Why and how to teach better decision making

New Zealand is facing productivity challenge created by our low levels of industrial and commercial efficiency. The escalating pace of enterprise and increased political pressures to deliver enhanced public services means managers must become better decision makers.

In terms of labour output, New Zealand is only half as efficient as the United States. Our productivity growth during the 1990s was the third worst among 27 OECD countries. When it comes to competitiveness, we rank 19th behind countries like Singapore, Hong Kong, Iceland and Ireland and just ahead of Chile and Estonia. The discomfiting reality is that if all New Zealand’s investment was in the hands of many of its competitors, the output would be appreciably better than anything the nation’s public and private sector managers achieve.

If unlearned lessons are one example of poor decision making, there is no shortage of real-life evidence that we seldom learn from our mistakes. Despite expensive enquiries, expert reports and declarations that lessons were learned, police computer projects, 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. At least three other projects whose failure could cost another $300 million are classified as high-risk.

In the Health Service, an enquiry was held to discover why pathologist at Gisborne hospital’s cytopathology laboratory made so many undetected mistakes over five-year period in what has been described as the country’s “biggest medical disaster”. His recurring mistake was part of other serious errors – called “sentinel events” – that occur at an estimated rate of approximately one in 1000 reportable events in our health and disability sector organisations.

Our private sector isn’t much better. Consider, for instance, the series of operational debacles and poor strategic decisions that led to the demise of our once largest enterprise, Fletcher Challenge. The legacy of poor decision making in that enterprise and its offspring continue to this day. Safety issues recur year after year at Tranz Rail and NZ Steel, resulting in deaths and horrific personal injuries.

On more systemic level, New Zealand is near the bottom of the international league table when taking start-ups on from the small business phase, failing that suggests less than effective decision making.

Dedicated discipline
If there is relationship between education and national prosperity, why isn’t teaching the craft of decision making dedicated discipline, either on the job or in our business schools? Too often it is overly theoretical, unstructured, informal or anecdotally subsumed into wider specialities such as marketing, strategy and leadership. Managers are left to rely on their intuition, anything they can learn arbitrarily from their own and others’ experience or their ability to cope with corporate politics.

At non-theoretical level – teaching by using actual experiences – decision-making’s application is confined to random, unstructured methods by individuals and post-project reviews and usually used only to investigate large failures.

It is now fashionable to introduce so-called knowledge management and/or “learning organisation” practices, which usually involves installing sophisticated computer retrieval system for quick access to archival documentation. Its most useful perceived applications are twofold:the ability to identify people in organisations with relevant skills and experience who can be consulted, and the collection of data to identify useful trends upon which to focus management attention.

Unfortunately, today’s more flexible labour market replaces almost the entire employee base of most organisations every four or five years, depleting the pool of individuals worth consulting. And, while organisations can identify what needs attention, computer can’t convey how best to achieve it.

Good decision making is not just about entering all paperwork into sophisticated electronic data bank. It is also about capturing and applying the valuable tacit knowledge that seldom gets recorded, much of which is implicit and ambiguous and exists only in the minds of employees. It is usually acquired by functional experience and is time and organisation-specific. It is the type of expertise relating to all the routines and processes (formal or otherwise) that make an organisation tick. And it walks out the front door every night, not always returning the next day.

Good decision making is inextricably bound up with an ability to recall information accurately. Imprecise recall, short and selective memory, defensive reasoning and ‘lost’ corporate knowledge are worthless. For these reasons, using reflective processes to teach decision making is studiously avoided.

How, then, can better decision making be taught in organisations and learning institutions?

Reflective thinking
One option is Experience-Based Management (EBM). It uses actual experience as the learning medium. It prescribes the process of reflective thinking in business through formalised, six-stage circular sequence adapted from prototypes created by American academics Kurt Lewin and David Kolb. Their various works cover:
• how to choose experiences from which to learn;
• how to implement strategies that help overcome deficient memory in user-friendly learning formats;
• how to construct the reflection process to improve decision making.

In its wider application, the methodology gives knowledge management an information technology role beyond sophisticated data collection and distribution.

EBM familiarises managers with the mutable character of decision making and the range of decision-making options.

Suitably adapted, it can be used as both teaching tool in business schools and in management training organisations.

1. Choosing experiences from which to learn set of broad principles with which organisations can pre-select these experiences should include both perceived successes and failures. Priority should be given to work areas that have high staff turnover.

2. Ensuring accurate recall The early theorists of experiential learning recognised that learning was inextricably bound up with the ability to recall information. This was later refined to include tacit knowledge. Hard to formalise and communicate – and rarely documented – it includes the detail of job-related events and the knowledge of tried-and-tested usage as it applies to the organisation’s own market circumstances and special environment. It includes all the routines and processes (formal or otherwise) that make an organisation tick. Better decisions are made by using both explicit and tacit knowledge.

Most organisations can retrieve archival evidence such as internal and external memos, discussion documents and reports. But the written word invariably lacks detail and important tacit content. The ‘how’ of know-how can be captured through two efficient but under-utilised knowledge management tools: oral debriefing and corporate history.

Oral debriefing depends on expert questioning of individuals to extract crucial knowledge. Formal debriefing programmes can be applied either at regular intervals during an employee’s tenure, when employees retire or leave to join another company or immediately after key projects. It is principally relevant to short and medium-term experiences, and operational issues.

The traditional corporate history is invaluable when compiled as learning tool rather than as public relations exercise. As the most portable repository of an organisation’s past, it is applicable to mainly long-term experiences, strategy and culture.

3. Reflection Erudition is about making sense of information, extracting meaning and relating information to everyday life, specifically understanding the world through reinterpreting knowledge. Armed with rigorous experien

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