Better big decision by timing big decisions.
Last year I finished a research project with CFOs. The goal was to identify the best practices for squeezing maximum impact out of capital budgets.
One pronounced finding was a scathing indictment against using capital slates for capital allocation decisions. Organizations using capital slate committees were more than twice as likely to report high or very high capital stress (i.e. a severe shortage of capital).
The study’s CFOs (including those using capital slates) had several theories for the capital slate’s clear underperformance ranging from rushed analysis to cloakroom vote trading among division heads.
Now there’s an additional suspect: Decision Fatigue
Too Much For One Day
Decision fatigue is a recent discovery that describes how our mental energy is depleted by making several decisions. As our day wears on, our decision quality wears out.
We begin to make decisions based on the path of least resistance.
- If a decision requires a bold step into unfamiliar territory, we will tend to say no. It’s easier to maintain the status quo.
- Conversely, if the request is accompanied by a cadre of strong supporters, it’s easier to go with the flow and approve the proposal.
Decision fatigue also causes us to simplify our decisions. Instead of weighing multiple criteria such as risk minimization versus income maximization versus workforce impacts, we focus on a single attribute and choose accordingly.
Blind Spot
It’s important to note here that we are completely unaware of decision fatigue. We don’t feel the exhaustion or weakness that we feel with physical fatigue. It’s also not any annoyance we feel toward having to make a lot of decisions.
Decision fatigue is completely hidden from our perceptions – a very dangerous management hazard.
Plan Ahead
The best counter-measure is the simplest… schedule important decisions for early in the day. If first thing isn’t possible, a distant second-best time is after a healthy lunch.
Just before lunch is bad, and mid to late afternoon puts executives in greatest jeopardy. We may feel on top of our game, but all the science says we’re not. It’s not a question of intelligence, experience, or fitness – our brains are simply at their peak in the morning. We need to put critical decisions (capital and otherwise) early in the day.
So, will you? It can be as simple as giving a standing instruction to your Executive Assistant and others who control calendars: Schedule meetings for important decision very early in the day …but again, will you?
By Dave Wittenberg, EPM Contributor, from: http://capexcompass.com/2013/09/30/decision-overload/
Dave Wittenberg is a writer, educator, and practitioner in strategy execution and executive decision-making. He brings the experience of more than 250 major strategic initiatives across a wide spectrum of industries, helping companies successfully execute strategy with greater impact while using less capital. Dave’s unique blend of finance tools and cutting-edge behavioral techniques transforms how business teams attack decisions to foster innovation, wring out waste, and boost growth & ROI. Dave earned his MBA from The Wharton School at the University of Pennsylvania. See Dave’s articles on EPM Channel here.