Decision Making at Digital Speed

In an era in which companies can forfeit $1 million each day they delay a product launch-and being second can mean failure-pharma executives are under pressure to make risk and opportunity decisions in less time than ever.

The Web site of a leading biotech says it best: "We compete against time, past performance, and industry rivals to rapidly achieve high-quality results. Our teams work quickly to move scientific breakthroughs from the lab through the clinic to the marketplace."

How are managers and workers coping with the need for greater speed in decision making? And how are companies balancing the need for speed with the concomitant need for quality?

The Business Research Group of Kepner-Tregoe surveyed 818 US managers and workers in a wide range of industries, including pharmaceuticals, and asked them to describe how decision making has changed for their organization:

• Are they making more decisions in less time?

• Has time pressure eroded the quality of decisions?

• In what areas has quality suffered most?

• What are the barriers to speedy, high-quality decision making?

• How has technology affected the quantity and quality of the information on which they base their decisions?

Finding the Answers

The first phase of the study yielded interesting results, including

• The majority of respondents said they are making an increasing number of decisions in the same or less time. (See "More Decisions, Less Time," page 64.) Yet they also claimed that they-and their organizations-miss opportunities because they don't make decisions quickly enough.

• Respondents reported that when speed takes precedence, decision making quality can suffer. (See "Decision Delay," page 66.)

• When asked, "Are you faster than competitors?" only one-quarter of workers and fewer than one-third of managers said they are moving faster than the competition.

The survey responses highlight the key challenges companies now face. But to isolate solutions to those challenges, Kepner-Tregoe identified and examined a group of 12 "decision leaders." The list, selected from the ranks of the world's most profitable and/or most admired companies, included AES, Citigroup, Corning, Home Depot, Johnson & Johnson, and Oracle.

To learn how they cope with the need for speed, researchers conducted in-depth interviews with senior executives from each company, isolating seven drivers for decision making success common to them all.

Decision making can be a difficult and time consuming process, especially when it occurs in a vacuum. Vision helps define the playing field. When everyone in a company is clear about the products and services it offers, the customers it serves, and the relationships it seeks to build, there is no need to continually revisit that edgy question "Why?"

Driven by Vision

Because the boundaries around what is required, what is permissible, and what is not are clearly demarcated in companies with clear vision, decisions are made with the speed of a reflex action.

Johnson & Johnson is well known for the credo that has been at the core of its decision making since chairman Robert Wood Johnson created it in 1943. The credo puts customers first, followed by employees, the community, and last, stockholders. Johnson & Johnson's top management team immediately rejects any proposals that are incompatible with the credo's ethical demands. The world saw the practical effect of that credo during the Tylenol tampering situation, when J&J was able to mobilize and execute a quick response in the midst of a major crisis.

In 1996, senior managers attended the first in a series of conferences, where they met with J&J's executive management team to discuss the credo and to develop related standards of leadership on which their performance is now judged. Since then, the company has been committed to involving more employees, at every level of the organization, in executive conferences and other credo-focused seminars. The objective is to give them greater understanding of the company's guiding principles, so that when they make decisions, their goals and the credo are in sync.

In an ideal world, decision makers would never have to sacrifice quality to gain speed. But in reality, they must often make trade-offs. Sometimes compromises have few or no negative consequences. At other times, they can lead to disaster. When is it safe to hedge on quality in favor of speed?

Prioritizing Ruthlessly

Leaders faced with that question fall back on an axiom they know to be true: not all decisions are created equal. Some leave no room for failure; others are less than perfect. To determine which decisions fall into each category, decision leaders invest a substantial amount of time in setting priorities and adhere to them ruthlessly.

Nothing cures the paralysis that results from initiative overload faster than a clear strategy. Take the current blur of merger and acquisition activity. As Roy Davis, vice-president of business development and strategy for J&J's Ortho Clinical Diagnostics, points out, "An acquiring company should have a clearly articulated business strategy that allows it to quickly screen possible candidates. A major value of strategy must always be to determine what not to do as well as what to energetically pursue."

Eberhard Weiss, team services manager for Robert Bosch Australia, a global automotive components maker, explains his company's strategy: "Because we're working at an extremely fast pace, we break decisions down in terms of their importance, identifying A, B, and C category decisions. The As are decisions related to our strategic direction for the future: where we want to go and how we want to get there. For those, we take complete days off. We leave the premises, take a terrific facilitator, and spend as much time as we need. We discuss the issues forward and backward until we all agree on the direction we must move. We refuse to be pressured by outside forces. " Investing that time up front frequently saves time later, explains Weiss. "We are often able to accelerate decisions later on because, having gone through this exercise, we know they are in line with our broader policy."

Culture is the somewhat elusive pattern of norms, values, beliefs, and attitudes that influence individual and group behavior within an organization. Originating with the founders, culture is shaped and honed over time by succeeding senior executives and other stakeholders. Culture filters down through the organization and is further refined and modified in the day-to-day priorities and actions of everyone in the business.

The Right Culture

The key question is: What attributes within a company's culture best support speedy decision making? The study isolated three such attributes among the decision leader companies.

Speed as a corporate virtue. While the pundits preached the gospel of speed, decision leaders took action. They looked carefully at their company's structure, systems, processes, and people to identify and remove barriers to rapid decision making.

Organizational structure is one of the main culprits. More than 40 percent of both workers and managers who participated in the survey cited the need for multiple approvals as the most frequently encountered barrier to speedy decisions.

Decision leaders have learned that sacred cows must be kicked. Corning, for example, highly values quality and process. Its formal authorization procedure requires no fewer than ten levels of approval. But even Corning is now experiencing what its vice-president and general manager of telecommunications Alan Eudsen refers to as "the need for stunning speed and for fast, effective decision making" on a daily basis. In response, says Eudsen, those ten levels are no longer sacrosanct: "On the rare occasions when we need to, we cut the process down to three steps. We'll say, 'These three people are the key decision makers, so we'll get their authorization and keep the others informed.'"

A passion for information sharing. If information is the foundation of the digital age, then a willingness to share it is paramount to decision making. Acting on the premise that a great volume of relevant information leads to fast, high-quality decisions, leaders in the field share as much operational information as possible with their people. For the same reason, those companies also take special care to share and explain their corporate strategy.

AES is a fast-growing, Arlington, Virginia based energy company with a unique approach to information sharing. Lacking a hierarchy, it has literally no restrictions. Imagine a continuous loop that goes from an individual decision maker anywhere in the company directly to every other person-all 54,000 of them-including CEO Dennis Bakke. As individual decision makers begin to gather information, they ask one initial question: Who in the company has the information I need? Once they locate that information, they tap into it through e-mail, voicemail, telephone, and face-to-face meetings, exploiting all avenues in a just-in-time model for decision making.

A willingness to take risks. Delegating decision making requires a leap of faith and can disappoint even the most ardent delegator. For companies unwilling to take that leap, decision making remains the province of a select few. Decision leaders, on the other hand, recognize that the complexity of today's business environment and the speed at which results must be achieved demand that more people assume decision making responsibilities.

When Merck began to understand the potential for Vioxx (rofecoxib), it shared the risk of making a big decision with managers from the lab to the executive suite. CEO Raymond V. Gilmartin brought in marketers earlier in the process than usual to form teams with manufacturing and research staff. By planning ahead, Merck was able to carve four to five weeks off the normal product launch process. Even though it launched after Celebrex (celecoxib), with firm support from top to bottom, Merck's Vioxx made significant market gains.

There is an inherent risk in sharing decision making: too many bad decisions can sandbag a company. But leaders are willing to risk a certain amount of failure if the company and the decision maker can learn from it and move forward. (See "Decision Consequences.")

To determine who should make decisions, leaders ask two questions. The first is: Who has the most relevant information about the customer or market?

Who is Responsible?

J&J has long been decentralized. Managers of its 190 business units around the globe make critical decisions each day. Leaders encourage decision making at the lowest level possible, using the company's credo and standards of leadership as guideposts.

Michael Carey, vice-president of human resources, says, "They act in the best interest of the company and strive to best serve their customers. Not all decisions are an easy choice between yes and no. Many fall into a gray area, and decision makers need a support system to arrive at their final decision."

That support is provided by a network of individuals on whom J&J leaders can test tough decisions before implementing them. The company's culture encourages a free exchange between business leaders and expert staff in the legal, public relations, human resources, and finance departments.

To determine the level at which a decision should be made, decision leaders pose a second question: Who will be responsible for implementation? That point of interface between making a decision and acting on it is where speed and effectiveness count most. Redefining decision ownership is not merely a matter of passing the baton to a wider number of people. It also requires a supportive environment in which decision making plays out through clearly defined roles and responsibilities, skills, tools, and rewards accompanying each job. The concept is not new, but decision leaders actually put it into practice.

Technology matters. Without question, it can speed up decision making in many ways, from providing instant access to vital information to improving communication among team members in different countries and time zones. The study's decision leaders have used technology to compress decision making time in several areas.

Humanized Networks

For its customers and service reps worldwide, Oracle created an enormous data warehouse of solutions for past customer-service problems. In its attempt to achieve Six Sigma quality-a standard for a minimum number of defects to which manufacturers worldwide aspire-Honeywell established a company-wide database to store all production statistics. And within Corning's Optical Fibergroup, the competitive analysis team's constant mining of Internet data keeps management informed as it sets future strategic direction.

Regardless of technology's importance in the age of speed, people matter more. Decision leaders are keenly aware of the need to maintain a healthy equilibrium between "high tech and high touch." They make wide but judicious use of digital avenues of communication while recognizing that such avenues will never replace human interaction.

The company's sheer geographic expanse makes it imperative for Novell's vice-president of education Debbie Maucieri to rely on technology to communicate with colleagues and customers worldwide. But technology without the human element can create a dangerous vacuum, so Maucieri personally visits each of Novell's overseas operations at least once a year. She says, "You have to go from customer to customer to listen to and understand their challenges to be able to make decisions. You can't understand all the variables and empathize by sitting in an office thousands of miles away from the action."

The word "process" has many meanings and usages. Referring to the physical world, people speak of an engineering process or a manufacturing process. In the mental realm, process refers to the series of steps individuals go through to organize and analyze information and make judgments about it.

The Need for Process

Having a mutually agreed-upon process enables all those involved in a decision, regardless of background or function, to work collaboratively toward a common goal. To ensure that decisions are made with maximum speed and quality, decision leaders pay careful attention to process in both its physical and mental meanings.

First, standard processes help keep decision makers on track. Eberhard Weiss of Robert Bosch Australia says that in his company, "every team follows the same process, every time, so it is second nature to us. All our procedures are linked to QS9000 quality standards, so we have clearly identified steps. There is never any doubt about where we are in the process, what decisions we have to make before moving to the next step, or what information we need."

The importance to pharmaceuticals-in which every significant decision is linked to another-is obvious. From early investigations through trials and approvals, to production and marketing, each decision depends upon a clear understanding of the past, present, and potential future. Diverse interested parties, including senior scientists, commercial leaders, operations specialists, and quality technicians must be able to bring their disciplines into sync for a successful launch. An undisciplined decision process introduces errors and delays that can spell doom for a new product.

Common mental processes also speed up decisions. Corning, for instance, has spent a good deal of time and effort developing its employees' critical-thinking skills. It expects them to use a systematic approach when making decisions or recommendations. There is no question, says executive vice-president Peter Volanakis, that has enabled employees to speed up decision making considerably. "If you just stop to clarify your objectives and get group agreement on their relative importance," he says, "you spend five minutes to save five hours."

Those who ignore the past are condemned to repeat its errors, yet many companies have yet to take that dictum to heart. When asked, "Has your organization installed a database that includes information about how decisions were made in the past?," 92 percent of managers and 90 percent of workers either said "no" or couldn't answer the question. Clearly, many organizations spend time, money, and effort reinventing the wheel-a symptom of corporate amnesia.

Banking on Memory

One characteristic that sets decision leaders apart is their commitment to retaining information about past decisions so it can be applied to current ones. Another purpose of J&J's executive conferences is for leaders to share their experiences-both successes and failures-to help future leaders learn from them. Although the "leaders teaching leaders" methodology demands committee members and senior management make a significant time commitment, it has been an extraordinarily effective process.

One hallmark of successful companies is their ability to use technology to make effective decisions. But as important as technology is, it does not ultimately determine success. People do. In many cases, the age-old barriers to effective decision making-organizational politics, the need for multiple approvals, lack of agreement on objectives, and changing priorities-remain unchanged.

Successful decision leaders refuse to accept technology as a panacea for speed. Instead, they have a true understanding of the risks, barriers, and rewards inherent in decision making, and they work to balance speed and quality. Their goal is an integrated approach that combines the best of technology with the power of the human intellect, so the company's decision processes keep pace with industry's demands. z