each stakeholder group and what the ROI is?
  • Have we developed a set of rules and guidelines on how best to manage the process of building stakeholder reputation with each stakeholder group?

Unless you can answer these questions, you cannot assess the fourth set of implication of a decision, and your decisions will at best remain skewed.

The question I want to ask is whether managers will make certain decisions if they have been sensitised to the answers to these questions?

(To learn the answers to these questions and many more, attend the Stakeholder Reputation Master Class at the Hotel Apollo in Randburg from the 20th – 21st January 2010. Go to http://stakeholderreputation.invite43.com/ or e-mail reputationeducation@icon.co.za for a brochure and registration form)