Make time for reflection

By JANINE OGIER

If only we'd had the benefit of hindsight." How often have we heard those words after a business decision leads to unintended - and unwanted - results.

Knowledge management specialist Arnold Kransdorff thinks they're a cop-out. Hindsight, or corporate history, is there for the taking, he says, but by ignoring it we're doomed to continuously make poor decisions.

By capturing employees' knowledge, experience and memory - and using them to make decisions - Kransdorff says companies could add millions to their bottom lines.

"Productivity in New Zealand is relatively low and the way to improve that is to make better decisions," he says. "Very few companies have the tools in place to improve decision-making and also the business schools don't address it. So New Zealand has a huge disadvantage over many of its competitors."

Decision-making is the major management skill, but management courses aren't specifically teaching it, he says, and they should. A few business schools look at the theory of making decisions by evaluating alternative courses of action and their implications. But Kransdorff, a visiting lecturer at the University of Auckland's business school, does not think that is enough.

Instead, he's designed a non-theoretical approach to teaching decision-making. Called experience-based management, it looks at choosing the experiences from which to learn, implementing strategies that will help overcome deficient memory, and constructing the process of reflection to improve decision-making.

The key components of decision-making, says Kransdorff, are reflecting on good and bad prior decisions and constructively applying what you have learned to changing circumstances.

Aggravating the failure of business schools to teach learning from experience, Kransdorff says few companies debrief employees after projects or special events.

"The level of experiential learning in most companies is pretty poor but it is complicated and exacerbated by the flexible labour market, so the company allows staff to walk out the front door without capturing that experience or knowledge or memory.

"Some managers say 'never look back, only look forward'. But that is a very puzzling attitude. If you don't learn from the past you start from ground zero every time. It is so simple but so few business people or business academics realise that.

"But if you make one or two or three better decisions each year, profits or productivity can be greatly enhanced."

The failure to learn, he says, has led to some disastrous decisions.

"Despite expensive inquiries, expert reports and declarations that lessons had been learned, computer projects for the police, the Accident Compensation Commission, the National Library and the Justice Department all collapsed at an estimated cost to the taxpayer of more than $130 million," he says.

The Institute of Management agrees with Kransdorff that decision-making is such an important business skill it needs to be formally taught. So the institute has included in its certificate of management for secondary school students a decision-making and problem-solving module.

It teaches such things as ways of analysing situations, decision-making strategies and methodologies for critical thinking.

But the institute's chief executive, David Chapman, disagrees with Kransdorff on the quality of New Zealand managers' decision-making skills. He reckons they're quite good, "by and large".

Businesses need two types of decision-makers, says Chapman: those who make quick decisions and those who are more reflective and make up their mind after analysing and consulting widely.

"Some top people in business would pride themselves on being quick decision-makers and that is entirely correct for what they are about," he says.

But they also run the risk of getting it wrong because the nature of making your mind up in a hurry is that you often overlook things.

"A key thing is knowing when a quick decision is appropriate and when a more reflective approach would be better," Chapman says.

When it comes to making an important decision, there are several steps, he says. First define the problem, then look at possible solutions, check the facts, rank the outcomes in priority, choose a solution, and finally take responsibility for it.

Failing to look at all the options and not thinking about the impact of the alternatives are the most common mistakes managers make.

Another mistake is to panic - good managers take the alarm out of the process, says Chapman.

He believes most people learn to make decisions by experience.

David Newman, chief executive of the Institute of Directors, reckons New Zealanders are pragmatic decision-makers.

The bad decisions are those that haven't been made, he says, and it is pointless to dwell on whether a decision is right or wrong rather than just getting on with it.

He has experienced "decision by committee" - a lot of people sitting around a table procrastinating and often not making a decision - and has no time for it.

But he agrees that complex decisions can take time, and "parking" the idea for a couple of days often makes the solution easier to find.

Unlike Kransdorff, Newman doesn't believe managers can learn decision-making through a process. Rather, he says, it's learned in the school of hard knocks.

Given the small size of most New Zealand companies, the decision-making managers need a network of business people to bounce ideas off, he says.

"Nothing is ever new - it has always come up before in some other context somewhere else. If you are consulting people, those other people's experiences can come to the fore."

Pat Waite, president of the Institute of Chartered Accountants and chief executive of Public Trust, also believes good decision-making is the result of a process.

"The mistakes we see people making are that they rush in without getting all the facts or understanding all the issues or interpreting the signals they are getting.

"We often make decisions based on our heart and haven't thought it through from the mind's point of view."

Another common mistake is to minimise the financial implications of a decision, Waite believes.

And even then, the facts might show a rosy picture, but you need to ask questions behind the figures before making a decision.

"Good decisions are made by having the right facts so you can actually make an informed decision. People learn that skill in time by either making bad decisions and facing the consequences or seeing other people make good decisions and seeing the benefits that came out of that."

He advises those wanting to improve their decision-making skills to look at the good decisions of other businesses and think about what they would have had to know to make them.

On a systemic level, says Kransdorff, New Zealand's position near the bottom of the international league table for successfully growing start-up businesses, confirms inadequate decision-making abilities.

According to the Institute of Management, New Zealand managers are good at financial decisions - its management capability index ranks financial planning as their top skill.

And while that shows managers are cautious about spending money, it dismays Chapman.

"It is indicative of New Zealand firms, [that they] tend to focus on the bottom line all the time," he says. "That restrains your ability to be innovative and do new and wonderful things."

And to make new and wonderful decisions that stimulate the economy.

Kransdorff's six steps to good decisions

* Study appropriate successes and failures and learn from them.

* Record organisational knowledge of decision-making, using oral debriefing by an expert and corporate history.

* Evaluate how prior experience can be applied to a specific decision.

* Compile a list of do's and don'ts for when a similar decision arises.

* Test those lessons on different scenarios.

* When a similar decision arises, use the list and then evaluate how the revised practice can be improved.