Posts tagged decision making
Distributed Decision Making

Imagine you are in a car travelling down the motorway. You are trying to keep to the speed limit (110km/h here in Australia). How good are you at doing that? Do you, like me (and most of the population) just follow the car in front with an occasional glance at the speedometer? A few hasty speed corrections when that occasional glance tells you that the car in front was doing 130 not 100? Now imagine that there is a police car right behind you. Does your strategy change? Mine certainly does. Your eyes barely leave the speedometer. You maintain absolute, tight control over the car's speed.

There are downsides to this approach though. While your eyes are firmly fixed on the speedo (that's Australian for speedometer BTW) they aren't firmly fixed on the road. While you are deeply focused on the operational details of driving the car (controlling its speed) you have lost sight of something very important - the road ahead. You may be sitting right on the speed limit but you have just driven past your exit. Or worse, you may have missed a sign telling you that the speed limit had changed and now the flashing lights are in your rear view mirror and you are being pulled over for speeding. Precisely the thing you were trying to avoid.

Read More
Last Responsible Moment

Probably the least understood (or most misunderstood) lean principle is "decide as late as possible". I have seen it used to justify all sorts of weird decision-making policies that generally involve never making decisions, because surely as late as possible means leaving it until the absolute last possible moment, or even later. I have seldom, if ever, seen it applied correctly. So let's take a look at this principle and see what it really means.

The other way to express this principle is "defer decisions until the last responsible moment". There are two points of confusion here. The first is what is the last responsible moment? The other is what exactly do we mean by deferring decisions? Let's look at the last responsible moment. What is the last responsible moment? Does it mean the absolute last minute? Do we leave all decisions until we are absolutely forced to make one because otherwise the whole endeavour will fall flat? No. That makes no sense at all. Leaving decisions until they are forced upon you is hardly being responsible. Does it mean making decisions early because that's the responsible thing to do? Again, no. Making decisions early isn't using the last responsible moment. The last responsible moment is a really hard thing to define, so let's not try. Let's re-word it instead. The intent of the last responsible moment is to make decisions with the maximum possible information.

Read More
Control vs Empowerment

There has been a lot of talk at work about increasing empowerment and employee engagement. The common complaint I get from management is that "we have empowered our people but they just won't make use of it". It's a common story. Management gives empowerment but nothing at all happens. Things go on as they did before - everyone looks to management for direction. No one takes initiative. No one takes ownership. No one is empowered.

Empowerment takes more than a few words from management. You can't just tell people they are empowered and lo and behold, they are empowered. Empowerment is something people can't be given. They need to take it, it isn't something you can give. It is something people need to become. Management can't give empowerment. What they need to do is create an environment that allows people to become empowered.

Read More
The Team As A Decision Making Unit

Teams hold a special status in agile. Teams are at the heart of all agile frameworks and much of the focus of the agile community is on growing and supporting teams. Not just any teams, agile teams stress things like self organisation and cross functionality. There is no denying that a really good agile team is an awesome sight to behold. The amount of stuff they can get done is nothing short of remarkable. But there are also an awful lot of agile teams that have the same properties but their performance isn't anywhere near as good. So what is wrong with those teams? Is it the people? Is it the environment? Is it the nature of the work? What stops some teams from performing where others with the same characteristics flourish?

In an effort to understand why, I have been thinking deeply about the concept of the team; why they are so effective and why we insist on certain characteristics for our agile teams. The conclusion I have come to is that it's all about the ability to make decisions.

Read More
Outcome Based Funding

So last time I talked about large companies and some of the reasons why they make sub-optimal decisions. Not bad decisions, but ones that aren't as good as they could be. The main reason for sub-optimisation was centralisation of decision making and the main reason for centralisation was the need for control. In particular the control on spending money. With no central control of funding, anyone could spend a bunch of company money and the company would soon be broke.

If decentralised decisions are more optimal because the person making them has more information than someone further from the coal face, but centralisation is required for spend control, what are large companies to do? Are they doomed to make sub-optimal decisions forever? Fortunately, no. There are ways of maintaining centralised control of spend while allowing decentralised decision making about where to spend money. There are, in fact, many ways to do this and we will look at one of them now. I'm calling it outcome based funding; I'm sure the financial folks have a fancy, official name for it, but outcome based funding will do for now.

Read More
Why Do Large Organisations Make Bad Decisions

Everyone who has ever worked for a large company knows that they make really silly decisions. Completely illogical decisions. Decisions so monumentally ridiculous that you wonder how the company actually manages to survive as a going concern, let alone turn a profit. It's seemingly obvious to everyone in the organisation, except the senior executives who are making the decisions. Good projects aren't funded, bad ones are. Good teams or departments are restructured but poorly performing ones aren't. Opportunities are lost. How do they continue to make money with all these bad decisions? And why do smart executives continue to make them?

The answer of course is that big companies very seldom make truly bad decisions. What they make are a lot of very sub-optimal decisions. Decisions made are seldom illogical, there is a lot of reasoning that goes into them. Unfortunately, that logic and reasoning is based on very poor information. The decisions they make are good enough to stay in business and continue to make significant amounts of money. They just aren't the best decisions possible. The real question isn't "how can companies still make money while making poor decisions" but "how much more money could they make if they made better decisions". Looking at the reasons why companies make sub-optimal decisions can point us to ways to make better ones.

Read More