Managerial Decision Making: The Ideal Model

This article is an excerpt from the Shortform book guide to "High Output Management" by Andrew S. Grove. Shortform has the world's best summaries and analyses of books you should be reading.

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What is managerial decision making? Are there certain guides or models you can follow?

Managerial decision making is both the way managers make decisions, and how they determine how decisions are made. Using this ideal decision-making model from High Output Management, you can improve your managerial decision-making skills.

Read more about managerial decision making and how it works.

Ideal Managerial Decision Making

It’s important to adhere to a standard decision-making process for two reasons:

It’s faster—you don’t have to come up with a new process every time.
It’s less frustrating for the affected parties. If people know upfront who will be making and approving the decision, they know there’s the possibility the decision they’ve been working on will be vetoed. If they don’t know this upfront, even if there’s a good reason for the veto, they’ll potentially see the veto as political maneuvering or become demoralized.

There are four steps to Grove’s ideal managerial decision making model:

Step #1: Address the Six Pre-Decision Questions

Before starting the managerial decision making process, to promote an optimal, efficient decision, you must give everyone involved in the process the answers to the following six questions:

1. What is the decision?

For example, Intel had to decide where to build a new plant in the Philippines. The choices were a location next to an existing plant (which would be more convenient but more expensive because space was limited and the building would have to be multistory) or a new location.

2. What is the deadline?

Intel had to decide within a month so that there would be enough time to build the plant before it was needed.

3. Who will make the decision?

Intel’s facilities people (who knew about costs and construction) and manufacturing plant managers (who knew about operational benefits) would make the decision together. Three managers from approximately equal power-positions represented each group.

4. Whom do you need to talk to before making the decision?

The managers of each group spoke with their staff to gather relevant information.

5. Who will approve or reject the decision?

Grove would do this because he was the first common person in the organizational chart (the president) above the senior managers. He was also familiar with the existing Philippines plant.

6. Who needs to know the decision?

Grove would tell the chairman of the board. He wasn’t directly involved with plants, but building a new plant is a big business decision and therefore relevant to the chairman.

Step #2: Encourage Free Discussion

Discussion should cover all points of view and all relevant information because the best decision will come from considering the opinions of all knowledgeable people. Everyone should get to speak freely. Encourage disagreement—it’s common for participants to stay out of the discussion until one view seems likely to win and then jump in to support this view, but this behavior won’t produce the best decision because it results in people withholding their true opinions, which isn’t helpful for managerial decision making.

Free discussion ends when you’ve heard and considered all the information. At this time, push for a consensus, or make the decision yourself (you’ll be well-informed thanks to the free discussion). This timing is important:

If you end a discussion too early, you won’t have all the information you need to make a good decision.
If you don’t end it, it could go on forever and people could get further from the right decision.

For example, the Intel groups considered all the information about the new plant’s possible locations, including costs, geography, and traffic patterns. They thought it would work best to build the new plant beside the old plant but keep the new plant small to avoid huge costs.

Step #3: Explain the Decision Clearly

Once something is decided, it should be explained as clearly as possible to everyone who will be affected by it.

People tend to be vague about controversial decisions to avoid arguments with those who disagree with the choice, but you should do the opposite. Being vague doesn’t prevent an argument, it just postpones it, and people don’t like being kept in the dark.

If the decision is very different from what was on the table (for example, if Grove had canceled the construction of the plant), announce it, give people some time to digest it, and then later, talk about it with everyone. Some time for reflection and the opportunity to share feedback will help people accept the decision.

Step #4: Demand Full Support

Everyone involved in the decision must support it. They don’t have to agree with it—it’s not always possible to get agreement on everything because everyone has differences of opinion—but they must commit to executing it.

Challenges Associated With the Model

This four-step process comes with challenges in managerial decision making:

1. Unnaturalness. Middle managers often find this model awkward because they struggle to express their views, make hard decisions, and get behind decisions they don’t agree with.

2. Emotions. It’s hard for people to separate their emotions from decision-making, and people tend to get even more emotional when they have to make decisions with people they don’t know. If there’s a big divide between knowledge and power, everyone can feel uncertain. People might fear sounding stupid and not speak, or fear being overruled and therefore feel embarrassed.

To manage your emotions, remember that you, like all people, are smart and have willpower.

3. Peer-group syndrome. When in a group of peers, most people are reluctant to express an opinion because they don’t want to say something that the rest of the group doesn’t agree with. Therefore, people talk around in circles until they feel confident that the group is leaning towards something (or if this doesn’t happen, they talk forever). One member will state the perceived consensus weakly using first-person plural, so it’s not attached to them personally. If they’ve read the room right, everyone else will start supporting the position too. This is disadvantageous because it cuts the discussion short, and without examining all points of view, it’s harder to make a good decision.

There are two ways to avoid this circling:

Put someone in charge of the meeting. If this person notices that peer-group syndrome is developing, they must intervene and set the decision-making process back on course. Choose whoever will be most affected by the outcome of the decision as the leader, or call in a more senior manager (which is called a peer-plus-one approach at Intel). A senior manager can advise on decision-making techniques and lend the group some confidence.
Instill self-confidence in all of the peers. Tell everyone that there are no life-threatening consequences of making a suggestion that’s overruled or a wrong decision.

Managerial Decision Making: The Ideal Model