Finding balance in business decision making

Making balanced business decisions is complicated. There are simply so many variables and interactions involved in the situation, that sometimes we feel we can only guess at the best move.

Additionally, we sometimes feel we are caught in a Catch 22 situation where “You are damned if you do, and damned if you don’t.”

• Why does this happen?

Or perhaps better

• What can we do about it?

Implementing high-level decisions

We can be faced with making two types of decision.

• The first type of decision is where we autonomously realise that a decision has to be made, due to the way the situation is evolving.
• The second type of decision is where we are tasked with implementing a high level decision. Senior management has decided that a project will be implemented or that the company will proceed in a certain direction. Lower-level decision makers are then tasked with implementing the high-level decision.

Paradoxically, it may be easier for senior management to make a balanced decision than it is for lower level decision-makers. This is because senior management are in a central role, vis-a-vis the company’s overall capabilities and direction. Thus senior management has a high-level bird’s-eye view of the various capabilities which the company as a whole can exert to implement their decision.

The low-level decision maker is limited to the department-level resources or the team-level resources which they have at their command, however. Subsequently, even although the management decision may seem balanced relative to the entire company, it can create a local imbalance.

It is worthwhile understanding the nature of this potential imbalance, and how this imbalance can be usefully fed back to the high-level decision maker.

Systems

Generally speaking, most of the complex decisions we make, are made in the context of a system.

Q: What is a system?

A: Generally speaking, a system is any collection of interrelated parts that work together to produce a result. Examples of systems can range from a biological system (e.g. a tree or a flower), to a computer operating system, a socio-cultural system (e.g. a school), a country’s medical system, a computer business system, a psychological systems (e.g. the human mind) and a business.

Most professional work is performed within the context of a system.

Within a system, multiple capabilities are intertwined and many actors are involved in producing the final result. Any action taken to optimise one aspect of the system may have a deleterious effect on another part of the system.

Identifying the right course of action in a complex system requires intricate and detailed knowledge of all the moving parts, in addition to having a general overview of how the system operates. Categorising the forces that operate with a system can assist in simplifying the decision making process however, to a level that provides at least a reasonable chance of success.

It is difficult to find a way of analysing things that is applicable to every type of system, but the following is the closest to a set of universal analytical building blocks, of which I know.

Fundamental system aspects

Every system includes the following three fundamental aspects:

• Logic: The type of thinking that takes place within the system.
• Control: Controls that are enforced internally to ensure that the system operates within its set parameters.

Q: What are system parameters?

A: According to Wikipedia, a system parameter is, “any characteristic that can help in defining or classifying a particular system. That is, a parameter is an element of a system that is useful, or critical, when identifying the system, or when evaluating its performance, status, condition, etc.”

For example, an engine may be expected to revolve between 300 r.p.m. and 4000 r.p.m. Any slower, and the engine will stall. Any faster, and the engine will break. In this case we can say that the parameter for safe operation of the engine is between 300 r.p.m. and 4000 r.p.m.

• Energy: The internal “life-flow” that is generated as a result of the system functioning correctly.

For example:

We are used to assuming these basic system aspects in our everyday speech, so that:

• If we say “That person has a good mind,” we mean that they create healthy positive thoughts.
• If we say “This is a good business system,” we mean that it brings great benefit to the business.
• If we say “That is a good school,” we mean that the children who graduate from the school are well educated.

System integrity

In a robust system, each fundamental aspect of the system must maintain its own internal integrity. This means that

• the logic-aspect of the system must function correctly,
• the control-aspect of the system must function correctly, and
• the correct energy level must be maintained.

In addition, each system-aspect must interact correctly with the other two system-aspects:

Internal logic interaction

The logic-aspect of the system tells the control-aspect the correct parameters within which the system should operate. The logic-aspect of the system also tells the energy-aspect how to best employ its energy, for the betterment of the system.

Internal control interaction

The control-aspect of the system tells the logic-aspect the current operating state of the system, so that the logic-aspect can process this information. The control-aspect of the system also directly controls the energy levels of the energy-aspect, in order to make sure that the energy-aspect is operating within safe and sustainable levels.

Internal energy interaction

The energy-aspect of the system provides actuating energy to the logic-aspect and the control-aspect of the system.

Quandaries in decision making

Many of the quandaries that are found in system-centric environments occur because of the fine balance required between the logic, control and energy aspects of the system, which can be upset by an imbalance in one area.

Going back to the example systems above:

In each of the above cases, attempting to increase the system energy level can lead to unexpected outcomes, to the detriment of the system beneficiaries.

A system within a system

Within the operations of a company, we can identify a logic-aspect, a control-aspect and a energy-aspect as follows:

• The company’s logic-aspect is the overriding way of thinking which permeates the company. Setting this thinking-tone is normally the responsibility of the CEO or the senior management team. Implementing and fleshing out this thinking may be the responsibility of the business analysis team or of the product development team.
• The company’s control-aspect is the way in which the company controls its own operations. Practically this may consist of the legal department or the quality control department.
• The company’s energy-aspect is the actual work that occurs within the company, which produces the company’s products.

However, all of these functions also exist within each department and team. This is because each department and team also requires their own localised methodology, their own localised way of maintaining quality control and their own skills and aptitudes which are required to perform the work that is required of them.

Therefore, a department or a team, comprises a system that operates within the context of another system (namely, the company).

Local imbalance

The reason that a good high-level decision can lead to a local imbalance in a department or in a team, is because although the high-level decision maker may have correctly taken into account the general, overall capabilities of the organisation, it may not be possible to implement this decision in a department or team, in a balanced manner.

This is because doing what needs to be done in order to implement that high-level decision, may require that one aspect of the department or the team should be preferred at the expense of the other two aspects.

For example:

• The management decision may require that controls should be tightened within the department or within the team. This may suit those employees who are tasked with maintaining internal standards, but can pose a strangulation hazard to those employees who are responsible for carrying out the every-day business processes (the logic-aspect and the energy-aspect of the department or the team).
• The management decision may require that the throughput of the team or the department should be increased. Management assume that the team is capable of making their internal processes more efficient, in order to be able to cope with the additional throughput.
  In this case it is likely that business process fidelity will suffer, even if the increased throughput is achieved. Thus the energy-aspect of the department or the team has increased, but the logic-aspect has been compromised (since the logical fidelity of the overall business processes has been reduced) and the control-aspect has suffered (since processes now run out of their control limits).
• The management decision may require that the complexity managed by the department or the team should be increased. More products may have to be offered, or more nuancing may be required in existing products. This will require an increase in the logic-aspect of the department or the team (since the department or the team is now dealing with increased complexity in their everyday business processes), but may cause throughput (the energy-aspect) to suffer, and may also cause business processes to go out of control.

Push-back

Often the only realistic way to respond to a local departmental or team imbalance, which has been created by an upper-level managerial decision, is to push back on the decision. This is not always so easy, but by explaining the issue using precise and positive language, you can broaden the perspective of the senior decision-maker, who will then be able to take the ramifications of their own decision into account.

The decision may need to be re-thought, more resources may need to be supplied in order to implement the decision, or the business initiative may need to be implemented in stages, rather than all in one go.

However the situation pans out, by adopting terminology that is meaningful to the senior decision maker, you will earn their respect and consideration, and hopefully preserve the department’s or team’s homogeny, into the bargain.