Management decisions are decisions that pertain to the direction and control of a company or organization. These decisions may cover a wide range of areas, including strategy, implementation, stakeholder management, team management, operations, sales, and problem-solving. Management decisions are an important part of ensuring that an organization runs smoothly and effectively.
Big Decision Upfront
The formation of big plans that require many resources and significant time to implement. For example, a management team that spends six months developing requirements for a large information technology project.
Last Responsible Moment
Last responsible moment is the practice of doing things incrementally to maximize adaptability. This calls for decisions to be delayed until they truly need to be made. For example, a startup that implements 1600 changes to a product in a month in tight cycles of testing and learning.
Preserving ambiguity is the practice of avoiding early assumptions that irrationally constrain a decision. For example, a fast growing company that needs office space that avoids the early assumption that this needs to be a single physical location owned by the firm.
The function of leadership is to unify the efforts of a group. A basic requirement for doing this is to have some vision of the future such that all decisions are aligned to long term goals. For example, a CEO of an ecommerce company who sees delivery partners as hopelessly inefficient such that they have a vision of competing with them directly in the near future. This may influence a broad range of decisions such as contract terms with the delivery partners.
Decision analysis is the end-to-end process of collecting information and modeling a decision. For example, a product manager who develops a competitive analysis for 6 competing products before deciding on a product development strategy.
Analysis Paralysis is a type of overthinking whereby management devote too much time and resources to a decision without improving the quality of that decision much. For example, a manager who spends 6 weeks thinking about which candidate to hire such that the best candidates take other jobs due to this delay.
Bikeshedding is a tendency for management to focus on easy decisions as a means to avoid difficult decisions. This is based on a story about the management of a nuclear power facility that faces safety and compliance issues that spends most of their meetings discussing the construction of an employee bicycle parking area.
Motivated reasoning is the process of looking for logical arguments to support what you want to do. This can be contrasted with the use of logic to find the optimal decision. For example, a manager who comes up with logical arguments to discontinue a relationship with a partner they dislike as opposed to developing an objective analysis to arrive at a decision.
Avoiding options that involve uncertainty. For example, a firm with an old business model that creates significant pollution that avoids investment in new business models that are destined to replace them because they are unfamiliar with these areas.
Faulty logic that involves unexplained leaps that resemble belief in magic. For example, a manager who believes a firm should adopt a trendy new technology who claims it will produce spectacular results for the firm without being able to formulate exactly how.
Decision fatigue is the tendency for decision quality to decrease when you are overworked with decisions. For example, a manager at a hotel who deals with complaints all day such that their judgement declines with each stressful interaction.
The Abilene paradox is the tendency for groups to make decisions that each member of the group views as irrational. For example, 50 managers who arrive at an IT strategy that they all view as low quality as it reflects political compromises as opposed to being a product of rational thought.
Groupthink is an ideological environment whereby group members can’t express their true ideas due to social pressure to conform to the ideology. For example, a firm that views environmentalism as bad such that any suggestions that sound environmental are likely to result in admonishment and sidelining.
Cold logic is a decision or strategy that fails to consider human realities. For example, a manager who doesn’t allow an employee who has a sick child to work from home based on the logic that all employees should be treated the same regardless of their needs. This would be likely to backfire as the employee may end up remarkably disgruntled.
The maximax criterion is the choice that maximizes potential gains irrespective of risk. For example, a manager who wants to cut the quality of their bicycle helmet products in order to maximize margins irrespective of compliance, legal and reputational risk or ethical standards.
The minimax criterion is the choice that reduces some specific risk at any cost. For example, an airline operations manager who will never compromise safety to improve cost or revenue.
Decisions motivated by a desire to dominate and humiliate others. This doesn’t typically align to the goals of an organization. For example, a customer service manager at an airline who gives customers a hard time to enjoy a sense of personal power.
Managers commonly seek to copy dominant competitors due to a fear of missing out. This typically makes a firm less competitive than the dominant firm as they follow as opposed to leading. For example, a technology company that changes their strategy every time a competitor does something or says they will do something. The dominant firm can use this situation to announce vaporware that sends such competition down a rabbit hole.
Anchoring is when you place too much weight on a single fact in a decision. For example, a manger who will hire anyone from an Ivy League school whatever their other characteristics may be.
Managers who avoid decisions or take too much time with them such that the status quo continues or decisions are reached by default. For example, a manager who takes years to decide how to address a high risk legacy system until finally the system collapses causing vast business impacts.
Do Nothing Strategy
The decision to do nothing is very different from a nondecision. In fact, doing nothing is often a firm’s best strategy. For example, a manager who decides to do nothing about a competitor’s new strategy because they feel it is flawed such that it doesn’t require a response.