Decisions Matter — 3 Decision ModelsMar 09, 2023
Ultimately, the evaluation of any leader will be based on the manner in which they make decisions. When future generations look back at business wins and losses, they will study how a leader got to the decisions they made, how they processed information, and whether or not the decision yielded the right results. In varied environments, the decisions a person makes will produce different results.
Ron Johnson had some incredible successes at both Target and Apple. His decision-making at those companies seemed very solid, even producing consistent growth in both organizations. When he went to J.C. Penney in 2011, however, those very models of making decisions produced the spectacular failure of a retail brand. In under 2 years, Johnson’s decision-making reduced Market Capitalization by more than 90% for the retail brand. But what was it that made it so bad? Ultimately, it was Johnson’s unwillingness to include his team in making critical decisions, creating a group-think environment where the concerns of others were not accounted for. This is the reason models of decision-making are so critical. The three models that are important to focus on are:
- Rational Decision-Making: This model focuses on the story our research and data tell us. When a new product or a new direction is about to be launched, the research would have to support the direction the organization is about to take. First, what are the markers that make us believe a change is necessary? Second, what do the trends in data tell us? What is the direction our customers want us to go? Is that the majority or just a loud minority? What are the possible solutions that would best satisfy the needs of those we serve? What will the metrics be for tracking the effectiveness of our decisions? What time intervals will we track? The decisions we make using this model are not tied to a person’s ego, gut feeling, or intuition. They are tied to measurable data.
- Incremental Decision-Making: In this model, we do not implement sweeping change. Think of this as putting a toe in the water to check the temperature. We would still do the same research as in the rational model, but we would outline small changes we can make, then measure, then adjust. We would do this over and over in very small steps until we clearly understand what is producing the results we want. Once we had certainty about our direction, we would take bigger steps toward our goal.
- Experiential Decision-Making: This is a progressive learning model and is what is often relied on when a new leader is recruited. Based on this model, a review of the effectiveness of the decisions would be reviewed from the person’s past. We would lend greater authority to the person based on the consistency of positive outcomes. This was what was used for making the decision to hire Johnson to J.C. Penney. The fundamental flaw in this model is that there must be an “apples-to-apples” comparison of a company in the exact industry as the one a person is coming from. Going from Dillard’s to J.C. Penney would be a good comparison. Going from Apple to J.C. Penney would not. Apple’s customer base and decision models differed from those at J.C. Penney.
In the end, the choices we make will end up making us. We will be known for how we make decisions and the outcomes produced by those decisions. This should be a basic principle taught to kids by age 10. After all, we are making decisions at every age that will directly impact the life we get to live moving forward. Imagine how different the world would be if we learned to think critically through the choice we were making before we made those choices.
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