Making good business decisions is a critical part of every executive’s job and is vital to every company’s well-being.
There are three common decision types, ranging from those that are infrequent but significant in scope to smaller, routine decisions that can be delegated. While most organizations seem to make trade-offs between velocity (how fast was the decision made and executed?) and quality (how good was the decision?), faster decisions tend to be higher quality, suggesting that speed does not undercut the merit of a given decision. Rather, good decision-making practices tend to yield decisions that are both high quality and fast.
At the few companies that excel at decision making, which are called decision-making “winners,” they use the ability to perform well on both measures while also seeing better financial results.
Specifically, the winners make good decisions fast, execute them quickly, and see higher growth rates and/or overall returns from their decisions.
Three decision types that are most common are: big-bet, cross-cutting, and delegated decisions.
Big bets are infrequent and high-stakes decisions, often with the potential to shape the company’s future—for example, acquisitions and annual resource allocation.
Cross-cutting decisions, like big bets, are broad in scope, but they are more frequent and familiar. They consist of a series of smaller, interconnected decisions made by different groups in the company as part of a collaborative, end-to-end decision process, as with a pricing decision.
Finally, delegated decisions are frequent decisions that are much narrower in scope, such as changes to HR policy. These decisions are effectively handled by a single individual or working team made accountable for the decision, and they usually require limited input from others.
The quality and speed of decision making are both strongly associated with overall company performance, as well as faster decision-making processes and faster execution of decisions both link to higher returns.
Source: mckinsey.com
