Decision Consensus and Efficiency Can Go Together

Michael Roberto of Harvard Business School writes in a case study, "for firms to perform well, managers must make high-quality decisions in an efficient manner and simultaneously build consensus to facilitate implementation." The problem is, managers (and many scholars) believe the time required to build consensus takes too long.

Roberto worked with executives at Military Engineering, Inc., a supplier of military systems, to identify 10 strategic decisions—high-impact, complex decisions whose solutions would require significant resources and various company functions—they had made in the previous 18 months. Then he interviewed and surveyed people at four organizational levels (not just top managers) to find out how the decisions were made. He determined "efficiency" based on how often groups reconsidered options or revised goals, and how much time they spent on the process. "Consensus" was defined by how similar each person's understanding of the final decision was, and how committed they were to fulfilling it. A year later, Roberto looked at company and public documents to judge how the decision panned out, and the results were mixed. For example, four decisions resulted in "new contracts, increased revenues, and productivity improvements," but three led to "cost overruns, dismantled alliances, and lost contracts."

Contrary to popular belief, there was no direct relationship between efficiency and consensus. Three of the ten groups were able to both reach decisions efficiently and build strong consensus, and they had better outcomes than the others groups. Of those, three failed at both efficiency and consensus, and four teams achieved only one. The "Application" section describes how the top groups achieved both.

Making decisions efficiently cuts the costs of the decision-making process and reduces opportunity costs (the business opportunities you lose while making your decision). However, building consensus is well-proven to lead to better implementation of a decision. This happens because team members and the groups they represent are more committed to the solution and feel more personal investment in success. To achieve efficiency and consensus, Roberto proposes several tactics:

• Create and agree on criteria for your decision before starting the process.
• Make a tentative decision allowing for events out of your control. Effective groups allowed for that uncertainty by saying: "'we are going to do this if we can get x, y, and z…,'" as one participant put it, so the decision "'was always contingent on certain events happening.'" This approach reduces concerns about a decision, paving the way to agreement, and "provides an opportunity for additional learning prior to a final decision…"
• Make sure everyone is working from the same information at the same time. "During a group decision," Roberto writes, "people felt disadvantaged if they were examining data for the first time, while others had reviewed it earlier." The practice of "pre-selling" some members also made the others question whether "their views and opinions were truly valued…"
• Do not propose or waste time on options no one really supports. What Roberto found was that inefficient groups wasted time on options included just "to make the process appear thorough and analytical."
• Do not allow strong advocates for an option to evaluate that option. Strong believers tended to filter out information that hurt their positions or otherwise slant the data to support their beliefs. Besides hurting decision quality, this, too, caused other members to question their roles in the process. The more effective groups "invited third parties to provide objective analysis" of the options, such as "the firm's strategic planners, its financial analysts, or external consultants."

Source: Roberto, M. (04), "Strategic Decision-Making Processes: Beyond the Efficiency-Consensus Trade-Off," Group & Organization Management 29(6):625.