Harvard Business Publishing

What is needed is a generic business governance system that helps organizations move toward making the best business decisions, in both good and not-so-good times. Often policies such as meeting-the-quarterly-numbers, with no roadmap for achieving these goals, encourage unhealthy business decisions to be made, as many companies have recently experienced.

These demanding times offer the opportunity to reflect how current business systems are not working and need reinvention. Everyone in an organization needs to appreciate the importance of creating and using a no-nonsense business governance system that integrates healthy policy creation and deployment with a no nonsense blending of scorecards, strategic planning, business improvement, and control. A substantive business system is needed that addresses the complexities of today’s business environment, which executive orchestrate.

The American Management Association (AMA) in a December 2008 article (see article link below) describes a 9-step, 21st century business management governance system that addresses these needs and how a company benefited from its deployment.

Article link: http://www.smartersolutions.com/pdfs/online_database/P_111_AMAMWorld.pdf

I have read Mr. Breyfogle's post and the linked article. In my humble opinion, the model presented has been in place for many years. Perhaps one should look to Dr. Juran's Trilogy, (Planning, Control and Improvement), Deming's Principles (Customer Focus, Continuous Improvement and Teamwork) and ISO 9004 Principles (Customer Focus, Leadership, Involvement of People, Process Approach, System approach to Management, Continual improvement, Factual Approach to Decision Making and Mutually Beneficial Supplier Relationships).
The weakness in most models is in the implementation. After observing companies for the past 30 years, I find that the best companies are disciplined. I am an advocate of using ISO 9000 because it requires: internal and external process auditing, disciplined monitoring and measurement of processes outputs and outcomes and product/service conformity and management review on the data generated and requires decisions be made and documented.

Among the "key decisions" that would make 2009 the Year of Better Decisions are those that center on how best to make use of the opportunities presented by the current economic downturn. Rather than getting sidetracked with mundane day-to-day decisions, which ideally should be left to operations managers, a CEO or business leader should make the active choice to take a broad overview of the business. Within this context, experts say, a handful of decisions can strengthen a company's standing in the marketplace.

-Don't go it alone. Tap other business owners for ideas. Peer-to-peer groups help executives find new solutions to their problems.
-Seek out local talent. Colleges and universities are filled with students willing to intern for free in order to build their resumes.
-Build stronger relationships. In these tough times, customers feel the same anxiety as the businesses that serve them. Look for ways to become more relevant to customers and help them solve their problems.

The new year is the best opportunity to make the decision to take the "long view" of prospects for success in 2009 and beyond.

Mr. Arneson,

I understand how my previously described 9-step business system may initially sound like a re-packaging of traditional methodologies, but it is not. The 9-steps of this Integrated Enterprise Excellence (IEE) system does use and integrates the strengths of traditional methodologies. The result is the creation of a long-lasting business governance system that helps organizations move toward achievement of the 3 Rs of business; i.e., everyone doing the Right things, and doing them Right, at the Right time!

In my humble opinion, I disagree with your comment about ISO. I believe that many will agree that ISO 9000 has not done great and wonderful things for the business as a whole and is not really a business system. However, I do agree with the challenges of implementation. I think that one of the problems is that previous systems did not have a true detailed roadmap that integrated scorecards, strategic planning (blending analytics with innovation for determination), business improvement, and control.

The following link provides access to documentation details of the IEE system implementation and its benefits:
http://www.smartersolutions.com/blog/forrestbreyfogle/?p=650#more-650

Again, the 9-step IEE system is not just fluff or a repacking of previous systems. I truly believe in my heart that we need to make major changes to our business management system or we will not in the future have the life style that we have grown accustomed to. IEE is a system that addresses these needs.

I encourage anyone to contact me directly who would like to discuss further.

Forrest Breyfogle
Forrest@SmarterSolutions.com
512-918-0280

Tom

I totally agree on making this the year of better decisions. There is a lot of talk on the root causes for the current crisis, but it's absolutely clear that more visibility, more transparency and ultimately real management of business decisions would have helped both identify negative trends earlier, and facilitate compensating approaches.
What you outline is a high level approach, but the enterprise software world is already moving forward. Enterprise Decision Management (EDM) is taking hold as a recognized discipline that takes the more bottom-up and silo'ed decision execution (BPM, BRMS, predictive models, ...) decision monitoring (BAM, reporting, ...) to the point where managing decisions through their lifecycle is supported. Including such things as decision simulation, optimization, etc.
Carole-Ann writes about this in www.edmblog.com.

I believe this will catch on fast in the current circumstances.

I think something fundamental is missing in all the above suggestions. The poor decisions that were made in 2008 and previous to 2008 had nothing whatsoever to do with proper decision making systems not in place. It had to do with a fundamental DECISION to by pass systems, ethics and moral behavior. It had to do with an instant gratification culture and a society that has been socialized to excess without SELF monitoring.

I have no way of really knowing, but I can bet that systems were in place that were simply, expediently ignored. All of the above decision making tools sounds great. Unless leaders are making decisions that follow some very simple rules - i.e. honesty, integrity, do no harm, etc. which must be built into any system, we will have poor decision makers.

Elizabeth

The key is transparency and management.

With transparency, it becomes impossible for individuals (people or organizations) with getting away with ignoring the outcomes of the decisions. Yes, the systems in place may have been bypassed, but many, many people did raise the alarm. What was missed is the overall transparency / visibility on the outcome of the decisions which would have avoided the alarms being only raised by the "smart-but-not-listened-to" specialists.

With decision management, it becomes possible to do scenario based analysis, to understand business implications of decision outcomes, etc.. And to control the roll out of corrective actions.

So - yes, I agree, systems are in place to help control. But they have failed to make the decisions they support transparent and managed.
EDM tried to solve that.

This is of course just one more opinion...

Great post and I certainly hope we make some better decisions going forward. The deicsions that are made today are much more complicated and interconnected that they were in the past, so I think it would be helpful for decision makers to simulate their decisions in multiple contexts (preferably scenarios) before they move forward. Looking back on the fianancial metdown and looking forward to the difficult decsions on our collective plates today, we have to be able to test them in an easy to use sandbox before we make them. We can no longer trust leadership brillince and collaboration to catch the dangers of outlying scenarios.

Bottom Line; Too many decisions are made in vaacuum and are untested. This is dangerous and we are paying for it right now.

Elizabeth, I agree with your points; however, what can be done about it. Regulation controls such as Sarbanes Oxley (SOX), which was created because of the Enron turn of the century problems, did not prevent this financial crisis – guess SOX answered the wrong question to maybe the third decimal place.

I am not a big fan of government regulations. However, fundamental government-regulated and business policies can drive the wrong behavior, as we are now experiencing. Is there can that can be done about this, if good business management policies are identified? Let’s consider Toyota’s internal policies.

Many companies in the United Stated and elsewhere benchmark Toyota and its Toyota Production System (TPS). TPS focuses on the use of waste reduction tools in process improvement programs such as Lean Six Sigma; e.g., value stream mapping, 5S, and kaizen events.

However, a perhaps more important practice to benchmark is Toyota’s management system, referred to as “The Toyota Way,” as used in Japan. It needs to be noted that the following Toyota Way practices may not always be followed outside of Japan, since Toyota needs flexibility when working in other country cultures.

Many of the problems that organizations now are experiencing have been amplified because of existing management policies, which can lead to very detrimental behaviors. The following suggested management policy changes are consistent with the policies that Toyota is using in Japan:

- Make executive compensation ratio relative to the lowest paid worker similar to the magnitude that exists in Japan at Toyota.

- Eliminate executive golden parachutes.

- Eliminate pay for performance (executive and other organizational levels). In many western countries there is a management by objective philosophy, which can lead to playing games with the numbers so that bonuses will be made. This meet-the-numbers game is a “management by hope” strategy. The only “pay for performance” compensation that seems like it could be instituted fairly is a corporate-wide, salary-based profit sharing system.

- Avoid hiring a CEO (and other executive managers) to be superman or superwoman, where they are to act like a silver bullet to fix company problems and/or turn the organization around. This CEO hiring practice can result in activities that jeopardize long-term organizational health; e.g., management is looking to only complete their short-term commitment and exercise their golden parachute option. In Japan, Toyota has a basic promote from within policy. What Toyota has created over many years is a company-wide DNA; however, this is not practical in most Western companies. An alternative to creating a “Toyota-DNA culture,” which can take more than 25 years, is for a company to create a robust measurement-analysis-improvement system that is less dependent upon the individual who is the current person in charge. A methodology to accomplish this is the Integrated Enterprise Excellence (IEE) system.

- Use analytics as part of the business decision making process both in standardization and enterprise decision making processes such as determining what the customer wants/needs. When companies train and utilize TPS waste reduction tools, they need to integrate statistical analytical methodologies with the inclusion of process variability in their decision making process.

More discussion on this financial crisis and an Integrated Enterprise Excellence, 21st century management governance solution can be found at the following link.

Link: http://www.smartersolutions.com/blog/forrestbreyfogle/?p=650#more-650

Decision-making is an art and skills. There are no rules or regulations to control the process of making decisions.

There is guidance, steps you can adopt to make or even ease your process in making decisions. There are many types of decisions to be taken. Important, urgent, normal, staff issues. Even there are personal deacons to make.

The best definition to the Decision making process is the one I know:

The process of mapping the likely consequences of decisions, working out the importance of individual factors, and choosing the best course of action to take

It is true. It is basically Map minding process.

The best technique for making (not the correct decision), the nearest best decisions to suit the each situation is to use the

• Ask questions.
• Ask more questions.
• Try to find the information that helps you in making decision.
• Come up with alternative Decisions.
• Keep yourself ready to change your decision if needed.
• Respect your decisions.

Great post, I couldn’t agree more that business leaders need to be empowered with better tools to help make effective decisions regarding strategy, operations, marketing, etc. There is a need in most industries where business leaders struggle with the challenge of optimizing marketing decisions when it comes to resource allocation and pricing strategy. The universe of complexity surrounding marketing decisions due to the proliferation of advertising channels, products, customers, and supplier networks – reaching billions of possible permutations in large organizations – makes human navigation of this complexity impossible.

Extrapolating this truth to the domain of possible customer-product combinations means that each individual combination has a “right” price, where the price exactly matches what the customer is willing to pay, and no more. The business insight for a company with 400,000 SKUs and 100,000 individual customers is that there are really 40 Billion unique customer-product combinations, and each combination has an optimal price. Using statistical and probabilistic techniques to find these prices with a high level of statistical accuracy is how we apply Scientific Micromarket Management to a Revenue Optimization strategy, while our MarketMover™ technology allows us to process these prices and deliver them to salespeople or a comparable customer touch-point for execution in the field. Our technology has immediate and enduring impacts on an organization’s financial performance and competitive strength, while aligning disparate business units under a single revenue strategy. Our clients have realized significant impacts, where results are typically 1-3% revenue growth, 6-9% gross profit growth, and 12-18% gross margin growth.