5 Levels of Decision Making

Leaders make solid decisions and commit to seeing them through. Losers put off decisions and mess around with them once they are made. A key skill in becoming a successful leader is the skill of decision making. It is surprising how many people don't like to make decisions. They do all kinds of things to keep the moment of decision at arms length including: gathering more data, talking to more people, not thinking about the decision, fretting over who the decision might offend, worrying about the resources needed to pull the decision off, hoping the problem will go away on its own, etc. Good leaders develop the skill of making the best decision possible with the most accurate information possible in the timeliest manner. They are quick to decide and quick to take responsibility for their decisions - positive or negative.
Successful leaders have learned that action is vital. They know procrastination kills. There live with the reality of consequences and know there will always be uncertainty in decisions. No one can see all possible ramifications; no one can predict every contingency; no one can absolutely prevent failure. Leaders know that failure is not final, ratherit is a learning opportunity. The real danger surrounding decision making is not "will I make the wrong decision" but "did I make the best decision possible given the facts and circumstances". Strong leaders will always recover from poor decisions - they learn and become wiser. But losers mess around and miss opportunities. And once they finally make a decision, chances are their decision will have little momentum and no passion.
In addition to a bias for action, good decision makers approach decision making with some foundational strategies. These strategies can best be summed up with three questions:

QUESTION # 1. Is there a potential catastrophic downside?
If the liability involved is significant, and is even marginally possible, then the decision is "no, go find other options." One of the leader's most important jobs is to protect the organization. Exposing the organization to undue risk is never wise. CEO’s generally do this well. This is how they can make such quick decisions on complicated subjects. They simply look at the liability factor and if it is too great, the answer is always a resounding “No.”

Action Point – Think of a significant decision you need to make. Ask yourself, “What is the worst case scenario if I approve this and it goes bad?”

QUESTION # 2. What is the cost/benefit ratio?
Every decision is a trade-off between costs (usually company resources) and benefits (usually claims aimed at increasing company resources). Smart leaders use the cost/benefit ratio to leverage growth and profitability. Good decisions are highly leveraged with low cost/high benefit. Poor decisions are high cost/low benefit. When leaders find low cost/high benefit opportunities (with minor liability of course) the decision is, "Yes, let's do it."

Action Point – Take out a piece of paper and draw a T using the entire paper. Title the left side of the T “costs” and title the right side of the T “benefits”. Now, list as many costs as you can think of that come with the decision. Do the same with the benefits. Next give a rating to each individual cost and each individual benefit. Rate them on a scale from 1 – 10. 1 represents a minor cost or benefit; something that wouldn’t affect things all that much, whereas a 10 represents a major difficulty (cost) or a highly desired benefit. Add up all the cost ratings and write the total, then add up all the benefit ratings. You should now have two numbers side by side. The number on the left is the cost factor and the number on the right is the benefit factor. These two numbers together are your cost/benefit ratio.

QUESTION # 3. Who needs to be involved with this decision?
Good leaders understand that making decisions goes far beyond being in charge and calling the shots. Decision making is also one of the best developmental tools at their disposal. In order to create momentum around decisions the leader must cultivate commitment. Asking for input, especially from key stakeholders, is critical for momentum and effective implementation.

The Five Levels of Decision Making
The following are five levels of involvement leaders use when deciding who should be part of the decision making process:

Level One: Leader makes the decision alone.
This is used especially in emergency situations where immediate action is critical. Input is not helpful, quick action and immediate compliance is what counts.
Level Two: Leader makes the decision with input from key stakeholders.
The leader seeks input from key stakeholders, usually to cover blind spots and enhance their depth of understanding around the issue to be decided. Stakeholders hold important information and not consulting them would be foolish.
Level Three: Consensus building - leader gets final say.
Leader solicits input from a variety of sources, builds consensus around a specific direction, allows the group to make a recommendation of which the leader must finally approve. This level takes considerable skill and is where developing leaders often make mistakes. Solid decision makers are well versed in the skill sets of this level.
Level Four: Delegate the decision to someone else.
The authority and responsibility are clearly shifted away from the leader (usually to a direct report). Both the leader and the direct report live with the consequences - good or bad. The leader reviews the decision, but does not change it and uses it as an opportunity for development.
Level Five: True consensus.
Leader fully delegates the decision to a group (usually a committee). If the leader is part of the committee then he/she is just one vote among many. The group processes all the decisions involved, compromises positions until everyone is in agreement.
Strong leaders understand the process decisions must go through to be effective. As leaders move higher in organizations the demand upon their time and influence also increases. Poor leaders use the power of their position to make things happen. Whereas strong leaders use the power of their position to draw others into the decision making process – thus always developing the bench strength of the organization.

Action Point – Go through the five levels and decide who you need to get involved (if anybody) to give the decision momentum and secure buy-in. Meet with them and ask for input on your decision, according to the parameters listed in the five levels. Finally, execute the decision and watch the benefits pour in.