In Part I, we highlighted how having too much information about a decision often increases the confidence about the decision but usually doesn’t change the accuracy of the decision. In addition, gathering information takes time and effort, so the result is a more expensive and time-consuming decision that gives you a false sense of comfort. While most banks use the basic seven step process outlined below, in Part II, we highlight two additional rules for the decisioning box that can help increase decision effectiveness.
Tag: Decision Making
It is fairly common for a bank to want to be more innovative or take on a new strategic direction and the first thing they do is form a committee. They then decide who should be on that committee and in the desire to be all-inclusive, management invites each department head and maybe a board member or two. The thinking is that this structure will ensure the greatest number of ideas and that those ideas will be vetted. You know what happens? A great number of ideas, good vetting but very little innovation.
Many banks have a formal or informal expectation that certain decisions need to be unanimous. We often see this in credit committees, strategic planning sessions, hiring decisions and operational moves. If you find your bank committees often achieving votes where 100% of the members agree, chances are you have a flawed system. While unanimity in decision making seems like a positive attribute, we will show you how it counterintuitively leads to more risk, not less.
Say what you will about the morals and politics of President Kennedy, but his administration did more for bank decision making than almost any other group of people. After a horrible set of decisions connected with the Bay of Pigs in 1961 Kennedy vowed never to make those mistakes again. As a result, he commissioned an “after action review” that was uncommon at the time, but is now standard procedure for the military, highlighting some key failure points in the decision making process of the operation.