At all levels of a corporation, key decisions have to be made quickly. This is particularly critical at the strategic level, when senior executives are expected to have an exceptional talent for systematic and organized decision-making. However, this is not simple, and there is also no clear path to follow.
There is a plethora of studies and thought leadership around formulating and implementing strategy—but little on maturing into a leader with exceptional judgment abilities. Chief Executive Officers are frequently asked to develop their own executive on-the-job training programs for their managers and key executives in order to sharpen their strategic thinking and judgment abilities.
While making decisions, executives must make trade-offs, weighing the numerous available options. Executives find it difficult to choose the most viable option from a finite number of possibilities, as they want to keep all of their options open.
For leaders, Decision Making Acumen is a matter of survival. For CEOs, for example, it is critical to do a detailed evaluation of the benefits and drawbacks of entering a certain market prior to forwarding the case to the board for approval. They must determine which geographies to select and how to do so.
The ability to make smart decisions enables individuals to consider the big picture and think long term rather than focus primarily on short-term rewards. Executives with Decision Making Acumen are able to say no to poor business decisions.
An organized approach is essential to develop CEOs' judgment and decision-making abilities. Such a systematic approach to increasing an executive's Decision Making Acumen should include the following components:
- Grasp on Reality
- Strategic Choice Cascade
Understanding these two components enables CEOs to establish priorities, communicate their reasoning clearly, stay firm in their judgments, and encourage others to follow.
Now, let us explain why it is critical for leaders to have a clear grasp on reality as they develop Decision Making Acumen.
Grasp on Reality
Executives frequently have an inclination to perceive evidence in a way that conforms to their established views. This cognitive bias can cause them to misjudge situations. The first component of the strategy emphasizes the critical nature of removing biases and preconceived notions from the decision-making process. Executives with Decision Making Acumen make conclusions after doing a thorough study of the matter, setting aside personal biases and accepting facts.
Preconceived assumptions and a refusal to accept reality results in failures. For instance, under the assumption that expanding into economies such as Brazil would be simple due to innovation and brand equity in other markets, Proctor and Gamble invested extensively in the country to establish the distribution of their oral care business. P&G was unaware that Colgate had invested twice as much in the oral-care business and had created a huge distribution network in Brazil, resulting in enormous brand loyalty for its products. This mistake cost P&G millions of dollars in market share and forced the company's executives to rethink their growth strategy.
Interested in learning more about the other element of the systematic approach to Decision Making? You can download an editable PowerPoint on Executive Decision Making Acumen here on the Flevy documents marketplace.
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