Decision Speed, Performance and the CIO

Last week I wrote about “Turbulence, IT & The New CIO” and discussed the need to embrace agility and speed in order to address the turbulence that we see in business today.  In order to be agile, I mentioned the OODA (Observe, Orient, Decide, Act) model for use in helping keep agility at the front of your mind while planning and doing.

After writing last week’s post, I ran across an article by Kathleen Eisenhardt from titled “Making Fast Strategic Decisions in High-Velocity Environments“.  In this article, the author reports on a study that was conducted to compare the speed of the decision making process and the performance of those decisions at eight microcomputer organizations.

At the time of the article’s publication (1989), popular belief (and much research) stated the following:

• Leaders & organizations should be autocratic
• Decision making should be centralized for speed and control
• When planning, an organization should look at future projections, not operational data
• Careful analysis of the ‘best’ option should be performed
• Fast analysis means less data

Sound familiar to anyone?  I still see a lot of organizations and leaders following this approach today, especially in the IT space.

Eisenhardt’s research showed something interesting.  She was able to show that those organizations that made quick decisions were more apt to use more information and look at more options than those that made slow decisions.  The data also showed that centralized decision making isn’t the fastest route to a decision; organizations that shared data with a larger audience and welcomed feedback were more apt to perform better in the long run.

I won’t go into the full outcome of the research, but I wanted to highlight a few of the key propositions from the paper:

• The decision making process speeds up when you make use of real-time data
• The decision making process speeds up when you increased the # of alternatives considered simultaneously
• The more integrated your decision making process is, the faster it can go
• In “high-velocity environments”, the faster the decision making process goes, the greater the performance.
• Politics slows decision making and degrades performance.

So…what does this have to do with IT?

Everything.  To compete in the turbulent world today, we’ve got to be agile in our thinking and execution.  This research helps highlight that fact.

Organization’s, and especially organizations that use technology, are high-velocity environments.   We are doing more with less and have to do it faster than before.

The faster we can make decisions with more accurate data (real-time) and the more options we review, the better that decision outcome will be in the long run.  Will every decision be correct? No…but it will be a decision that moves you a little further.

If you take the OODA approach discussed last week, you’ll be making decisions, acting on those decisions and immediately looping back to review the post-decision environment and determining what needs to be tweaked in your strategy for the to reflect the ‘new’ environment and to prepare future.

Integrated Decision Making

One of the outcomes of the research showed that decision making processes worked better when they were integrated with each other.   Eisenhardt reports that in those organizations that had strategic planning integrated integrated with tactics (see my thoughts on this topic in Minding the gap between Strategy and Tactics), performance improved.  In addition, those leaders who brought together people from different parts of the organization during the decision making process performed better.

Surprised?  This is why it’s such a huge issue for The New CIO to be engaged and involved with the organizational strategic planning process and be tied in with other groups and teams’ decision making.    Eisenhardt reports that making decisions with as many options as possible using as much real-time operational information as possible is the key to performance…CIO’s should take this and run with it.

The New CIO needs to take research like this to heart.  Use all the data you can, include your team and others from the organization in your decision making process.  In addition, as CIO you need to push for inclusion in other teams’ decision making process.Ensuring integrated decision making with the proper people & data, you’ll be able to mind the strategy/tactic gap and act in an agile manner.

References

• Eisenhardt, K. (1989). Making Fast Strategic Decisions in High-Velocity Environments. The Academy of Management Journal, 32(3), 543-576.

The New CIO is a weekly article about the challenges facing today’s CIO as well as what can be done to prepare for future challenges. Join me next week for another article in the series.