Experts recommend the following decision making approaches:

The Balance Sheet Approach

Randy Komisar is Managing Director at venture capital firm Kleiner Perkins Caufield & Byers, where decisions mean either funding the next great company (like Google) or losing millions of dollars.  In an interview with McKinsey, Komisar offers a simple balance sheet technique for making better decisions.

Compile the group of people responsible for deciding whether your organization will pursue an opportunity.  To start the meeting, say “Tell me what’s good about this opportunity.  Tell me what’s bad about it.  Do not tell me your judgment yet.  I don’t want to know.”

In this way, participants can freely explore all angles, offer contrarian views, and uncover the underlying merits of the opportunity.  Often they gain a more fully-informed perspective on the opportunity and sometimes change their opinion regarding whether or not it should be pursued.

Plan B

The data shows that for large undertakings, the initial plan, “Plan A,” often fails, so you need an approach for determining a Plan B, C, D, etc. The Plan B approach helps you make the most of a new undertaking.

As a simple example, let’s say your organization used the Balance Sheet approach to determine it will roll-out a new product.  Now comes the planning process.  You create your plans (business case, goal statement, project plan, etc.).  That is “Plan A.”

But in reality, you cannot anticipate everything.  Plan A is likely flawed and may be built on faulty assumptions.  So you need to identify how you will get to Plan B, based on data you gain from outside your organization and as you implement.  Plan B is not a “contingency” or a “scenario” plan A, but rather a way to identify the larger questions and the assumptions, which must be identified and tested to find the underlying value in the business plan.

To create your method for reaching Plan B, first “dashboard” the assumptions of your Plan A.  List the underlying assumptions for why you are pursuing the opportunity and what you perceive must be true for it to succeed.  Many of these assumptions can be validated or refuted based on secondary data from other organizations that have completed similar undertakings.  The most important ones to list are those that are leaps of faith (those for which there is no existing data).  These need to be the assumptions that are the most closely monitored.

Now, create your assumptions dashboard.  This can be as simple as an Excel sheet, with columns for “Assumptions,” “% Validated,” “What evidence validated or refuted assumption” and “Plan for moving forward if not validated.”  Use the dashboard to find Plan B by regularly testing and modifying your assumptions.  When assumptions change, you should change your plans and model.  If you cannot find a Plan B, you should scrap the project early.

Companies, such as Intuit, that have used the Plan B approach find that project owners are more effective at either scrapping projects early or delivering better results, because it is easier to see what’s working or failing in individual assumptions (rather than the project as a whole) – while there is still time to course-correct.

Three Candidates

Anne Mulcahy, Chairman of Xerox, recommends this approach to force the hard people-decisions.  Make it your organization’s policy that leaders must have three good candidates for each job.  She calls it your “people portfolio.”

It challenges hiring managers to look beyond their typical sources to find candidates.  It also provides the substance for good debates – because instead of saying, “Can Mary do the job?,” leaders debate, “Which of these candidate will best fit the role and our overall direction?”

She also says teams need the essentials of courage and listening.  The best teams have both:  The courage to passionately disagree and audacity to take unpopular stands, combined with openness to learn and really listen to others’ opinions.

Great leaders and team members have courage and listen, which leads to the right conversations, learning, and growth.  When used properly, the “Three Candidates” approach can help build this kind of effective team.

PreMortems

We’re all familiar with the valuable practice of project postmortems.  After a project fails or is brought to completion, best-practice says do a postmortem or after action report.   Identify what worked well and what you will do differently next time.  Document and share your findings so your organization will better execute on future undertakings.

Premortems, as devised by behavioral psychologist Gary Klein, are similar, except they’re done before the project begins.  In the planning phase, gather your project team (and sponsors, if appropriate) and perform a premortem.

Say, “Assume I have a crystal ball.  Looking into the future, we know this project fails.  Take two minutes and list out why it fails.”  Based on these results, you won’t likely scrap the project, but you will most likely change your plan.  Often leaders can anticipate holes that may result from key risks, organization tendencies, faulty assumptions, or anticipated future situations.  But without a premortem, often these issues go unaddressed.

Each of these expert decision-making approaches are invaluable.  Take time now to determine the settings in which your organization will use them.  For more, contact us at (303) 980-8100 ext. 202 or rich.scholes@trynice.com or ext. 102 or ron.nice@trynice.com.