Checkmate: how bad decisions can cost an organisation

Why do public sector managers invariably fail at effective decision-making? It's through no fault of their own and until the system changes costly mistakes will continue to be made
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Your move; but how do managers know if they are making the right decision?

A government department has a large programme of work ready to move from its feasibility stage to implementation. The programme will save the department £10m as well as massively improve customer service. However, it needs £300,000 spent upfront to kick things off.

Decision? Cancel the programme – there is a freeze on any external support.

Another government department needs to send staff on an overseas training course so they can learn key skills for their job. The overseas trip means spending £10,000 now, the alternative is to pay for external support over the life of the project at a cost of £100,000.

Decision? Spend £100,000 – we can't be seen to be sending people overseas in this period of austerity.

The above examples have highlighted a real problem in the public sector. That too often decision-making is lacking in any common sense when considering the overall net impact and bigger picture, even if the individual drivers at the time are valid. Decision-making is also often poor, slow, and too political.

Where has it all gone wrong?

"The problem", says Mark Warren of consulting firm Moorhouse, "Is that today's public sector has become so complex and political that leaders become almost 'paralysed' when asked to make a decision. They try and take into account too many influencing factors – the political agenda, the position of senior bosses, what the media might say - and are terrified of making a mistake. They then either procrastinate and do nothing, or go for the 'correct' thing to do depending on who has the highest influence – even if that decision seems like craziness to everyone else."

A challenge, or in some cases direct interference, from leaders at the top has made decision making particularly difficult in the NHS. Decisions at a primary care trust (PCT) level are being modified because of a strategic health authority's position on a local issue – even if it doesn't make sense for the customer.

Richard Marsden, a partner with The Berkeley Partnership says: "We've seen good decisions watered down or completely upturned at the insistence of senior bodies – only to be reversed back to the original, locally led proposal later on. It's a huge waste of time and money."

Bad decision-making isn't just the fault of politics or interfering seniors though. There are many psychological traps in decision-making that leaders should be aware of, as outlined in the classic Harvard Business Review article 'The Hidden Traps in Decision-Making'.

There is the 'sunk cost trap'– where a deep-seated bias sees us make a choice to justify a past decision, the 'confirming evidence trap' – which has decision-makers ignore evidence which contradicts their instinct on a decision, and the 'status-quo trap' – in which leaders make decisions that perpetuate the status quo - to name but a few.

With all this to contend with, it is little wonder that good decision-making is so rare and a radical change in approach is required.

"People need to think about decision-making as a specific skill set," says Warren. "Strategic decisions that have a high impact need to be treated like a major project, and given all the resource, data, time, and discipline that you would normally dedicate to an important initiative."

This approach, plus the addition of some strong analytical players and others who are independent and specifically tasked with playing 'devil's advocate', can help leaders who are otherwise apt to procrastinate.

Basic rules of decision-making

The basic rules of decision-making are worth bearing in mind. Allan Wood, chairman of Harmoni, one of the leaders in providing primary care services, has this piece of advice: "Understand the psychological traps you can fall into with decision-making so you can do your best to avoid them. Then put some time aside to build an understanding of the context, using the data and facts that outline the issue, and involving the right people to discuss the critical factors.

He suggests using a balanced scorecard to decide on choices. "Finally, factor in some common sense. For example, a decision may be 'politically correct' and please a boss far away, but if it damages an entire department's motivation, your second choice may be better."

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