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Executive Interviews: Interview with Derek W Bunn on Decision Making
May 2008
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By Dr. Nagendra V Chowdary
From your decades of teaching,
research and consulting experiences,
can you share with us your insights
on decision making?
There has been a tremendous amount
of research on decision analysis,
decision making and leadership. A
lot of it is descriptive, and we all
make mistakes in what we learn
individually and collectively. Most
organizations are too busy facing
future challenges, that finding time
for constructive reflection on the
mistakes made, or the forecasts
poorly conceived, or the targets
missed, is often inconvenient. The
normative research and consulting
advice on how to improve decisionmaking
often advocates more
thorough analysis, but none of us can
incorporate "infinite and impeccable
pains" in our routine decision
making. The challenge is to know
how much analysis is appropriate.
But more importantly, moving from
analysis to action is crucial. There is
an old phrase concerning 'paralysis
through analysis', as too much
analysis may indeed erode
decisiveness and the motivation to
make things happen. Moving from
decision analysis to decision
leadership is a crucial and special
skill. Ultimately, analysis in
management is about communicating
a shared understanding of the
options, risks and ambitions in going
forward with a particular venture.
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One of the books you wrote was,
Analysis for Optimal Decisions. What
according to you are optimal
decisions? Can you give us few
examples?
I have touched on this issue above,
and the more strategic the decisions,
the more subtle is the notion of
optimality. In many operational
decisions, choice has clear outcomes,
like where to buy raw materials, how
much to produce from different
factories, how many new workers to
employ, etc. Even if these outcomes
are uncertain, a range of possibilities
can be conceived. An optimal
decision will then balance various
decisions with possible outcomes,
look at the risks and seek to make a
decision consistent with the risks that
the organization has been or should
be taking in its other activities. Here
optimality has the connotation of
coherence in risk taking. And that is
the essence of decision theory.
Decision analysis does not prescribe
pure rationality; it just provides an
extensive procedure for being more
and more consistent in evaluating the
risks and returns in various
decisions. This of course becomes
more and more difficult with the
bigger decisions, especially as the
stakeholders' risks in the company
become more exposed. Hence, the
importance of decision analysis being
a communication framework for
investor relations, for the major
projects, as well an internal support
to leadership. -
What, according to you, are the
similarities and dissimilarities
between individual, managerial,
executive, societal and governmental
decisions.
I think it is all a matter of
ramifications. The principle is the
same, in that decision-making is
ultimately about being comfortable
with the chosen course of action,
thereby being clear what the sources
of 'comfort' are. Usually, these will
involve issues of clear reasoning,
absence of contradictions, weighing
of different objectives, evaluation of
the risks, and a sense of consistency
with other actions and attitudes. This
might be purely intuitive for an
individual, or involve facilitated
group discussions for an
organization. Decisions for external
stakeholders, or that which involve
political compromises, have the
additional element of defensibility,
which brings us back again to the role
of decision analysis for persuasive
communication. -
One of your research interests is
in decision technology. What is
decision technology all about? Are
there any tools/mathematical models/
decision trees, etc., that the students
are taught?Was there a danger of tools
being mistook as the decisions
themselves?
That is a very good point. There is a
huge range of analytical approaches
and software to help decision makers
with forecasting and choosing. Most
of these are in regular use by major
companies. Airlines, for example,
make new investments, schedule
operations and adjust prices using
very sophisticated decision
technologies. Business schools teach
the elements of these procedures. But
you are right, there is a danger that
insecure students, managers and
politiciansmay believe themodels are
more rational than themselves or
prefer to put responsibility on the
models rather than take it on
themselves. Decision technology is
only there to support decision
makers. I usually emphasize to my
students that if the results of the
model surprise you, you have not
finished modeling, the point being
that the interaction of decision
technology and human judgment
should ultimately be a mutually
coherent one each is informed by
the other. -
Is decision-making a science or an
art? If it is to be believed as science,
can its principles be applied
universally? If it is an art, how can
someone be trained to be an effective
decision maker?
There are an increasing number of
scientific principles to rational
decision making, and an increasing number of tools to help decision
makers understand its complexity,
but as long as the consequences
involve human values and
organizational evolution, decision
making is not an exact science. Training in decision-making is about
framing complex problems to
elucidate the key issues, and
communicate and improve the
coherence of their analysis. What are
the skills that strategy consultants
bring to companies? They find the
key facts, of course, but mainly they
improve the dialogue and
decisiveness as they identify the risks
and opportunities to the company.
Many of these skills can be taught.
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