Whether you’re a CEO or a brand-new junior manager, effective decision-making is what will ultimately come to define how you are perceived by everyone around you. Ron Carucci’s article, 'A 10-year Study Reveals What Great Executives Know and Do', in the Harvard Business Review talks of four dimensions, the mastery of which separates the great from the good in the business world. The article offers some valuable insights and some sound advice, but to my mind falls just wide of the mark when it talks of the synergy between the four traits. Yes, you need to ‘know the whole business, be a ‘great decision-maker’, ‘know the industry’ in which you operate, and ‘form deep, trusting relationships’ if you want to be a great, rather than good leader, but is any one more crucial than the others? Carucci might argue no, or cite relationships as being the critical dimension. And that’s where I would disagree with what is a very well-reasoned article.
Let’s start with ‘Knowing the whole business’. The study points out the limitations imposed by having too narrow a range of experience, yet that is how we become experts in our field. Exposure to other disciplines / areas within the business, rather than expertise in those other areas is what I would say matters. Yes, coming from a background in a single discipline is likely to encumber you with a range of cognitive biases that drive your instincts in a particular direction, but providing you’re aware of that pitfall, you can counter it through ensuring your business is properly organized and integrated to function as a balanced system. Understanding all the aspects of your business as best you can makes you more effective, but that understanding is often necessarily superficial due to complexity.
Then there’s ‘Knowing the industry’. As with knowing the whole business, this is about breadth. No business exists in isolation, and nor does the industry in which it sits. Breadth of interest allows you to better understand your marketplace, but more importantly, it gives you an understanding of what lies beyond. Spotting opportunities, capitalizing on developing trends and technologies, all benefit from having a broad, rather than a narrow viewpoint. Such an understanding relies on an external perspective that lets you recognize emerging threats, challenge questionable assumptions and stay at least one step ahead. Again though, complexity makes that difficult, particularly in the world of Big Data.
I’m close to agreeing with the author on the importance of ‘Forming deep, trusting relationships’. Unfortunately, charisma can go a long way to making reasonable leadership look good, and good leadership look great. Here, empathy and honesty are key but not always practiced fully. If self-interest is your primary driver, you may be adept at concealing it in order to create the illusion of care and trust. There is a wealth of research suggesting that many otherwise good executives find it necessary to manage perceptions rather than embrace humility and proceed with confidence. An important dimension indeed, but too many can get by without it for me to consider it the most important facet.
Finally, ‘Being a great decision-maker’. Good decision-making relies on knowledge, understanding and intuition, essentially a blend of analytics and instinct. Getting the mix right is key; analyzing and understanding the data is vital, but when there is a fundamental piece of the jigsaw missing, gut feeling (usually based on experience, emotion and unfortunately, bias) is used to make the decision. Intuition has its place, and many great decision-makers have a knack for it, but sadly it’s something you can’t learn. Knowledge and understanding on the other hand, can be developed and expanded, and they will in turn lead to more reliable intuition. Knowledge and understanding come from our first two dimensions, while good relationships are easier to build when others trust and value your judgment. Synergy indeed.
So, is one dimension or trait more important than the others? To my mind, the ability to make good decisions is the cornerstone. It is certainly the metric by which you will be judged, and while others may respect your knowledge of your business and the wider industry, it is how you apply that knowledge that matters. Gaining that knowledge, understanding and trust takes time, but ultimately, it helps you become a better decision-maker. Essentially, the three other dimensions are enablers, they are the tools that help you make good decisions.
Of course, you may not have that breadth of knowledge, whether it is of your business or industry. You may excel in one particular discipline and have a basic but workable understanding of the others. What then? This is where the great use empowerment; this McKinsey article emphasizes the importance of training your managers and executives how to make good decisions. If you know you can rely on your subordinates to make good decisions, and they trust you to trust them, you know you will receive good advice / data upon which to base your own decisions. You now have what is properly called Situational Awareness. Synergy again, but it still comes down to making good decisions. Good decision-making across a business, not just at the top, is what matters. Good decisions feed good decisions.