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Discovery Surveys, Inc.
Specializing in Employee Opinion and Customer Satisfaction Surveys
Improving the Workplace
POOR DECISIONS BY LEADERS LEAD TO A LOSS OF CONFIDENCE

By Bruce L. Katcher, Ph.D. President, Discovery Surveys, Inc.

One out of two employees say management makes poor decisions.

U.S. Treasury Secretary Henry Paulson roiled the U.S. financial markets by continually flip-flopping on how he was going to spend the $700 billion financial bailout package Congressional lawmakers had approved. First, he said that the money would be used to buy troubled assets that had been clogging the balance sheets of banks. Then he said he would use the money to ease access to home, school, and auto loans. Then he said he would not even ask Congress for the second half of the $700 billion. Next there was talk of using some of the money to bail out automakers. Who knows how it will all end up?

Paulson tried to defend his leadership by saying that flexibility is needed when dealing with changing conditions.

But the damage had been done. The markets and the public quickly lost confidence in the government's ability to put together a coherent plan that would put the U.S. economy back on sound footing. Most people simply wanted to be able to trust the government to come up with the solutions.

Paulson's waffling contributed to a continued erosion of consumer confidence and the stock market continued its volatility. The result: a quickly cascading cyclical nightmare that spread across the globe with no end in sight.

It is common knowledge that psychological forces dictate the stock market. This was a good example of how poor decision-making made a bad situation worse by leading to a loss of confidence that then dramatically impacted the market.

THE PROBLEM

Leaders of organizations, as well as government leaders, need to be mindful of the importance of making clear-cut, well thought out decisions. Most organizational leaders do not do a particularly good job of this. Our research shows that only one out of two employees believe the leaders of their organizations are making good decisions.

Good decision-making is critically important during these challenging economic times when leaders are being called upon to: make important decisions about reducing costs, identify new strategic directions, and decide whether to implement previously planned investments in the future.

Employees need to have confidence in their leaders. They need to trust that the decisions they make are sound. They will follow their leaders even if they don't agree with the decision. What is important is that their leaders provide them with a clear, consistent direction.

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WHAT TO DO

  1. Think Before You Act

    Secretary Paulson was under pressure to make decisions quickly. The problem was that in his haste, his decisions were not well thought out. It seemed like he was making a new contradictory decision on a daily basis. The markets would have responded better to delayed decisions if they had demonstrated more consistency.

  2. Check Decisions With Others Before Going Public

    Many senior decision-making groups suffer from what Irving Janis calls groupthink. This is when the group, in the pursuit of cohesiveness, is quick to acquiesce to the leader so as to minimize conflict without critically testing, analyzing, and evaluating ideas.

    Here is an approach I have used in my consulting work to help groups view major decisions from multiple perspectives before making a final decision. It involves using devils advocates to make certain that the decision has been thoroughly reviewed, critiqued, evaluated, and re-evaluated.

    Break up the decision-making group into the following four subgroups and have them answer some basic questions.

    1. THE OPTIMISTIC GROUP - The glass is half full.

      • How will this decision help the organization?

      • I am confident that this decision will work as intended because…

    2. THE PESSIMISTIC GROUP - The glass is half empty.

      • Why is this a bad decision and how might it hurt the organization?

      • I doubt that this plan will work as intended because…

    3. THE CAUTIOUS GROUP - Let's reconsider whether we should be drinking at all.

      • Have we identified the correct approach?

      • I am cautiously optimistic, but not without reservations, because…

      • What are some alternatives decisions that have not been considered?

    4. THE PRAGMATIC GROUP - Let's drink, but very carefully.

      • What are the major challenges we will face to make this decision work?

      • In order to make the decision successful, it will be important to…

      • How will we know if the decision is succeeding and whether mid-course corrections are needed?

  3. Fully Communicate Decisions

    Our research also shows that only 38 percent of employees believe management does a good job of explaining the reasons behind decisions. Employees want to be treated like adults. They want to know why a decision was made, what are the risks, and what are the potential rewards. Most importantly, they want honesty from their leaders.

CONCLUSION

When an important decision must be made, be certain that you don't appear to be making a different decision daily, enlist the help of others to view the problem from multiple perspectives, and fully communicate decisions to employees and others.

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