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Without any alternative? – Improved decision making

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You surely know such sentences:

  • “We have to do it this way!“
  • “There’s no other option!“
  • “It’s the only way to get through this!“
  • “There is no alternative!“

Such phrases are often used to justify unpopular decisions, not only in politics, but also in companies, clubs, or schools, i.e. not only the decision makers Themselves, but also other people are affected by the consequences of a decision.

The attractiveness of presenting decisions as the only way

Presenting something as the only alternative, as it is suggested by such phrases, does have its advantage: it makes matters seem urgent, and urgency is a pivotal element in change processes [1]. Also, if deviating paths of action are excluded right from the beginning, those concerned are discouraged from thinking about other options. So for a decision maker, putting forth a decision for which there are supposedly no alternatives definitely has its pros.

However, deciding on a single-option basis has serious disadvantages. If there is only one option to choose from, the actual decision has already been taken elsewhere. Thus you can assume that the decision makers will not back up their “decision” as they would do if they had really taken a decision on their own. In the context of change processes, this will weaken the leading coalition and not strengthen it [1].

Another effect of signing off on a decision rather than sincerely taking the decision is that decision makers will not think about and discuss a matter as thoroughly as they should. Therefore, an option for which there is no alternative way of action is hardly sufficiently elaborated and regularly not the best option for the organization.

Developing single option strategies?

Unfortunately, decisions options without alternatives are often difficult to recognise. Whenever there is only one answer to a strategic question, only one solution to an entrepreneurial problem, only one option in a decision paper, someone is trying to apply the concept of no alternatives.

This may not be done out of bad will, but unconsciousness does not make this approach any better: Such a decision does not match the ultimate potential of the organisation. Important strategic decisions are taken without sufficiently discussing the underlying problems and searching for different courses of action.

Strategy development as decision process

You can easily avoid single option strategies by conceiving strategy development as a decision process which features a real choice [3]. The idea put forth by Lafley et al. is based on a simple jet effective approach: For each strategic decision, define at least two contradicting options to choose from.

The resulting success is enormous. Since there are two or more competing options, discussion on the decision become more intense, the pros and cons are thoroughly discussed, and assumptions are critically reviewed. The outcome is a higher quality of strategic decisions.

Improved strategic decision making

In order to leverage the potential for increasing the quality of strategic decisions, a four-step approach can be used:

  1. Define alternative options;
  2. Identify success requirements and obstacles;
  3. Analyse feasibility and prospects;
  4. Decide on one option.

First, the decision options need to be defined. It is important that there are at least two options. These should be formulated in a way that only one of them can be implemented as the process is about choosing the best option for the company and not arriving at a compromise.

After drafting the strategic options, the requirements for a successful implementation and its obstacles need to be worked out for each of them. By sketching out the respective requirements you create a baseline for further evaluation.

Next, data need to be collected which supports or refutes the strategic options. The data available at the end of this step should be sufficient to judge the success and implementability of each of the options defined in the beginning. One additional approach to creating a basis for decision-making, especially in uncertain framework conditions, is scenario planning.

Once all information is available, the final strategic decision can be taken. As the different ideas have been thoroughly considered throughout the decision making process based on hard data, the resulting decision on the company’s strategy is better adjusted to the actual situation of the company.

 

[1] J. P. Kotter (2012). „Leading Change”. Harvard Business Review Press: Boston, USA.

[3] A.G. Lafley et al. (2019). “Die Kunst der Strategieplanung”. In: Harvard Business Manager, Edition 1/2019, pages 44-53.

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Four requirements for scenario planning

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Making strategic decisions in an insecure, constantly changing environment is challenging for two reasons: first, the changes a company faces are normally unpredictable and second, in most decision-making processes there are systematic weaknesses.

Using scenario planning to improve decision-making processes

According to Kees van der Heijden it is several different mechanisms that systematically paralyse strategic decision-making processes. In his studies he identifies seven such mechanisms which individually or in combination can cause a strategic paralysis of companies:

  • Ingrained, inflexible attitudes
  • contradictory, unaligned perception
  • prejudiced way of receiving and interpreting information
  • embedded biases
  • risk aversion
  • overconfidence
  • misjudging the accuracy of one’s own predictions

These mechanisms can easily affect decision-making processes in a negative way, especially if the environment of a company is exposed to substantial change. All this leads to errors in strategic decisions and, eventually, economic failure.
One way of avoiding these traps is scenario planning. Scenario planning visualises possible future developments. This process, usually cooperative and drawing on data from different sources, bypasses the pitfalls listed by van der Heijden. It systematically improves the effectiveness of strategic planning, which, in turn, will become more responsive to shifting circumstances.

Key criteria for scenarios

If scenario planning is to have such a positive effect on decision-making processes, the developed scenarios have to meet the following criteria:

Relevant

The forecast spectre of developments drafted by scenario tools must be relevant to the decisions in question. This means that scenario planning must take account of all dynamics that have an impact on relevant decisions and their consequences.
In a similar way this is true for the specified timeframe: for a comprehensive evaluation it should cover the whole range of possible decisions and their effects. If the created scenarios, however, go significantly beyond this time span, they might distract attention from essential issues.

Comprehensive

Apart from being relevant, scenarios should also be comprehensive. In this context the term ‘comprehensive’ means that both uncertainties and certainties are considered. Uncertainties, i.e. dynamic situations and constellations which may develop in any direction, form the basis for thinking up plausible futures. However, certainties, i.e. factors whose future development can be easily predicted, are just as important in scenario planning because they help scenarios remain realistic.

Sufficiently revealing and realistic

The scenarios created by scenario planning should be sufficiently revealing. This means that they should extend the scope of possible futures and their timeframe as far as possible. If this requirement is met by two, three or more scenarios depends on the specific case in question.
At the same time, the scenarios should remain realistic by remaining within the scope of the prognosis. This scope should be made plausible, wherever possible, by available data and studies.

Restricted

Every scenario developed in the context of scenario planning should be restricted. Scenarios are no predictions of the future, but describe a possible way that things might turn. Such an outline has a clear beginning, usually the present, and a defined end-point, which is the end of the timeframe under consideration. Between these defining points lies the description of a development which begins at the starting point and goes through right to the end-point.
If these four criteria for scenario planning are met, the scenarios will be a strong tool to avoid the described weaknesses in decision-making processes.

We highlighted guidelines for the decision-making process in the article “Without any alternative? – Improved decision making”. Considering these tips will enable you to develop meaningful scenarios and create a positive impact on your company. If you have any questions, do not hesitate to contact us.

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