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1、Critical Decision-Making in an Uncertain WorldSPECIAL REPORT2SECTION 2.Situational decision-making:Flexing style to make better choices12ContentsConclusion213ForewordSECTION 1.State of play:Making critical decisions in the age of uncertainty5SECTION 3.The opportunities and pitfalls of data rationali

2、sm173Foreword Critical decision-making can make or break a company.Making high-quality,timely decisions about the questions that have a strategic impactwhether to acquire a company,to enter a new market,or to transform the operating modelaffects both short-term financial performance and long-term va

3、lue.One school of thought says that,while CEOs and senior executives have multiple responsibilities,their core responsibility is making good decisionsparticularly the ones that have significant consequences for their people and for their organizations financial health.In fact,over the past five year

4、s executives have noticed that high-risk decisions are landing on their desks more frequently than before.Executives accept responsibility for making critical decisions,but this research shows that they find it difficult to make good choices.While there are pockets of success,we found that businesse

5、s have a less than 50%success rate when it comes to their toughest decisionsfrom major technology choices to supply chain reorganizations.Also,48%of C-level respondents admit their organization has made a short-term decision that has had negative long-term consequences over the past 24 months.L.E.K.

6、strongly believes that CEOs and senior executives can get better at critical decisions.So,we designed this research,which surveys 400 senior executives in five countries,to diagnose where decision-making is going wrong and learn how to improve it.The research shows that one way to improve decision q

7、uality is to customize decision-making approaches for each situation.And it tells us where a certain approachsuch as focusing on data analytics or using a less consensus-driven,more directive decision-making stylemight give companies the bestoutcome.To help executives navigate decision-making,this r

8、eport looks at where companies are struggling today;how to get the best outcomes;and success factors including high-quality debate within executive teams and advanced data analytics.We hope this report provides you with insights that help to shape how you and your teams think about decision-making.C

9、lay Heskett,Managing Partner,L.E.K.Consulting L.E.K.CONSULTING4About the researchThe study is based on a survey of 400 executives in countries across North America,Europe,and Oceania(with a focus on Australia).There are representatives from 12 industries,including aerospace,energy,healthcare and lif

10、e sciences,industrials,hospitality,retail and consumer products,and transportation.Their organizations all have annual revenues above$500 million.A significant proportion are senior leaders:26%are board members or members of the C-suite,47%are either at VP level or head of department,and 28%are at d

11、irector level.As well as the survey research,we conducted one-on-one interviews with a number of senior executives and experts,and insights from these are featured in this report.Our thanks go to everyone who contributed.L.E.K.CONSULTING5SECTION 1.State of play:Making critical decisions in the age o

12、f uncertaintyTrends that range from generative AI to sustainability are having a profound effect on the economy and individual industries.And they are significantly increasing the number of major decisions executives need to make about their operating models,business strategy,and customer experience

13、.Whether it is reacting to industry disruptions caused by new market entrants or recalibrating supply chain networks to avoid supply outages,todays decision-makers are also under pressure to get more tough judgment calls right.Value is at risk when leaders struggle with critical decisionsBut the rea

14、lity is that many businesses struggle with critical decisions.In our research,42%of respondents say their organization is below average when it comes to making decisions that will drastically transform their business models.On average,they are less proficient at these critical,higher-risk decisions

15、than at decisions which are medium-or low-risk.In other words,people are struggling with those calls that will have the most significant consequences if they gowrong.On average,over the past three years,executives said they had had a less than 50%success rate with tough critical decisions,the toughe

16、st being business operations decisions,such as supply chain reorganizations;market plays,such as geographic-market entries;L.E.K.CONSULTING6Organizations face critical decisions every few years that can shape their path and success for the next decade.Some can even change the course of history.In 30

17、 years time,business leaders will be able to look back and see five or six decisions that left an indelible imprint on their company.These choices will explain reasons for financial success,show how catastrophe was averted,or how their organization responded under extremepressure.”Jonathan Neale,COO

18、,McLaren Technology Group“L.E.K.CONSULTING7and major technology investment choices.Respondents in C-suite positions felt more strongly than the overall base about the complexity of business operations decisions,with 70%ranking these operational choices as the most challenging criticaldecisions.The e

19、xecutives in our research say that the burden of constantly making many lower-risk,everyday decisions reduces their capacity to give critical decisions the required attention:54%say they personally spend too much time on tactical,day-to-day decision-making to devote enough time to critical decisions

20、.At the same time,it appears executives are expected to squeeze more critical decisions into their workload.When we asked them how decision-making had changed over the past five years,the standout response(chosen by 50%)was the increased frequency of critical decisions.The lack of time to focus on i

21、ncreasingly prevalent critical decisions could explain why many executives are struggling to make good high-risk decisions and provokes a question:Could more junior colleagues be making the lower-risk decisions?It is not just a case of passing on responsibility:leaders have to ensure that colleagues

22、 make good choices themselves.That means not only empowering them with enough authority,but also arming them with the skills and tools they need to make effective decisions.Why are critical decisions so hard to getright?We have already noted that a lack of time to devote to critical decisions is one

23、 of the challenges facing executives.They also say that macroeconomic uncertainty and process bottlenecks are significant barriers tosuccess.If we take macroeconomic uncertainty first,65%of respondents say that todays challenging and uncertain macroeconomic environment has made effective critical de

24、cision-making moredifficult.“The last few years have really been driven by volatility and uncertainty,”says L.E.K.CONSULTING8Christian Most,Senior Director,Digital Operations Optimization Lufthansa.“The most certain information we have from a data perspective is the bookings for the next 12 months,a

25、nd everything beyond that is guesswork.In these situations,the only thing we can do is take social,economic,and other KPIs to compile future projections,decide which scenario is the most probable,then orient everything around this approach.”He notes that pairing this approach with the right strategi

26、c guidelines will help ensure businesses make the wisest decisionspossible.Asked about the decision-making process,42%of executives surveyed say that the issue of cumbersome decision-approval processes is their toughest challenge.Proliferation of documentation,concerns over regulatory compliance fac

27、tors,and the time needed to consult all perceived stakeholders can all make approval a major stumblingblock.However,while approval is a challenge,our respondents do feel positive about stakeholder alignment and bringing in new perspectives:66%are confident in their approach to securing alignment for

28、 a decision from stakeholders ranging from internal executives to external investors.That is crucial:ensuring that all the right stakeholders are aligned on the strategy and goals of a decision is a vital successfactor.“You have to build cohesion straight from the start,”says Paul Walsh,Executive Ch

29、airman,McLaren Group.“The biggest decision you make in business is the people you put around you.If you dont have the right people,all subsequent decisions risk beingflawed.”At the same time,61%say they are effective at ensuring new voices can provide fresh perspectives.This could reflect the moveme

30、nt made by companies toward considering the impact of long-term strategic decisions on multiple stakeholdersshareholders,customers,andemployees.Different situations also benefit from different decision-makingstylesTo understand how companies can improve critical decision-making,we asked the responde

31、nts to identify which of the four following decision-making styles is most characteristic of theirorganizations.L.E.K.CONSULTING922%say they are data rational:focused on hard evidence,with an emphasis on detailed data analysis and forecasting.37%say their organization tends to be directive:focused o

32、n setting clear,top-down strategic direction.24%say their organization is consensus-led:focused on consensus and the willingness to engage in open and constructive debate.18%say they are agile:focused on adaptability,with the flexibility and willingness to change course in response to changing marke

33、t signals.Which one of the following decision-making styles is most characteristic of your organization?Respondents default approaches to critical decisions Note:Data in this chart totals 101%because of rounding.L.E.K.CONSULTING10The fact that over a third say their organizations dominant decision c

34、haracteristic is directive perhaps indicates that leaders still attribute importance to clear goals and giving their people a clearly structured path forward with high-stakes decisions,particularly given the fluidity and uncertainty of todaysenvironment.Although directive approaches are helpful for

35、giving leaders a degree of control in high-stakes decisions,business leaders should remember that directive decisions may not work for everyone.Critical decisions often take organizations in a new direction,and that may not align with what every stakeholder wantsespecially when a directive approach

36、is used.Naturally,this can trigger talent loss as the business evolves in line with the chosen decision.So,have a contingency plan at the ready for talent attrition just in case,L.E.K.recommends.Even though organizations might have a default decision-making style,the executives in the survey acknowl

37、edge that they need to be aware that other decision-making protocols may be more effective in certain situations.For instance,62%say that when it comes to ethically sensitive decisions,businesses should shift to a more consensus-driven approach and incorporate diverse opinions andperspectives.The ab

38、ility to adapt has its rewards.The executives in the survey who say they are skilled at flexing to the context of each decision rated their organizations as more effective than the total respondent base in a number of areas.They are better at making timely progress and minimizing the cost of indecis

39、ion(74%achieve this17%more than the overall average).The same proportion also excel at managing risks to optimize the output of a decision19%more than the overallaverage.Overall respondentsOrganisations that are good at flexing decision-making styleThose who are effective at making timely progress t

40、o minimize the cost of indecisionThose who are effective at managing risks to optimize the output of a decision74%Respondents effectiveness in organizational decision-making 55%74%57%L.E.K.CONSULTING11Organizations that follow agile decision-making methods demonstrate the most confidence in adapting

41、 their approach to the situations context,with 61%of this group saying they are effective at adjusting their decision-making style to the situation at hand,in comparison with 50%of the overallrespondents.But flexibility is something that many organizations struggle with:50%of the executives in the s

42、urvey say they are not effective at adapting to their surroundings when it comes to critical decisions.Rather than worrying about shapeshifting approaches to every individual decision,these businesses could instead focus on being prepared to use the right framework in the really bigmoments.To unders

43、tand how organizations can improve this capability,our next section takes our four ways of approaching decisionsdirective,consensus-led,data rational,and agileand examines which ones deliver best results in terms of type of decision and stage ofdecision.Our research investigates two contextual facto

44、rs in decision-making:Decision stage:from exploring potential solutions to committing the resources toexecute Decision type:from lower-risk tactical decisions to higher-risk critical decisionsAs part of this,we analyzed the survey data to identify the companies that are effective at decision-making.

45、In other words,those that say their decision-making capability is above average or best-in-class.These are the effective decision-makers(EDMs).Our goal is to understand what practices and tactics these EDMs are using at different stages and with different types of decision.Three findings emerge from

46、 that analysis:1.Data rationalists perform strongly when it comes to high-stakes,transformationaldecisions.2.Clear responsibility and commitment are critical to high-stakes decisions.3.Executives struggle with option selection,but avoiding the consensus trap can help.L.E.K.CONSULTING12SECTION 2.Situ

47、ational decision-making:Flexing style to make betterchoices1.Data rationalists perform strongly when it comes to high-stakes,transformational decisions When it comes to making high-stakes,transformational decisions,EDMs are more likely to be those who favor a data-rational decision style than those

48、who tend to employ a consensus-drivenstyle.Of course,building a successful data-rational decision style requires significant effort,from implementing the right systems and data processes to acquiring the right talent and skills.Organizations will need a culture of data-driven decision-making and a l

49、eadership team who are willing to show that informed,data-driven decision-making is important to the organization.We examine these issues in more depth within the third and final chapter of thisreport.2.Clear responsibility and commitment are critical to high-stakes decisions To understand the skill

50、s that organizations should prioritize when making critical decisions,we searched for correlation between certain decision-making skills and decision-making effectiveness.Those who are very effective at the following decision-making skills also tend to be above average at handling higher-risk,transf

51、ormationaldecisions.OverallDirective approachData-rational approachAgile approachConsensus approachCritical decision-making(transformational)higher risk27%28%31%30%18%L.E.K.CONSULTING13The focus on responsibility suggests that high-performing organizations seek clear commitment to executing decision

52、s once they are made.Interestingly,these organizations also excel at setting objectivessuggesting that they put in place the specific time-bound targets needed to ensure a decision isdelivering.Jonathan Neale,COO,McLaren Technology Group,outlines the importance of having targets that are aligned wit

53、h the overall mission and strategy of the organization and which provide clarity in fast-changing,uncertain environments.“Its easy to sail a ship in calm waters,”he says.“The important thing is to use this time to prepare teams for the storm.A key part of facing difficult,crunch-time decisions is en

54、suring that all decision-makers are laser-focused on the key objectivesthe goals that matter most to yourbusiness.”TOP SKILLS FOR MAKING EFFECTIVE CRITICALDECISIONS1.Clearly defining objectives and ensuring the decision-making process remains aligned with achieving thesegoals2.Ensuring all necessary

55、 data and insight is to hand,so an informed critical decisionismade3.Assigning clear responsibility for carrying out thedecisionL.E.K.CONSULTING14“That sounds really easy but,in reality,we know that meetings can get completely derailed by lack of openness,transparency,death by reporting,and the hunt

56、 for perfection.The question then is:How can organizations best determine what mattersespecially as whats most important changes depending on thecontext?”3.Executives struggle with option selection,but avoiding the consensus trap canhelpOption selection is a particularly challenging stage of decisio

57、n-making.It is a particular trouble spot in both tactical decisions(52%say it is the most difficult stage)and decisions that entail significant transformation and greater risk(42%).The option selection phase is where decision-makers need to reach a verdict on which direction to take.To do this well,

58、proficiency is especially needed in two of the top skills for making effective critical decisions(page 14):objective clarity and data gathering.Companies that are weak at clearly defining objectives and staying aligned with their goals are at risk of seeing mission drift flare up at the option selec

59、tion stage.Without clarity and constant alignment with the companys strategic aims,objectives can fast become a distant memory.As a result,decisions become completely disconnected from target objectives and then struggle to generate the desired outcomes.Similarly,those who fail to ensure all necessa

60、ry data and insight is to hand will struggle to complete the due diligence exercises required to make an informed critical decision.Attempts to reach unanimous decisions can also drain efficiency levels at the option selection stage.When compared to the other decision-making approaches,businesses th

61、at follow a consensus-driven approach are the least likely to be completely effective at the option selection stage.Of those using a consensus-driven approach at the option selection stage,81%admit that their approach has flaws that need improving,Stage 1:Ideation(e.g.,considering the full range of

62、alternative options)Stage 2:Option selection(e.g.,testing proposals through in-depth data analysis)Stage 3:Conversion to action(e.g.,putting the right human and financial resources behind a decision)Tactical decision-making lower riskAdaptive decision-making medium riskTransformational decision-maki

63、ng higher riskWhich process stage is hardest to get right for each decision type?The option-selection stage presents challenges for both tactical and high-stakes decisions22%26%52%31%42%28%22%36%42%L.E.K.CONSULTING15which is 8%higher than other decision-making styles.Just under a third(28%)of this c

64、onsensus group label themselves as completely ineffective at the option selectionstage.Costly delays can take hold when there is an expectation that every stakeholder involved should be completely satisfied with the option selected.Progress can become gridlocked,especially when there is an excessive

65、 number of stakeholders with decision-making influence.This is a difficult balancing act.The right people have to be involved to ensure that bad choices are not fast-tracked through without proper diligence and control,but decision-making should not be paralyzed by too many sign-off layers.For Erica

66、 Mackie,CEO,GRID Alternatives,making sense of this balancing act requires knowing when to flex your approach to securing input from stakeholders.“If we have the time,we try to get some sampling of the individuals who are going to be most impacted by a decision,”she says,“as those closest to the issu

67、e may know the most about what the solution could be.”“If we dont have the time,say in times of crisis,then from the start we are transparent with the board,external constituents and employees,and clearly name the mode of the decision as being fast-paced.So,we will quickly listen to a sampling,and t

68、hen a member of the leadership team will make a rapid decision.Without this transparency,it can feel really discombobulating for stakeholders to see the standard decision-making process change shape.”81%of those using a consensus-driven approach at the option selection stage admit their approach has

69、 flaws that need improving,which is 8%higher than other decision-making stylesL.E.K.CONSULTING16L.E.K.CONSULTING17SECTION 3.The opportunities and pitfalls of data rationalismAs businesses try to make smarter critical decisions,our research indicates that many are focusing on building data-driven int

70、elligence.When we asked them what major changes their companies will make over the next three years to improve their decision-making skills,59%said they would invest in analytics and talent with data science skills,and instill sharper data-governance practices in their workforce.There are a number o

71、f success factors when it comes to building analytics capability and capitalizing on the opportunities of the data rational approach:Advanced models and techniques are key to unlocking value from dataData has clear value for decision-making.When the survey asked respondents to say how decision-makin

72、g had changed over the past five years,43%said a notable difference was that the“increase of data availability has improved our decision-making abilities.”However,investing in the platforms or tools that support data analytics will not on its own deliver the insights needed to make better decisions,

73、serve customers better,or outperform your immediate competition.The quality of data analytics will also depend on the ability of organizations to innovate and use novel data analytics techniques.This,in turn,requires a willingness to experiment L.E.K.CONSULTING18and collaborateworking with external

74、experts to pioneer new approaches to generatinginsight.Leaders need to set an ambitious strategy and vision for data analytics so that organizations avoid incrementalizing improvements and efforts are aligned on driving a bold analytics agenda that seeks to bring novel new techniques to decision-mak

75、ing.Win the war for data talent The past 18 months have seen a surge in interest in how AI can improve decision-making,and 40%of the executives in our research intend to introduce smart decision-making tools such as AI into their workflows over the next 12 months.Because of the potential leaps data

76、analytics and AI can bring to business effectiveness,there is huge global demand for individuals who can support these ambitions,but less supply.Organizations need to ensure that external data hires are not only recruited,but retained,by ensuring that the right development pathways are in place to p

77、rovide a motivating career path.Upskilling of current staff can also build the data bench,with a proactive skills development strategy that anticipates the expertise your people will need tomorrow rather than the skills that could soon beobsolescent.Combine the best of data intelligence and human ex

78、pertise and intuitionGood decision-making draws on both data analytics and the human intuition and experience of senior executives.Data will rarely provide a definitive answer to what the perfect course of action is.Decision-makers need to interpret the data in light of the environmental factors at

79、play,such as the evolution of their markets competitive landscape.Business leaders must,therefore,L.E.K.CONSULTING19Dont instantly assume that the results the analytics tool spits out are always the right answers.Often,you hear people backing up their opinions by saying,Well,the spreadsheet says or

80、The model says X.But to really trust data results,it is important to know how the inputs informed the outputs and then cross-reference these with other sources ofintelligence.Clay Heskett,Managing Partner,L.E.K.Consulting“L.E.K.CONSULTING20confront any issues that affect their decision-making.For in

81、stance,a common issue in organizations that are struggling to make a decision is to keep deferring the final judgment under the guise of needing more data-driven insight.Instead,organizations should balance data analytics with a recognition that experience also matters.Requesting more data will not

82、solve every difficult decision choice,and experience plays a critical role in making the necessary and timely judgment call.Executives need to ensure they have a clear sense of what they need to know from the data to make a call,and then use that experience to make their judgment in line with the ti

83、meframe agreed.Dont let ego or fear of failure get in the way of data-based evidenceOnce an organization has made a decision and puts a plan into action,sometimes the results fail to live up to expectations.And even when data KPIs are sending a strong signal to executives that it is time to change c

84、ourse,they can struggle with a psychological barrier that stops them from taking action.Instead,they often invest more time and capital to try to rescue what has already been sunk into the initiative.Executives in this position need to let go of the emotional attachment to an initiative and think an

85、alytically about the best way forward.To encourage this behavior,companies need to build cultures that allow individuals to innovate,but also to learn and grow when an initiative fails.At the same time,companies need to put in place a disciplined process of progress reviews and KPIs,so there is a cl

86、ear framework for assessing whether a decision is going in the right direction.People hang onto an idea even when its way past its sell-by date.The key is to let go of the emotion and think analytically about the way forward.If a decisions output starts to go awry,it is important to recognize when t

87、o change course.John Hudson,Professor of practice,University of Strathclyde“L.E.K.CONSULTING21ConclusionTrends ranging from generative AI to increasing regulatory scrutiny of sustainability agendas are reshaping our economy and the industries we work in.In this environmentwith leaders facing an incr

88、easing number of decisions,each with its own particular risks and impacts on the organizationthe ability to make critical decisions well,and with confidence,is a lifeline for business survival.Organizations that are good at decision-making will be better placed to respond to changes in their markets

89、 and regulatory environments.They will also be seen as more attractive destinations for talented people,who will want to work in organizations where decisions are not weighed down by excessive bureaucracy.The outcome of a decision is clearly important,but what this research has shown is that how you

90、 make decisions is equally critical.22About L.E.K.ConsultingWere L.E.K.Consulting,a global strategy consultancy working with business leaders to seize competitive advantage and amplify growth.Our insights are catalysts that reshape the trajectory of our clients businesses,uncovering opportunities and empowering them to master their moments of truth.Since 1983,our worldwide practicespanning the Americas,Asia Pacific and Europehas guided leaders across all industries,from global corporations to emerging entrepreneurial businesses and private equity investors.Looking for more?Visit .