by Dawna Jones, author of Decision Making for Dummies on Steve Denning's (Forbes) list of 8 Noteworthy Books for 2014
Making money in business isn't what it used to be. Exponential entrepreneurs move an idea from startup to billion-dollar company in short order. Business models are easily rendered irrelevant. Why are so many companies sticking to routine business making decisions as if nothing has changed, as if complexity has no impact? What do upstart startups, select mid-sized companies and agile business units of large companies see others don't?
Is Profit the Result or the Means for our Business to Achieve Bigger Goals?
On every executive decision maker's list of priorities you will find three priorities: increase revenue, mitigate risk and cut costs. Yet, hidden decision-making habits sabotage achievement of those same goals.
That is exactly what is happening when decisions are based on one glaring and flawed assumption: profit is the purpose of a business. A narrow focus is too narrow a frame in the context of complexity, where relevant data exists beyond view. Companies restrict and limit growth, leaving employees disengaged, but busy. Without a wider lens to see the big picture, the default is to solving problems and putting fires out. Instead, converting problems into business opportunities inspires engagement.
Assumptions are beliefs, sometimes rigidly held, assumed to be true but they might not be. While useful to compensate for insufficient information, left unexplored or unnoticed, assumptions increase risk and obscure clarity. In the traditional way of thinking, profit is the result of a company's endeavour. In the contemporary mind, profit is the support a company needs to achieve something bigger. Fulfill a vision. Contribute something significant to the world.
If making grand assumptions is one risky routine habit, what else sabotages profitability?
Risk Mitigation
Risk has always been a matter of perception. When tainted meat gets recalled, the problem to the consumer isn't the same as the problem as viewed by marketing or by executives. Forecasting risk, is sabotaged by one of many cognitive biases: "What is closer is more real than what is further away." Mitigating risk is achieved by designing the decision making process to reduce or remove built-in cognitive bias. Not attending to cognitive bias in hiring, project management, sales and other key functions, exposes your reputation and weakens business sustainability.
Self-awareness alone does not remove cognitive biases. Designing decision-making to mitigate the effects of bias can reduce risk of self-sabotage. Cognitive bias applies to hiring, sales, management decisions, or promotion for example. In fact, as long as you are human bias actively distorts perception.
What if companies asked themselves?
What is the impact of this decision on the customer? Red Bull paid the price, $13 million to be exact, when customers found the advertising promise didn't match the experience. Consumers are calling for companies to be transparent and trustworthy and expect them to tell the truth.
What if management learned to work with employees as peers rather than control them? Would the costs of stress related illness be as high as $190 billion USD annually?
What if decisions were checked against one ethical principle: Do No Harm?
For instance, "How will 'this decision/action negatively impact the psychological safety employees feel? Or the health of the communities we live-work-serve in?" Costs of unethical behavior are largely hidden hence the need to raise leadership awareness.
Cutting Costs
A funny thing happened on the way to becoming a business decision maker. Fear. Nothing sabotages decisions faster. Fear of losing market share or fear of failing. The good news about fear is that it motivates action. The bad news is, the action tends to be risk avoidance rather than growth. As a decision maker, knowing you're in a fear-based environment gives you control over avoiding costly mistakes.
Biologically, growth is impossible if you are protecting yourself from perceived threat. From a neuroscience point of view, the brain interprets negativity as a threat. The organizational brain sees 'Cutting costs' as threatening. The company heads smack into desperation and survival mode. Forget innovation, engagement or creativity.
Pivot language to the positive. Find cost savings. Besides being more inspiring, you will achieve serious returns to the bottom line, more so if you've built high trust into your culture.
Pivoting Decision Making to Support Business Adaptability
1) Focus and Oversight: Notice the underlying driver of the decision. Is it negative or positive? Limiting or Inspiring? Narrow or do you have the big picture in plain sight?
2) Relationships and Difficult Conversations: Can you have the difficult conversations in your company without making it personal? Or spiralling down into destabilizing conflict? How good are you at hearing bad news? If your people can't give you bad news without retribution, you are creating risk. You want your people to be on your team, not to be afraid of the team leader. Fear is not a management strategy.
3) Diversity of Perspective: Engage more people in the decision-making process. Diversity in this context refers to diverse perspectives found in all layers of the organization. You can achieve this through decentralizing decision-making or by reaching out to the collective intelligence to significantly increase accuracy.
4) Foresight and Strategy: In the good old days, strategy making relied on forecasting the future by extrapolating based on what happened in the past. Linear thinking. Today, nothing about the past defines the future.
As a leader, your effectiveness relies on gaining comfort with working with what emerges. As a decision maker, you gain greater accuracy by engaging diverse perspectives (Reference point 3).
Software that uses collective intelligence to crowd source accuracy in future forecasting is out in beta. Test trials of Percypt show 94-97% accuracy. Try it out; tell me what happens. Reach beyond the executive level otherwise you'll be consulting with yourselves. The true power lies in the diversity found in every corner of the company.
5) Purpose with Wider Benefit: When it comes to the environment, do no harm isn't good enough. The effects of global climate change impact business and all life. The growing millennial workforce, at least, expects business to act as responsible global citizens.
- Present a challenge for the company to aspire to that is far bigger than itself. For instance, Novo Nordisk is about achieving 'systemic health'.
- Aim for regenerating the natural life support systems. Doing less harm isn't good enough.
Courage and expanded awareness is essential to engage the deep intelligence residing in the ecosystem of relationships in and beyond the company. Decision-making is the obvious place to start pivoting to a better position.
Dawna Jones knows business can transform itself to be better for society and the ecological community we depend on to sustain life. Collectively making better decisions based on expanding body-mind-spirit awareness asks for deep commitment to realizing potential. Contact Dawna to learn about custom designed experiential learning programs to integrate personal and collective multi-dimensional knowledge.
Dawna is also the author of Decision Making for Dummies, on Steve Denning's (Forbes) list of 8 noteworthy books for 2014. She hosts the Evolutionary Provocateur podcast. Contact her at dawna@frominsighttoaction.com or through LinkedIn. 