Countless articles and books have been written about decision-making, and many have valuable insights to share. But anyone hoping to eliminate the agony of it all—perhaps by learning methods of data gathering and analysis that will cause the answer to magically reveal itself and bring all parties into alignment—is out of luck.
“There is no inherent reason why medicines should taste horrible—but effective ones usually do,” Drucker warned. “Similarly, there is no inherent reason why decisions should be distasteful—but most effective ones are.”
These sentences appear in Drucker’s book The Effective Executive, which marks its 50th anniversary with the publication in January of a special edition (featuring a foreword from Jim Collins and an afterword from the Drucker Institute’s Zach First).
At fewer than 200 pages, The Effective Executive manages to be both definitive and concise. It also remains as relevant as ever: When Jeff Bezos of Amazon hosted a series of all-day book clubs with his top executives a few years ago, The Effective Executive was one of the three books that he picked, while McKinsey has noted that the time-management suggestions Drucker makes in his 1967 work “sound remarkably like the ones offered up by today’s . . . experts.”
But of all the topics covered in The Effective Executive—including not just managing your time but building on your strengths and setting priorities—one of the book’s most memorable chapters is centered on that most inescapable of executive duties: making decisions.
So Baker chose to issue stock as well as debt. “This was not initially met with a warm response,” he says. “But our calculus was this: If you end up with too much stock—that is, the credit markets don’t freeze—it’s really easy to fix. You issue a three-line press memo announcing a share buyback and pay for it by borrowing the money you would have borrowed anyway.”
In short, using equity financing placed Ecolab on the right side of wrong. Several months later, after the crisis in Washington was averted and credit markets could exhale, Baker knew what to do. “We announced a buyback,” he says. And shareholders were happy again.
If you wait until you have all the facts and data you’d like to have, you’re too late.
President, Purdue University
DECIDE TODAY, REPAIR TOMORROW
With a long career in the public and private sectors—political advisor to Ronald Reagan, executive at Eli Lilly, head of the Office of Management and Budget during the first term of George W. Bush, two terms as governor of Indiana and, today, president of Purdue University—Mitch Daniels has developed a lot of rules about decision-making.
He serves up a few: “Religious about ends, agnostic about means.” “‘Oops’ isn’t a hard word.” “Results are trump.” (He says he may now have to reword this one.) He also keeps a copy of The Daily Drucker on his shelf—a practice that we wholeheartedly endorse.
But Daniels places particular emphasis on speed. “If you wait until you have all the facts and data you’d like to have, you’re too late,” he says. “That’s why the second-best decision today often produces a better result than the perfect decision in six months.”
One reason speed can be especially important in government is that leaders come into office with momentum, and if they want to make use of it they must tackle big efforts early on.
When Daniels became governor of Indiana in 2005, he faced a $700 million structural deficit as well as overburdened infrastructure that was overdue for improvements. Within two months, Daniels oversaw the passage of an austere budget that avoided tax increases and allowed the state to accumulate a reserve fund. He also pushed ahead on a plan to lease the Indiana Toll Road to a private company with all proceeds going to long-term investment in infrastructure. This was a controversial deal, and some people advised him to wait and study the idea for a year.
“If we’d done that, it never would have happened,” Daniels says. Instead, he took the plunge, and it worked out well. “Today,” says Daniels, “there are billions of dollars of completed road and bridge projects, many of which had been on the books for decades, and people are much less likely to debate it once the results are literally concrete.”
SELL THE TOUGHEST DECISIONS BY REFRAMING THEM
When Rich Stearns worked in the private sector—as CEO of Parker Brothers, the maker of games, and as CEO of Lenox, the producer of china—he made plenty of hard decisions. But some of the toughest have come as president of World Vision U.S., a Christian humanitarian organization, which he has headed for the past 19 years.
In the late 1990s, Stearns and his team decided to address the toll taken by AIDS in Africa. Many of World Vision’s usual supporters were reluctant to confront the issue, since they associated AIDS with promiscuity and drug use. Stearns and his colleagues challenged this bias by reframing things: They reminded donors that customers of African brothels were only a small fraction of those affected by AIDS.
“We took a strategy of focusing on orphans and widows,” he says. The organization raised hundreds of millions of dollars and, according to Stearns, wound up generating enthusiasm in Congress for the President’s Emergency Plan for AIDS Relief, passed in 2003.
A couple of years ago, World Vision set out to help another group unpopular in some quarters: refugees from the conflict in Syria.
“Fear was strong in the American public, and there was an anti-Muslim bias and an anti-refugee bias,” Stearns says. “People were also experiencing Middle East fatigue after two long and painful wars.”
So what to do?
Again, Stearns reframed things—not just for donors, but also for his own employees—as he looked to provide millions of displaced Syrians with shelter, education and sanitation at refugee camps in neighboring countries.
“I fell back on those core Christian values,” he says. “I was a stranger and you invited me in.”
The campaign has been a success. In just the past few weeks, World Vision has distributed about 2,500 blankets and 1,000 mattresses to 3,500 people fleeing Aleppo. And the organization says it is planning to scale up its efforts to support 100,000 newly displaced Syrians.
BROADEN THE SCOPE OF CHOICES
When behavioral economist Dan Ariely goes out to dinner, he likes to ask the waiter which dish on the menu is the most unusual, rather than which is best or most popular.
“I think one of the challenges in decision-making is how to expand the scope to include choices that you don’t normally consider,” he says, noting that novel ideas and experiences often lead to innovations and improvements.
“In general, trying new things is recipe for a better life,” Ariely says. “We often do things many times, not really allowing any variance or any learning.”
Similarly, when deciding whether to accept a client or work assignment, Ariely likes to consider if a potential opportunity offers something unfamiliar. He recalls being contacted by someone in the financial sector who wanted him to consult on a product that would allow people to buy large blocks of stock. Despite knowing very little about stocks—and warning the caller of this—Ariely was drawn to the novelty of the gig. And so he traveled to Toronto to spend a day with this new client.
“During that day I learned a lot about the stock market,” Ariely says. “And I taught them about how to create trust, which is something you need when you sell blocks of stock.”
Plunging into the unknown does require one form of preparation, however: accepting a higher risk of failure.
If you’re going to make unusual decisions, therefore, keep the stakes at a reasonable level—by making your choices more about small projects, say, than about really weighty matters such as war and peace.
Also, be ready to appreciate the insights gained from things that don’t work out. The unusual entree might taste bad or the strange client might be a dud, but you’ll be the wiser for it. You “celebrate in those cases,” as Ariely puts it, and “change the focus from enjoyment to learning.”
Lee Ehmke, president and CEO of the Houston Zoo, estimates that he makes upward of 10 major decisions a year—about personnel, budgets, strategy and animals coming or going, among other things. One rule he brings to them: Be disposed toward going big.
In fact, if a non-incremental approach isn’t among the alternatives being considered, ask if it should be.
Ehmke learned this lesson after moving from New York to Minnesota in 2000 to head up the Minnesota Zoo, a state-owned asset with declining attendance. For the first couple of years, his impact was minimal.
“I realized that trying to advance slowly and build up credibility and do things one step at a time wasn’t getting us anywhere,” he says.
So Ehmke stopped looking at how to shuffle around limited resources (an annual operating budget of about $17 million) and instead came up with something truly transformative: a makeover that would cost many times that amount and turn the zoo into a world-class, rather than provincial, institution.
Specifically, the exhibits would become more immersive, the walks shorter and the concrete less ubiquitous.
Going big worked. This new approach attracted the enthusiasm of the governor and quickly pulled in $35 million in state funding. Donations from private donors also climbed.
Ehmke says that, ever since, he’s made sure to include a going-big option in the mix. “Decisions that go big and bold,” he says, “capture attention and create excitement and interest and often success.”
Decisions that go big and bold capture attention and create excitement and interest and often success.
President and CEO, Houston Zoo
LET YOUR VALUES DRIVE YOUR DECISIONS
Since 2009, Tom and Kate Chappell have run a clothing company called Ramblers Way, which specializes in creating “non-itchy” wool garments sourced ethically and made entirely in the United States, both to ensure environmental standards and provide employment to Americans. But they’re best known for having founded and led Tom’s of Maine, famous for its toothpaste, deodorant and soap, which was purchased in 2006 by Colgate-Palmolive for $100 million.
Each time they’ve confronted difficult decisions, the Chappells say, the answers have become much clearer after being viewed through the prism of their organization’s core values.
At both of their companies, one value has been a commitment to creating products that are healthy for people and the environment. Another has been to educate consumers on how their purchases benefit the planet and their own well-being.
Like all businesses, Ramblers Way has faced plenty of challenges. For example, the fabric used by Ramblers Way relies on a scarce type of wool—Rambouillet Merino—and sourcing it exclusively in the United States became difficult a few years ago because of the company’s rapid growth and fluctuations in supply.
One option was to compromise on the texture of the wool or blend in other fibers, but that would weaken the appeal of the brand. Another was to source it outside of the country, but that risked undermining the company’s commitment to sound environmental practices.
Eventually, the Chappells chose to source in part from abroad, but they imposed a condition: All of their wool providers would have to meet something called the Global Organic Textile Standard to help ensure that they were acting in ecologically and socially responsible ways.
The Chappells’ core values, in other words, drove their decision.
A second challenge came from their approach to promoting their garments. Originally, the Chappells sold wholesale to independent clothing retailers. But this deprived Ramblers Way of interaction with their own customers. And since educating consumers is a core value for the Chappells, they decided to cut out the intermediaries and launch an online store as well as three of the brick-and-mortar variety.
This new approach has wound up working well. “It allowed us to lower our retail prices considerably,” says Tom Chappell. “And it’s given us control over our business, because we’re educating consumers and we have a direct relationship.”
They now plan to open 20 more branded stores.
AFTER YOU MAKE A DECISION, SHOOT HOLES IN IT
In the summer of 2009, one year after a financial crash that nearly brought down Wall Street, a proposed settlement landed on the desk of United States District Court Judge Jed Rakoff.
The parties involved were the U.S. Securities and Exchange Commission and the Bank of America, the latter of which had agreed to pay a $33 million fine for having failed to inform its shareholders of several facts that were critical to a questionable deal it made when it acquired Merrill Lynch. With most settlements, especially those involving a government agency, the judge will glance at them quickly and sign off.
Rakoff, however, chose to apply a rule that he uses for all important cases: He made a list of the three best arguments that could be mustered against his own decision.
“I know that if I don’t have a clear and coherent answer to each of the objections,” he says, “then I have to rethink the entire decision.”
In this instance, says Rakoff, the first objection that he wrote down was that Bank of America shareholders were paying the settlement, even though they were the ones who’d allegedly been defrauded. “I tried really hard to come up with an answer to that,” Rakoff says. “And I couldn’t.”
This led Rakoff to veto the settlement, an extremely rare move that made him a hero to some and a villain to others.
Eventually, the parties returned with a settlement that placed the financial obligations on former Merrill Lynch shareholders, the beneficiaries of the misconduct. Rakoff approved this one.
“I know that many people who have to regularly make important decisions pride themselves on making them quickly,” the judge says. “It’s almost a macho thing.”
As he well knows, however, it’s often better to slow down a bit and play devil’s advocate—against yourself. *
What will you do on Monday that’s different?
DIGEST A LITTLE DRUCKER
If you haven’t ever read it, or haven’t read it for a while, now is a great time to study up on Peter Drucker’s pointers for sound decision-making by ordering a special 50th anniversary edition of The Effective Executive.
TAKE STOCK OF YOUR DECISIONS
Go through the last few big decisions you’ve made and ask yourself: Is there someone clearly responsible for carrying each of them out? Do they have clear deadlines? And do all of the people who will be affected understand what’s coming?
The next time your team meets and easily agrees on a decision, don’t approve. Instead, urge everyone to think through possible alternatives and try to stimulate the imagination through healthy disagreement.