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Date Posted: 7/12/16
By Kevin Carpenter, contact:
Years ago I knew a guy that like to state "I'd rather be lucky than good", usually after something good happened to him.  His subtle point was that if he could rely on being lucky, he didn't really need to be good at whatever he was undertaking.  Of course "lucky" is just having the better outcome turn up from a range of outcomes, both good and bad, and sooner or later those bad outcomes will turn up as well.  The most common bad decision that on occasion has a good outcome is playing the lottery.  I've mentioned before that the lottery is a tax on the mathematically challenged.  Any way you calculate the odds, investing in a lottery game is bad decision.  However, often times someone wins, and these folks are the very definition of "better lucky than good". 
So if we can't count on "lucky" outcomes, we had better fall back on "being good" and that means making better decisions.  While good decisions don't guarantee a good outcome, it does increase the likelihood of better outcomes than leaving it all to chance.
I often write in this blog about the different thought patterns, biases, critical thinking and misleading math - focusing on the analytics side of making decisions.  However, there's a higher order way of thinking about decisions of which the analytics are only part of the equation, and that's the concept of Decision Quality. 
Six Elements to a Quality DecisionIf you Google "Decision Quality" you'll find a list developed by the Stanford University Decisions and Ethics Center of the six elements of a quality decision: 
• An Appropriate Frame
• Creative Doable Alternatives
• Meaningful Reliable Information
• Clear Values and Trade-offs
• Logically Correct Reasoning
• Commitment to Follow Through
Ensuring these six elements are part of your decision making process will improve your decisions and increase the chance of better outcomes.  More importantly, failing to at least think through each of these elements increases the likelihood of a poor decision and poor outcome. 
History is full of examples of poor decision quality leading to failures:  
• The poor framing in early wireless communications that led companies to invest heavily in satellite phones.
• Limiting cost reduction alternatives resulting in massive layoffs when other options may have increased long-term value to the companies.
• Using poor information with bad calculations resulting in the Mars lander turning into a high impact probe.  (This has also happened drilling for oil where metrics/US measures were confused and the engineers couldn't figure out why they kept hitting the bottom of the well.)
• The town council that used poor reasoning to justify not building tornado shelters and then the school is destroyed with an EF4.
• And multiple cases of a project being approved with no true commitment, only to wither and die as budgets, staff, and interest slowly fade.
Successful companies pay attention to decision quality and make it a part of their decision process and culture. However, while these six elements have been widely applied across industries and governmental organizations, they have been adopted with varying degrees of rigor.  Some groups choose to let the elements be judged subjectively, while others implement a strict scale for measuring each attribute. Simply saying our decisions have these characteristics doesn’t ensure they in fact do.
The solution is to have your institution standardize, adopt, and reinforce Decision Quality in a way that engages teams and decision makers in a dialog to test the decision quality and explore the decision elements.  Decision Quality must be dynamic and intentional rather than an exercise to check boxes and say "yep we have it".
By facilitating many decision review meetings, I've found some common probing questions that help discover the degree of quality in the team's project recommendations. Below are a few examples.
The Frame: 
• Have the objectives for the project been clearly defined and have the alignments and conflicts with other teams and corporate objectives been noted?  
• Is the owner of each key objective documented? 
• Are items considered "out of scope" excluded because others are addressing those items, or was it done because of resource limitations?
The Alternatives:
• Are the alternatives proposed for consideration truly unique or are they slight variations of the same theme?
• What alternatives were dismissed early in the process as "too radical"?
• Is there a surprise alternative that was discovered through the process and is presented for consideration?
• Is all of the information based on trending past data, or does it include estimates of future values from experts?
• Are the variables meaningful and at an appropriate level to differentiate between the alternatives?
• Does the team or the experts have a historical bias, positive or negative, when providing estimates?
Clear Values and Trade-offs:
• Has the team calculated a Value of Information and Value of Control for the key variables?
• Are distributions evenly distributed about a center point or skewed either positive or negative?
• Under what conditions would the preferred alternative change to another option?
• Have disconfirming questions been drafted and explored?
• If extremes in the uncertainties were experienced would we regret our decision?
• Can we support our solution across the full range of possible outcomes?
• Do the owners of the Objectives from the framing "own" the modeled outcome?
• Will the decision approvers own the project outcome on their performance scorecard, even if they change jobs?
• Has the team identified the critical success metrics for execution and does the approval board endorse ensuring those metrics are measured and achieved?
These are a subset of an exhaustive list we typically use in facilitating as we probe and challenge teams to test, question, and endorse their course of action. Whether at a formal review board meeting or during work-in-progress team meetings, questions like these should be asked and discussed.  The team should always be watchful for pressure to short cut the process and potentially harm a quality decision, and the review meetings should never be a "rubber stamp" of approval.
If you find your company is ignoring any of these six elements, or would like to know more how Decision Quality affects the success of your enterprise, please contact us for more information!
Next time - "Intuition can be a dangerous thing"



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