By Dr. Jim McGrath

In the 1970s the American business leader and author of the international bestseller Up the Organisation said that a good manager got 1/3 of their decisions right, 1/3 wrong and the remaining 1/3 would have turned out the same whatever they decided.

Compared to the 1960s/70s we live in an information golden age. Yet the quality of decision making has not noticeably improved in the last fifty years. There appears to be three reasons for this lack of progress.

Firstly, and most obviously, decisions are about the future and the future is unknowable. Therefore, wrong decisions will always be made.

Secondly, managers are obsessed with scientific management. They take comfort in the certainty of facts, statistics, mathematical models, and accounting data. . They are not interested in soft qualitative data which is concerned with people’s feelings, attitudes and beliefs. Failure to take such data into account can be disastrous as Robert McNamara the US Secretary of Defence during the Viet Nam War discovered. Trying to understand why America lost the war he developed what has become known as the McNamara Fallacy. His model describes the decision making approach of the American military and politicians during the war and shows that:

  • Decisions were based upon what could be easily measured, such as Viet Cong casualties and the number of bombing raids.
  • Data that could not be measured or was difficult to measure was ignored.
  • Decision makers believed that what couldn’t be measured was of little importance. Therefore, the Viet Cong’s, high moral, desire to be free of outside influences, and the level of popular support they enjoyed was meaningless.
  • The assumption that what couldn’t be measured didn’t exist and therefore had no effect on the wars progress.

The implications for managers are obvious. When making decisions, managers must take into account factors that are difficult, or seemingly impossible, to express in financial terms such as staff morale, staff expertise, the quality of relationships with customers and suppliers and between staff and management and management effectiveness and the likely impact of their decisions on such relationships. Your organisation needs to collect and use such information. There are plenty of excellent qualitative researchers around, some may be hiding in your organisation, they can collect and analyse such data for you. Use them and your decision making will improve.

Thirdly, don’t be afraid to use the tacit knowledge you have accumulated over your career to inform your decision making. Tacit knowledge resides in your sub-conscious and informs just about everything you do. For example, you’ve probably been in a meeting when a great idea has been proposed by your boss or the latest genius to join the organisation. You immediately know that it will fail but you can’t verbalise why it will be a disaster. That’s the sum total of your professional knowledge and experience of the organisation talking and it’s usually right.

Bud Hadfield founder of Kwik Kopy in the United States and a successful writer on management recognised the value of such information but called it by its old name when he argued that: ‘When it’s time to make a decision about a person or a problem … trust your intuition (gut) and act.’

To increase your store of tacit knowledge and improve your ‘gut instincts’ get out of the office more and talk to people. Talk to everyone from the office cleaner to board members and everyone in between and find out what’s really going on.

Use meetings with staff, colleagues, suppliers and customers and the general chats and banter that occurs before and after these meetings, as an opportunity to add to your store of information. But, don’t just listen to what’s said. Clock people’s attitudes, beliefs, motives, reactions, opinions and relationships. Who is talking to who? Who’s at war with a colleague? Where does power and influence reside in the meeting?

The information you gather will compost down in your subconscious and form linkages and connections in your brain which will enrich your tacit knowledge and conscious thinking. When confronted with a problem or a decision this knowledge will inform your thinking and very often provide you with an answer. But you need to be brave enough to accept the answer and rely on your ‘gut instinct’.

Finally, a word on hard data. Of course it’s important and must be used in decision making. However, never accept financial or statistical data without understanding how it was calculated. Ask your accountant, or other expert, to explain how they arrived at the figures. Accountancy isn’t a natural science like physics. At best it’s a social science. It involves choices, opinions, professional judgements and tacit knowledge. And I should know I was an accountant for 25 years.

Dr Jim McGrath has published eight non-fiction books. His latest The Little Book of Big Management Wisdom was published in November by Pearson, priced £10.99. https://www.amazon.co.uk/Little-Book-Big-Management-Wisdom/dp/1292148438

His second Novel, A Death in Spring: 1968 was published on 1/12/2016. Jim blogs at https://www.goodreads.com/author/show/491372.Jim_McGrath


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