Executive Interviews: Interview with Derek W Bunn on Decision Making
May 2008 - By Dr. Nagendra V Chowdary

Derek W Bunn
Professor at London Business School.

• To trust employees and to allow them to make decisions, particularly without all the pieces to the puzzle is anathema in business today. What is the appropriateness of participatory decision-making and unilateral decision-making?
  This is a very good question in an age of compliance monitoring and explicit stakeholder responsibilities. More and more aspects of organizational decision-making need audit trails. Formal methods can help here, but as you suggest, they can also get in the way and restrict risk taking. There is indeed muchmore emphasis upon risk management in companies, and this is an example of the use of explicit decision analysis for defensibility. Does it make companies more cautious, less enterprising and undermine creative leadership? I think it depends on who you ask, and whose money is at stake. Institutional pension fund investors will want to put their money only where they feel careful and transparent decision-making procedures have been instituted.

• Would fostering dissent (a constructive dissent) lead to better decision making? Does conflict lead to better decisions? Or would it be an unqualified hindrance to decision making?
  It all depends on how the conflict gets resolved. A number of companies who advocate scenario workshops, will deliberately role play conflicting positions. It is generally agreed that methods to consider extreme perspectives can improve our understanding of risks and how to manage them. Group facilitation is then a delicate process consensus has to be produced in a way that reflects a fair compromise and a realistic way forward.

• In today's corporate environment executives are often not willing to be so decisive, as they fear committing mistakes and the resulting fallout. At the same time, there is zero tolerance for indecision, lapses in integrity, and, above all, weakness all of which can be career ending. How should executives/leaders engage in a (delicate) balancing act of decisiveness and indecision; overconfidence and insufficient confidence? Would anticipatory regret hinder decisiveness?
  I wonder how different today's managerial environment is from the past. I think it has always been the case that managers are concerned about their jobs, and decisions often get made for personal pragmatic reasons. That is why incentive based management practices are so important. There is nothing wrong with risk averse decision making it can be very coherent, but only if it matches the organizational objectives. I am not an expert in organizational incentive design, but I think this is where it comes in. If we look at financial traders, a lot of work is undertaken there to incentivize their risk taking within compliance and controls.

• What is the role of business schools in preparing better decision makers? What specific steps do you suggest for business schools in terms of designing their curricula and delivering focused courses to prepare better decision makers?
  Business Schools have a major role in this area. There is the descriptive agenda of looking at the way individuals and organizations have created effective, or dysfunctional,decision-making processes. There is the normative agenda of how principles of decision coherence and decision technologies can be used to better effect. To the extent that better decision makers are better decision communicators, the business school environment can give a lot of case study practice and criticism. There is more they can do, however, especially in forcing students to actively and explicitly defend their analyses.

• What kind of decision-making capabilities is required for different industries? After all, an FMCG's CEO needs to make a lot quicker decisions than either a steel company's CEO or a cement company's CEO.
  Clearly, different contexts require different styles. One of the founders of decision analysis, Ron Howard, once said that "decision analysis is what you do when you do not know what to do". Managers need to be educated to have good decisionmaking intuition. They also need to know what to do if they need to think about the matter in more depth, or how to engage consultants, or facilitate strategy workshops. In other words, there is a progression of skills that an accomplished manager can pursue depending upon the complexity and importance of the decision. I am not sure whether this is industry context specific, rather than activity specific.

• Jim Collins, in an article in Fortune (June 27, 2005) distinguished between bad decisions and wrong decisions. What according to you is the distinction between bad decisions and wrong decisions?
  I have always held to the coherence principle of analysis. We cannot predict the future exactly and we cannot make the right decision every time. Sometimes we have to acknowledge that individuals and companies have succeeded through luck rather than skill. However, a bad decision comes from a flawed or inadequate decision-making process. The analysis could simply be incoherent with the facts, or incoherent through contradictory assumptions, or inappropriate in the weights given to different objectives, or just inadequate in the collection of information. There is no way to ensure that your decision will be the best, but there are better ways of making the decision.