Decision Quality (DQ) primer

Steve Glickman and I led a book club on Strategic Decisions Group (SDG) 's book "Decision Quality: Value Creation from Better Business Decisions" in May 2023 and put together the following primer containing some of the fundamentals. I recommend reading the book for a more detailed and nuanced understanding. It should help you as you embark on your decision-making adventure!

What is a Decision to focus on: An irrevocable allocation of resources. Not decisions already made to be taken as a given (policy), nor those that can be made either later or separately (tactics). Similarly, don't expend too much effort on two-way doors, reversible decisions.

Change your approach depending on the?magnitude of decision: Quick, Significant, or Strategic

Core concept: The quality of a Decision can be evaluated at the time it’s being made rather than waiting for an outcome. It can be done by checking against each of the six elements with the quality limited by the weakest link in the chain

Six elements of Decision Quality:

1. Appropriate Frame: What problem (or opportunity) are we addressing? Components: (1) Our purpose in making the decision; (2) The scope, what will be included and excluded; (3) Our perspective, including points of view, how we approach the decision, and what conversations are needed and with whom. Proper framing prevents solving the wrong problem and makes decision-making efforts quicker and easier.
2. Creative Alternatives: Alternatives need to be creative and compelling and sufficiently different. Simply debating whether to accept or reject a proposal is insufficient. Diversity is key in coming up with creative alternatives. A decision can’t be better than the best alternative. Settling for good enough leaves tremendous value on the table.
3. Relevant and Reliable Information: Information is relevant when it helps us anticipate the value outcomes that may arise after an alternative is chosen, and when sensitivity analysis shows it to be a key driver of value during sound reasoning. Information is reliable when it is trustworthy and unbiased. In the face of uncertainty, information that is needed for a decision must be expressed with possibilities (i.e. specific possible outcomes) and probabilities (i.e. their likelihoods of occurring).
4. Clear Values and Tradeoffs: Values are preferences and decision makers must make trade-offs between values. Without clarity about both the values and the tradeoffs in a decision, we are unlikely to choose the best path forward.
5. Sound Reasoning: For complex decisions, tools such as decision trees and tornado diagrams help create a system for sound reasoning. The human mind is not wired to reliably intuit this amidst uncertainty. Questions to help ensure sound reasoning on p104.
6. Commitment to Action: Without effective action, all of the time and effort that went into the decision is wasted. Involvement of the right people in the decision effort is critical. The right people must include individuals who have the authority and resources to commit to the decision and make it stick (the decision makers) and those who will be asked to execute the decided upon actions (the implementers).

Appropriate Frame Common mistakes include: plunging in with no conscious frame, falling victim to the comfort-zone mega-bias, or framing the problem too narrowly. (p49)

Characteristics of good alternatives (p53-54): Creative; significantly different; representative of a broad range of choices; reasonable contenders for selection; compelling; feasible; manageable in number. Strategy tables compare alternatives on the values selected in the frame.

Relevant and Reliable Information - Things that can go wrong (p74):

• Biased sources; Data containing errors; Information sources without expertise; Information that has been cherry picked to justify certain conclusions; The temptation to seek only the information that supports biased opinions and assumptions; Overconfidence-that is, believing that we know more than we do.
• Decision trees representing the sequence of decisions and uncertainties show the possible outcomes and probabilities of each option and can be populated with this information.

Clear Values and Tradeoffs: It is important to keep a clear line of sight to the ultimate direct values we seek even when indirect values are tracked. Decisions can be simplified by using even swaps to convert all values, including intangibles, to a common unit. Discounting should only be used to account for time preferences, not differences in risk.

Sound Reasoning Tools include: Decision trees; Influence/relevance diagrams; Tornado diagram with sensitivity analysis; Flying bars comparing uncertainty range of possible outcomes for alternatives

Commitment to Action - Things that can go wrong (p116): Disagreement about whether a decision needs to be made; Lack of agreement on the quality of the other DQ requirements; Discomfort with the decision’s inherent uncertainty; Hesitation in shifting from decision mode to action mode; Failure to align with those who must implement the decision

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Mega-biases that affect decision making:

1. Narrow Framing — this is the most common source of decision failures. (p. 145)
2. Illusion of DQ — a decision is only as strong as its weakest link. Decision makers are wired like the rest of us to make good enough decisions.
3. Agreement trap — an agreement does not equal Decision Quality.
4. Comfort zone mega-bias — we solve the problem we are comfortable with, rather than the problem that needs to be solved.
5. Advocacy/approval myth — effective advocacy is misinterpreted for evidence of the quality of the recommended decision.

The Dialogue Decision Process is useful in mitigating many of the biases and ensuring alignment between decision makers, the project team, subject experts, and implementers.

The Decision Quality Appraisal Cycle to use for significant decisions

1. Develop initial frame
2. Make rapid pass through all DQ requirements
3. Assess quality of each requirement
4. Improve quality of weak links
5. When all requirements are 100%, make the decision and shift into action mode

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p.s. Opinions and perspectives are my own and not representative of other groups or organizations.