You are your decisions 9781527509054, 1527509052

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You Are Your Decisions

You Are Your Decisions By

Love Ekenberg, Harald Kjellin and Kristina Sygel

You Are Your Decisions By Love Ekenberg, Harald Kjellin and Kristina Sygel This book first published 2018 Cambridge Scholars Publishing Lady Stephenson Library, Newcastle upon Tyne, NE6 2PA, UK British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Copyright © 2018 by Love Ekenberg, Harald Kjellin and Kristina Sygel All rights for this book reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. ISBN (10): 1-5275-0905-2 ISBN (13): 978-1-5275-0905-4

Midway upon the journey of our life I found myself within a forest dark, For the straightforward pathway had been lost. Ah me! how hard a thing it is to say What was this forest savage, rough, and stern, Which in the very thought renews the fear. Dante Alighieri, The Divine Comedy (Translation Henry Wadsworth Longfellow)

When the old order changeth, make sure you’re the bugger who changeth it. Churchill, Stalin, or Dalziel, according to Reginald Hill, Midnight Fugue (New York: Harper, 2009)

TABLE OF CONTENTS

Preface ........................................................................................................ ix Chapter One ................................................................................................. 1 Assume Responsibility Chapter Two .............................................................................................. 13 Prioritise Right Chapter Three ............................................................................................ 21 Stop Being Dependent on Full Security Chapter Four .............................................................................................. 29 Maintain Your Composure Chapter Five .............................................................................................. 33 Status and Respect Chapter Six ................................................................................................ 41 Conscious Decision Making Chapter Seven............................................................................................ 49 A Developed Basis for Decision making Chapter Eight ............................................................................................. 57 Distributed Implementation Chapter Nine.............................................................................................. 65 The Importance of Abstraction Chapter Ten ............................................................................................... 83 From Decision to Strategy Chapter Eleven .......................................................................................... 91 Flexibility

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Chapter Twelve ....................................................................................... 101 Do it Right Chapter Thirteen ...................................................................................... 125 An Agile Organisation Epilogue................................................................................................... 131 Suggestions for Further Reading ............................................................. 133 Bibliography ............................................................................................ 141 Biographies .............................................................................................. 149

PREFACE

Our book is directed to those of you who seriously want to gain real success for yourselves, your surroundings, and your organisational contexts and who seriously want to become involved in your lives and the lives of others. We want to give you the tools to become good and conscious decision makers. To start with, you might like to consider the difference between those who earn € 24 000 a year and those who earn € 240 000 a year, or between someone who becomes a celebrated artist and someone who will never be known in spite of an ambition to seduce the whole world. What is the decisive characteristic, at least allegedly, of successful people? x Could it be that they have rich parents? They undoubtedly have greater chances if they do, but many offspring from rich families nevertheless have lacklustre careers. x Could it be their education? Success in life can depend on one’s education, but not always. x Could it be how intelligent they are? Intelligence can lead to success if you know how to use it, but even intelligent people are often not able to effectively deal with reality. x Could it be how creative they are? Although this can be a great advantage, creativity often ends in dreams that never materialise. x Could it be how stubborn they are? Stubborn people go far, but they also tend to get stuck in erroneous thinking. Whatever the real secret may be, we can entertain many ideas about what helps people attain success. But are these ideas true? In this book, we look more closely at success in the important sense of having actually developed an organisation or a context, or having achieved whatever goals one at least believes oneself to have. We’ll concentrate on a characteristic that is decisive for success—a characteristic that is fundamental for realizing your dreams.

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You must have the ability to make good decisions Certainly, pure luck can occasionally determine the outcome, but without structures and analysis it’s hard to make decisions. The core of the matter is that you need good models and you need to know how to collect relevant background information. Put simply: x The better your methods . . . x The more factual your information . . . x The more structured your situation . . . x . . . the better your decisions. In many situations, there aren’t enough facts available to allow you to make a good decision. But astoundingly often, people just fail to find out what they need to know even when this information is available. Those who make spontaneous decisions often get more done than people who analyse the situation. Getting more done may seem to be a good thing. Many people would make that argument, but it’s not uncommon for things to go awry for them. Are our spontaneous decisions the right decisions, and how would we know? Or is there some other factor that determines whether things happen to turn out well after all? Instead, perhaps we should pause to ask just why we feel we don’t have time to prepare before making decisions—and what consequences this lamentable behaviour can have. Most often people are not aware of the need for deliberate decision making. Yes, we could all live our lives any which way we want, but when our ways affect others, and they invariably do, then it’s simply wrong not to take responsibility for what we do. It’s downright wrong not to devote time to investigate and structure the available information and avoid considering our own limitations and what to do about them. But here’s the catch. Taking decision making seriously is hard, and we can’t just sit down and wait for flashes of insight. For those inclined, there’s a plethora of books that describe how limited we are and what deficiencies we have. But these usually contain no clue as to how we can mitigate our shortcomings. Though our failings are often interesting, even entertaining, we need more than self-examination of our limitations to become good decision makers. We would like to address people who are interested in improving their capabilities, especially present and future leaders. Perhaps you already are or would like to become one of those leaders. Take this as an opportunity. We want to show serious leaders how they can improve their ability to analyse, as well as to make and execute decisions. Decisions that matter. Decisions that create, change, and improve both individuals and organisations.

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We see this as an evolutionary process. It’ll be like an absorbing hike, in several stages, perhaps through unfamiliar terrain. And we know that it’s easier for the reader to follow the analysis precisely because it’s so obvious that any simplistic solution to a decision only leads to new decision problems that require new refined methods and new structures. It’ll be a journey towards greater clarity in our recurring confrontations with complexity. The difficulties with making reasonable decisions cannot be overstated. Decision making is an art that must be learned and practiced, and we’ll argue for this in the following thirteen chapters, which thus constitute a kind of exploration of increasing maturity, starting from the way people behave to the way they should behave as policy makers and organisational leaders. We’ll successively describe increasingly difficult decision-making situations that can be read as a series of dialectical processes. Such processes evolve through syntheses between opposites. Decisions evolve dialectically because every solution creates a new problem, the solution of which in turn creates another new problem, and so it continues. We begin with everyday decision making on the basis of common ideas, assumptions, and examples. Decision problems and the methods for handling them become progressively more difficult and more complicated with each chapter. Again, look upon it as a process of maturing, in which there is a gradual development towards a better organisation, but also as gaining a broader understanding of our existence in general. As you learn why it can be difficult to make decisions in certain situations, more elaborate methods and structures will be introduced in order to deal with these difficulties. We start with relatively simple problems from a personal perspective and end with more complex organisational problems. You’ll acquire an increasing ability to understand limitations and to use proper methods with which to manage them. At the end of the book we offer some suggested further reading for each chapter aimed at the readers who wish to more extensively penetrate this fascinating world. Our hope is that you can accompany us in what is actually a rather dramatic story about your own possible development, and an account of how you’ll realize your full potential. During this journey, our aim is that you will assimilate substantial insights about structured methods in decision making and organisational analysis. The authors, January 20181 1 The authors are grateful to Dr. Guy Miklos for highly valuable discussions when writing this book.

CHAPTER ONE ASSUME RESPONSIBILITY

It’s quite typical that people don’t understand how their feelings of stress and dissatisfaction are related to their bad decisions. How can we then understand our feelings better? Certainly the first stage is to fully recognise the feelings and understand that what you’re experiencing correlates with the quality of your decisions. Experience comes from being attuned to what’s happening. By this we don’t mean neutral or meaningless experiences, but rather experiences that are emotionally significant. Experiences that matter. Experiences that involve reflection and criticism.

Decision Qualms and Their Opposite But what if we aren’t in contact with any clear feelings about what’s happening? We may experience many feelings, but they might be so conflicting and fragmented that they become more of a hindrance than a help—or even worse, we might become so fed up with it all as to be indifferent to what’s going on. Making decisions becomes particularly difficult for matters that most concern us. x Should I enter into a relationship with this or that person? Or at all? x Should I take the job offer that’s challenging, or the one that’s secure? x Should I buy that luxury residence downtown or the less expensive house in the suburb? x Should I say yes to the challenge of more tasks at work, or should I prioritise my family? x Should I even bother carrying on living, when I’ve lost so much? We may think it pointless to more or less unsystematically wander around deliberating over problems that we actually believe to be unsolvable.

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Many people simply have trouble making decisions even if they spend a lot of time pondering the problems. And many decisions are truly difficult. We might consider needing to live with our decision problems for a while, and dwell obsessively upon them until some kind of solution appears that we might consider an adequate model of our options. Someone who’s invested significant energy focusing on a specific problem may one day suddenly wake up and shout, “Eureka! I have it”. The sum of all unconscious processes really can sometimes lead to one decision option weighing emotionally more than an alternative option. Not having a clue as to how that decision was reached might seem immaterial. Surely it’s the result that matters. We just needed to brood a while in order to build up enough feelings about the possible options in order to reach our decision. This is how it often happens, and it’s not uncommon for this to be sufficiently functional for us to pull through. Not surprisingly, however, there are a number of problems with this approach. Often it requires an unnecessarily long period of time, and the decisions we make aren’t always the best. Also, how could we even know what’s best if our process is more or less unconscious and devoid of structure? The reasons for making the decision aren’t even clear to us ourselves. Furthermore, we’ll never be able to explain the decision so that others can understand it. An important aspect here is that to not make a decision is also a kind of decision, but a decision in which one may lose control. So why do many people have such difficulty making decisions? There are various reasons: x They’re listless x They don’t know what they want x They see themselves as victims in a situation they can’t control x They don’t understand what to do x They don’t care x They fear something or other x They feel comfortable with their fantasies When we don’t want or cannot make decisions, what happens is that we fail to exploit opportunity, and instead we become more like passive observers of our own lives or cause unintended harm to others through our passivity. We don’t live life to the fullest and instead are reduced to a piteous appurtenance to the mindless masses. History and our surroundings are filled with what the mindless masses bring about through their irresponsible passivity. There is another type of decision maker: one who is active but doesn’t ponder. These decision makers think that there’s power in making

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decisions—preferably quickly, preferably assertively—commandeering without explanation, neither to themselves nor to others. Occasionally such decision makers are even worse than the passive ones. There are many psychological aspects of decision making that have nothing to do with the decisions themselves. But there are many other problems in our decision making, even when we are seriously trying to make good decisions. We may not think we have enough information, knowledge, experience, or training in a field, or we may believe that we simply don’t have the knowledge and methods to be able to make decisions at all. Most decision problems are a result of the attitude we have towards decision making. These attitudes are easier to perceive in others because it is uncomfortable to see them in ourselves. So first we need a short survey of the attitudes that we ourselves bear. x It’s not my fault To avoid blame is a very common and destructive way to deal with decision-making situations. x It wasn’t me I bear no responsibility for things having turned out this way. x I can’t control what happens The reasoning is often founded on the problem being seen not as something that we need to fix, but rather that “others” must set right. In this way, we create a reason to avoid the problem and focus our attention on something more agreeable. The sad thing about this attitude is that it rarely leads to improvements; to our great surprise, those “others” don’t jump in of their own accord to arrange things the way we’d like to have them. x It’s someone else’s fault This variation on the above is the seductive blame game, which assumes that someone else has done something stupid or wrong, and it’s therefore their duty to fix it all and possibly compensate me for the loss I suffered. Unsurprisingly, in this case we clearly slide into a victim mentality.

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Harry has been heading his management unit for five years. He loses his position as boss in conjunction with two care units merging and thereby has to revert to performing tasks that constitute the basis for his employment as a nurse. The information about the merger came suddenly, from above, and was presented somewhat clumsily to the whole team only one hour after Harry found out that his appointment would not be extended. After a month or so, Harry still feels discontented. This manifests in his taking two weeks of sick leave due to stress. When he returns, he spends most of the workday in the break room, where he predicts the entire clinic’s downfall, instead of making a plan to hand over responsibilities to the new boss and acquainting himself with the practical routines that have changed since he last worked clinically. A short-term benefit of Harry’s strategy is that it can be a good way to force other people to work toward a goal he himself had no desire to work towards. Harry may also feel superior and think he has insight without having to try especially hard by sitting in the break room feeling offended. This attitude often creates long-term problems with a hostile ambience and bad relationships within the group. Harry is likely to deal with his own situation very badly, ending in acrimony. Regardless of Harry’s personal reactions and decision-making problems, his co-workers are now inextricably involved. A good way to fend off blighters like Harry and people who avoid responsibility is to ask them to describe precisely how they think the problem should be solved, and then ask them how they would like to handle it. Hopefully this results in their being forced to engage in the substantive issue in a form in which sweeping dismissals are no longer reasonable. Without intending to, they then become involved in solving the problem. As often as this fails, at least it significantly reduces their status and influence. x There’s really nothing I can do about all of this Even when people don’t have a strong tendency to avoid decisions by distancing themselves, they may still have low self-esteem and a strong sense of powerlessness in the face of a complex decision situation. They don’t deny that they should take a position, but they believe that they simply have neither the capacity, the will, nor the energy to imagine any constructive solutions or alternative courses of action.

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Ann is a unit manager at a university who often has problems with her subordinates. She’s continually criticised for decisions taking too long and lacking outcome. Ann is becoming increasingly unhappy and can’t break this repeated pattern. Ann’s external image resonates within her, and she becomes increasingly paralyzed and falls ever deeper into hapless inaction, powerless to break this destructive cycle. Her decisiveness just withers more and more until Ann’s will to live is annihilated. In this situation, how can Ann generate strength and self-esteem in sufficient quantity to be able to trust her own capability again? Willpower grows stronger in relation to the feelings and experiences that come from using that will. Willpower grows through its successful use, and there are no known limits to how strong an internal drive we can acquire. The more we succeed when using our incentive, the stronger it becomes. In other words, decisions facilitate decisions. It’s about being interested in using our volition. Wanting to bring forth our incentive. Later in the book, we’ll focus on the circumstances that can contribute to fostering willpower. x I’ll do what I want Some people have no trouble using their willpower from the outset. Usually they’ll have learnt early in life that it pays to be spontaneous and to refrain from worrying about the consequences of their actions—particularly when they haven’t had to bear the cost of those consequences. Perhaps they lived in an environment where this particular strategy didn’t encounter much resistance. Maybe their surroundings were pampering and forgiving, or, on the contrary, showed a complete lack of care. Such a person would learn that being spontaneous and impulsive was a strategy that brought integrity and self-esteem. Maybe they never bore any cost at all for the costly consequences of their unfortunate decisions. Whatever the case, we can say that their consciousness was configured so as to satisfy their needs as quickly as possible. Their spontaneous impulses were sometimes afforded the highest priority, and their reactions were too vague or uninteresting to induce any perception of risk that might justify consideration. These kinds of people can have great difficulty adapting to others in their environment, and sometimes they have strong empathy disorders or even psychopathic personality traits. Under favourable conditions, when they’re forced to take others into account in order to survive, and given time, they can sometimes develop an ability to use their spontaneous desires in a way that they’re at least not

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constantly trying to exploit and manipulate their surroundings. But if people with this character do not learn self-control at an early stage in life, they can become very dominating and strong-willed. Often this behaviour becomes counterproductive as well as inefficient. As was previously mentioned, effective decisions often generate more energy and capacity with which to make even more effective decisions. The principle behind such a process is very simple. Each individual decision a person makes increases his or her perceived capacity to make more decisions. In many cases, because the act of making decisions is character building, under favourable circumstances an accelerating effect of making good decisions can lead to their becoming a successful entrepreneur. Obviously, there must be sufficient indication that a decision will lead to success, and occasionally entrepreneurs accustomed to making decisions are successful in discovering those indicators. However, such people rarely hesitate in taking disproportionate risks, which means they often need to be steered. The solution to this problem in organisations is to mix risk-taking people with careful people when putting together teams. x Let’s just go for it Creative people aren’t necessarily more intelligent than others, but they have often learnt to dare to do things and to take risks. Because of this, creative decision makers often fail more than others, but sometimes they attain extreme success. They fail more because they dare to try new things, but they also learn a lot more, and because they learn more, they can sometimes succeed much better than others, which may compensate for past failures. It’s a common belief that you can never become a good businessperson until you’ve gone bankrupt a few times and nonetheless had the strength to continue. This phenomenon can be found on all levels and in all areas. The often-revered US President Abraham Lincoln was also known for having had many failures behind him. The conclusion is that it is not really hard to become a dynamic decision maker. It might seem that we’re saying that it’s really not that hard to become a dynamic decision maker. It may appear that we’re arguing that you just have to make a start, take some risks, and dare to decide things, and then

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you’ll become a better decision maker. It’s not like that at all. Such reasoning would ignore the negative effects that arise when decision makers haven’t learnt to adapt to the conditions of the world around them, but remain entrenched in their views and their willingness to take risks. The negative effects could become serious. A person who has acquired a habit of never understanding or submitting to external influences has difficulty adapting his or her seemingly powerful decisions to reality. People like this may make spontaneous decisions, but they’ll understand neither the whole picture nor the situations that are incompatible with their immediate gratification. Someone who cannot focus one’s will but is instead controlled by impulses without conscious control won’t have been able to learn what other people have had to learn early on in life: to understand that we cannot always follow our impulses, and that for the most part we need to adapt to our environment with its moral, social, and economic structures. This is a difficult type of personality to handle. Such individuals must be placed in a context where there is a good deal of control over their behaviour. x You can’t do that The opposite type of personality is the pedantic and rigid person. Such people find security in their decision making because they have restricted their lives to follow routines or regulations. This makes it easy for them to adjust to unforeseen events but restricts their capacity to deal with more sophisticated decision making.

Genetic or Social Determination As usual, when it comes to explaining aberrant human behaviour, there are various opinions as to what’s biologically determined by genes and what results from socialisation. Often this conditioning is a combination of several causative processes. There are various explanations for why people behave one way or the other, and although it’s valuable to know more about this, it has little bearing on our descriptions of the circumstances for making decisions. Obviously, people are biologically predisposed to various degrees in their capacity to develop a strong will while maintaining impulse control. But because this book is focused on the idea that our will and ability to make decisions can be developed through insights into more analytical decision making, we’ll pay no heed to discussions of biological and social predisposition.

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x I know what I’m doing Whichever personality type a person belongs to, it’s usually easier to make good decisions if we have access to relevant and accurate background information. This needn’t consist of empirical and objective facts only, even if these exist. Nor must such facts always be quantified or formalised. In many personally important situations, such as the purchase of a befitting new home or the choice of someone who might be considered a compatible life partner, corresponding to our level of aspirations, it’s rather a matter of preference and opinion; that is to say, we experience some kind of inner feeling about something. Such experiences of preferences are often the end result of having projected enough feelings onto our options and this projection having led to our options eventually becoming animated and desirable. In this way, decision making can often turn into pure self-suggestion. During this process, it’s likely that we’ll make quite a number of smaller decisions that allow various alternative actions to become gradually clearer and more transparent. One could say that it becomes progressively easier to identify with our various options. The cognitive processes that make it possible to identify with decision options need not be rationally underpinned at all; rather, they often are based on accumulated emotional associations. It is therefore highly likely that these associations will not correspond to the rational processes that should precede complex decisions. We might finally decide on our dream house purely emotionally, because we internalised the way the afternoon light so beautifully illuminated the garden. At the same time, we’ve not counted the cost of housing when the town council raises the ground rent while the banks raise interest rates, nor read up on legal recourses for a housing association with three members when the mood turns sour over the vote about replacement plumbing, when the drains in our dream flat turn out to date from 1962 and the property turns out to be heated directly with electricity. It may well be that before we get as far as being able to deal with the components of the decision in a more structured way, it might be easier to understand the decision situation if we cumulatively address a large number of small partial decisions and circumstances. The smaller decisions then become a kind of preparation that makes it clear which conditions apply; that is, they allow for a more focused contextual awareness and systematic analysis, and they allow the decision maker to assimilate the decision problem. This is especially true in situations in which there’s great uncertainty.

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Pedantic and inflexible people can experience a greater sense of security in their decision making precisely because they’ve decided in advance to limit their lives based on strict daily routines or rule books. This can make it easier for them to respond to unforeseen events, but it also limits their capacity for more sophisticated decision making. Instead they become imprisoned by primitive taboo relationships with possible solutions that conflict with their daily routines and outlook. A person’s ability to engage with and penetrate a question is largely dependent on how many relevant, detailed decisions the person has managed to make before the final decision needs to be taken. But this must be seen in the context of constraints. This is where we easily delude ourselves.

Free Will The most important decision in our lives, which is crucial to success in our undertakings, consists of a single basic decision that can be very difficult to make. But those who make this decision get off to a good start in realizing their ambitions, while those who do not make this decision are likely to remain as part of the large number of people who feel that they have control neither over their lives nor over their surroundings. At the risk of slipping into obnoxious New Age terminology, this decision might be seen as a kind of rite of passage into a world of freedom and personal empowerment. This important decision may be formulated in many different ways. The issue could be formulated as Hamlet does, by stating, “To be or not to be, that is the question”. Or you can assert, as various more or less mystical philosophers do, that it’s all about having the courage to be yourself. Psychologists put it in slightly clearer terms when they define the basic decision as the capacity to be adult enough to understand and take responsibility for our actions. But what does it mean to take responsibility for our actions? One possible answer to this question is to require that a responsible person should acknowledge his or her own role.

Whatever I experience in my life depends on me Many people experience life-changing events and decisions as profoundly unjust. x It can’t have been my fault that I got hit by a car in the middle of the zebra crossing!

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x It’s none of my doing that I have a crazy boss! x I’m not to blame for having had epilepsy during my adolescence! Life is and always will be unfair in a variety of ways, and we can relate to that by various means. If we assume the perspective that most of what occurs really depends on the consequences of our own actions, then we get much better conditions for learning how we can project our will onto realistic goals. There is a large enough proportion of situations in which it is advantageous to influence our own lives to our advantage if we take more responsibility for them. Our feeling of responsibility enables us to experience logical relationships in the situation, although the relationships are not possible to discern at each moment. Thus, there is a clear statistical relationship between the people who think that they can influence their situation and the people who discover real opportunities to influence it. The cognitive functions of strategic thinking are based on our attitude, and the fundamental decision to take responsibility for our lives facilitates the learning of strategic thinking: x If there is not a feeling of responsibility, we experience something positive without having contributed to its occurrence. It sort of happened all on its own. Then we note (presumably with satisfaction), “Weren’t we lucky!” x If there is a feeling of responsibility, we assert our will in a certain direction and then we encounter something. Then the question often arises, “What did we do to make this happen?” The first case is of no interest because no learning function is activated, because the results are difficult to relate to any activities. It’s difficult to relate to any specific activities because there were no responsible activities. In the latter case, however, some important learning occurs. It’s possible for adults to reflect on the value of more or less conscious choices. The decision to assume responsibility for the events in our lives is much broader and more complex than simple learning by trial and error. It’s about having an approach to life that enables a continuous and often intensive gathering of information relevant to decisions. We must continually reflect on our actions, even when it might be more convenient to just coast alongside like a sidecar to life itself. It’s about being willing to learn why we feel good or bad, or why we’re satisfied or dissatisfied, and to do so without blaming others or hide behind rigid structures.

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Because memory is directly related to the emotional engagement that we have when we assert our will, we have varied capacity to reflect on which strategies can and should be repeated and which should not be repeated. An experience that is not related to a conscious reflection is more difficult to remember than an experience that has been interpreted consciously. Conscious volition makes reflection much easier than for those who don’t use their will. And reflection is facilitated even more when we relate our memories to strategic behaviour.

Summary x Only those who take responsibility for their lives live them to the fullest. x Willingness to take responsibility is based on the perception that “As long as I don’t do anything, nothing will happen.” x Making decisions is initially about having enough emotional energy to create and manage the various decision options. x Emotional energy can be used to think about options, to gather facts, and to gain a partial understanding for what we do. x The willingness and ability to make decisions grows when you practice decision making. x No matter how it’s done, decision making requires motivation. x No development of the decision-making capacity occurs if we aren’t willing to see ourselves as being in control of our lives through conscious decisions.

CHAPTER TWO PRIORITISE RIGHT

In the previous chapter, we described why it’s important to take responsibility for our decisions, rather than just sitting and whining while things happen. We described how people learn to take responsibility for creating the conditions that lead to better decisions. We argued that responsibility and awareness can make us stronger, freer, and more enterprising, given that we understand what we’re doing and don’t just slide into a stream of unconscious or enforced routines. Now we’ll address the dialectical opposite. We’ll address new problems that occur when taking more initiative. As we do so more frequently, we encounter increasing resistance and also the demand that much more be accomplished. By taking the initiative, we frequently encounter problems coming from our surroundings in various ways. If, on the other hand, we’re merely insignificant cronies or just plain bureaucrats, we don’t encounter these problems. Instead our existence loses meaning. But we’d prefer to be something more, right? You may often meet people who more or less consciously follow the principle, “By doing nothing, we make no mistakes”. They need to get a real life. But how can they get it? We have already determined that there are people who take too many decisions without hesitation and without taking responsibility for the consequences of what they do. But if you listen too much to what the bores, laggards, and whingers say, nothing of any importance gets done. We need somehow to qualify our hesitance. So what is reasonable? How do we know what is constructive or destructive in decision situations? On a personal level, people can express trivialities in terms of knowing what they want but need to sleep on in order to be sure; or for harder decisions, they might express that they need a deeper or more profound feeling for the situation. This becomes too diffuse for more professional contexts. In larger organisations, at least, the proper way to evaluate decisions must be formalised in order to verify the validity of the decision making. If we really try to achieve something concrete, we quickly notice how the world we confront is filled up with small and large obstacles that require both our time and our resources. We must be able to deal with this; otherwise, we may soon just give up. All too many people fail to

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implement even relatively straightforward decisions like losing weight, drinking moderately, exercising, or contributing in some small way to making the world a better place. We might choose the easy way out instead of engaging in something boring. Another common issue is that it might turn out later that all was not as we’d intended because we couldn’t actually carry it out. Or that we have not understood all the consequences of our decision or how our motivation or preferences might have changed when circumstances changed. We need to structure problems and opportunities in relation to values as well as develop criteria for assessing how alternative decisions correspond to these values. But this might seem overbearing. It’s easier just to do what feels good at the time. When we work together with groups or other organisations, this will naturally be even more difficult because we have to confront a larger spectrum of people (like the types of personality we described earlier), who for one reason or another don’t want to do what we consider a good idea, even though they actually share our beliefs and priorities. We need to confront the people who are manipulative, reactionary, conservative, unwilling, selfish, hostile, or all the other negative characteristics—in other words, all the people who perceive you as a competitor or at least as a bothersome type. In order to implement anything at all, we must therefore adapt our actions to the circumstances. So it’s important to consider the circumstances when prioritising what we’re striving for, and to be able to say “no” to something that we want, in order to bag something that we want even more. Otherwise, we quickly tire and lose both what’s most important as well as everything else. So what should we do? In some abstract sense, it’s quite simple. We confine our attention to decisions that don’t require excessive resources for their execution. It can also be about waiting until the time is right and finding or creating better conditions for both decisions and implementation. This may sound obvious but usually it isn’t. This too requires a careful decision process.

We Make So Many Errors In his autobiography, business executive Percy Barnevik describes how he devotes 10 per cent of his time to solving problems of strategy and 90 per cent to implementation. In turn, the strategy part can be divided into half analysis and half feelings about the decision. Barnevik felt that this highlights how wrong much of higher education is because the teaching there is so focused on analysis, which is to say a mere 5 per cent of the

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entire process. His concern is that to some extent people in Sweden are trained to handle initial and theoretical aspects of decision-making situations, but they lack the realism and capacity to implement, which are skills the students therefore have to acquire some other way. Regardless of whether you share Barnevik’s opinion or not, it’s clear that the implementation process is critical in decision management. In real life, the implementation process is deeply entangled in the analysis, which should therefore not be seen as an independent process. Two common mistakes in the implementation process: We use resources in a suboptimal way. At best, we spend energy on analysing the problem we have and how it should be formulated, but ignore a real analysis of the implementation and its efficacy. We often miss the devil being in the details, that is to say that even if we think we know what should be done at a more general level, it turns out that the whole thing can often be considerably more difficult, or even impossible, once implementation begins. The problem becomes apparent in the details that we haven’t thought of, because we’d specified neither the problem nor the proposed solution particularly well. This becomes especially clear in decisions that are to be executed in more complex circumstances. So, what is it that’s so difficult? Rather a lot, actually. x Surprisingly often, initiative itself clashes with decisions that have already been made. This is fairly common in complex situations with many stakeholders. Or, so much friction arises during the actual implementation that it can’t be completed. A proper and early analysis provides time to prepare for countermeasures. For example, this might mean looking at the town plan before starting to plan a complex construction. x Often ideas are based on estimates and wishful thinking. It may turn out that they don’t work at a detailed level or that they won’t fit with the present circumstances. If we’d recognised from the outset the need to wait for a suitable time or to modify the circumstances, things might have turned out differently. For example, the captain of the ill-fated Estonia, which sank in 1994 in the Baltic Sea, should have realised that it was more important to reduce speed or change course than to arrive on time, as the whole ship shook with each wave it encountered.

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x In a changing world, conditions change from those that prevailed when we originally formulated our idea. Things often happen that weren’t really possible to include in initial estimates. This is particularly difficult when you’re not really clear about which circumstances shaped the idea. If we build flexibility into the actual process as part of the decision, then we create a considerably better dynamic in the decision-making processes. x Similarly, we can be too rigid in the implementation model that we initially decided on. New ideas emerge, and various stakeholders try to delay or even block the implementation. Countless are the times when none of what we thought we could accomplish happened, because some madman or other ran amok. We must be extremely vigilant about this and be prepared to change the strategies throughout the whole process. x People simply give up because it is too laborious. They didn’t foresee the workload that would be required. For example, most systems development and infrastructure projects fail precisely because it seems to be very difficult to estimate the resource needs intuitively. x We may fail to design an organisation for the project implementation. Perhaps there were no clear objectives or processes, or else management and leadership failed. Without a clear plan for the project, unnecessary conflicts increase. x There actually may be many interesting options, but there are lockin effects in the implementation plan that prevent us from imagining more attractive options even though they existed as options during the implementation phase. Thus, we only attain smaller portions of the goals we initially envisaged. “It felt so good to write contracts. At last we were underway. Then it turned out that we got stuck with that idiotic contract for two years.” This list could be made considerably longer, but you can safely say that much can be facilitated through a period of contemplation.

Without Any Doubt We Will Become Stupid People who don’t hesitate before making decisions can make unnecessary mistakes. Often there’s a preliminary idea for the decision, but before it’s fully implemented, it has to be analysed. Possible decisions should be pitched against conceivable circumstances. In the political arena, there’s a formalised referral procedure. In organisations, a trial balloon can be

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released so as to give the whole organisation a chance to discover any weaknesses in an idea before its actual implementation. At a personal level, it may be sufficient to test an idea with, e.g., the hairdresser while being trimmed. Another variation is to ask your taxi driver. Taxi drivers tend to have opinions about everything from politics to how to succeed in business. Direct responses from unbiased observers who are not stakeholders can many times be surprisingly useful despite how trivial this might sound. The fear, doubt, or critical review that may present itself as we approach an operational situation arises so as to show us that it’s still not too late to put the brakes on. We might ask ourselves whether we really are completely sure that what we’re doing is what we want. Our doubt is not always about reluctance to make a decision one way or the other. It’s often about our qualms before an actual implementation. It’s about thinking as much as is necessary about whether the time and context are really right for carrying out our intentions. Maybe we need to face a concrete experience of what might happen if our decision is actually carried out, and why we should gather more refined information for making our decision so that we understand what we’re doing. One dilemma is that, in principle, we can discuss or simulate possible future scenarios indefinitely. They’re usually quite numerous. An all too extensive discussion can naturally hamper their implementation. A decision maker who publicly displays too much doubt has lower status even when a sufficiently deliberated hesitation can lead to considerably less trouble at a later stage in carrying out the decision. But it’s difficult to estimate how much deliberation is sufficient. Obviously, this doubt must be based on the circumstances. On a purely personal level, perhaps it is enough with a moment’s reflection to build up some confidence before beginning. We described in Chapter 1 that once we’ve made a decision, energy is released that can be used to develop the details of that decision. We can update and refine impact assessments and engage in reflection. Our preferences can sometimes change very quickly. When we’re well, we want lots of things, but when we’re ill, we want only one thing. However, it’s seldom reasonable to make a very detailed impact assessment for all possible decision options in all conceivable situations. That simply uses up too many resources, especially if there’s a surplus of interesting initiatives in which to immerse ourselves. Therefore, on an individual level one needs to balance this equivocation over the various possibilities and ponder what looks most doable. For an organisation, this probably looks different. There it may be our unconditional responsibility to make accurate analyses in order to

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investigate how something should be done. Often, we have considerably greater resources, even though it’s astoundingly rare that we use them to sort out what should be done and how. In larger organisations, it should also be possible to analyse previously made decisions as well as alternative ones before new decisions can be implemented. On the whole, these kinds of processes are often costly. However, it can be even more expensive not to carry them out along with the detailed planning that is always necessary when implementing complex projects.

What, Then, Are We To Do? Cognitively, our emotions can be regarded as a kind of imprecise probability calculator in which the emotions are associated with each other and accumulated into more intense emotions, which in turn can be combined into complex models where similar feelings gradually aggregate into a holistic experience, that is, a sort of deeper and more tightly integrated feeling that often creates pleasure and a sense of insight. Feelings are aggregated, integrated, and organised more or less automatically in parallel processes in the brain. This creates patterns that in turn allow new feelings to be related to earlier ones through the principle of similarity. Even if they’re not identical, the feelings can still reinforce each other, allowing us to experience an ever-greater sense of insight. Unfortunately, humans are imperfect beings, and although we experience insight, this experience can be highly misleading. We should not confuse our belief in something, which has been built up in this way, with it being true. The antithesis to this emotional probability calculator is something often perceived as boring. It is the rational analysis that processes information more sequentially. This rational thinking runs through a context or reasoned argument and tends to fragment processes and components into small pieces. It’s difficult to add rational thoughts to more general summarising thoughts and thereby arrive at some sort of plenary perspective. This makes it more difficult to experience the entirety that must be experienced in order to be able to make a good decision. The foundation for all of this is the analysis, which includes complex considerations and calculations that are usually very time-consuming and also experienced as difficult. The analysis is necessary in order to allow us to make good decisions in situations where our intuition cannot handle the complexity. The rationality is a critical factor, and we will come back to this in the latter part of the book where we describe the advantages of rational decision making.

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Summary x The willpower and strength of initiative that result from taking responsibility lead to too many activities, creating too much work. There are insufficient resources to carry out all activities. x When there are too many initiatives, we have to begin to choose amongst them, which often requires considerable thought. x We must also turn how we assume responsibility in a positive way, into a kind of questioning attitude in relation to implementation. Handled properly, this can be used to reduce the number of initiatives that are hard to implement, and to eliminate those that are bad or not well founded. x It’s common for important decisions in organisations to be based on alternative solutions that are predefined and that already existed before the decision-making process even began. This often leads to some very strange consequences, because this doesn’t stimulate broader support or better decision quality. x There are methods supporting analytical decision making, but they have to be understood and used.

CHAPTER THREE STOP BEING DEPENDENT ON FULL SECURITY

In the previous chapter, we described the importance of being able to sort out the most valuable initiatives and of finding suitable circumstances for the actual implementation. We need to ensure adequate capacity and energy to focus on the main ideas. We also described the need for a clear picture of the resources required so we know that enough will be available to at least carry out the most important decisions. But this can lead to too little activity. The dialectical dilemma is that we easily become passive when we problematise decision-making situations and get the impression that nothing is perceived as absolutely necessary. We delay the challenges as well as what we perceive as too uncertain, and we ignore alternatives even when large profits may be gained from doing the right thing. We simply become much too risk averse even when this isn’t necessary. Generally, far too little gets done because we’re seldom certain that everything will run smoothly and we’re seldom certain about the risks involved. The outcome is that far too few constructive initiatives and projects are fully implemented. Excessive need for safety and security can hinder constructive initiatives, particularly when the gains lie in the future and when we don’t really understand what a more developed analysis might look like. Again, to wait stubbornly for the right opportunity to execute a decision can be good in cases when we know too little, but if this strategy is applied too often it results in devastating stagnation. The fear of difficulties or of failure easily leads to the listlessness that over time destroys all good initiatives.

Understanding the Risks In Chapter 1, we saw that we must dare to stand by our initiatives in order to gain more power for other initiatives. In Chapter 2, we saw that too many conflicting or unrealistic initiatives must be curbed if we are to achieve anything at all. But now, we can state the obvious: if the brakes are too effective, nothing happens at all. Routines that are repeated long enough transmute into conventions that cannot be broken. Be extra

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vigilant about this. Organisations become entrenched in their own bureaucratic processes terribly easily, and eventually they become so rigid that they require extensive resources just to solve trivial problems, especially problems that lie outside established routines. This often happens in organisations where bureaucracy has been allowed to grow and where those who gain much of their sustenance from preventing new initiatives, under more or less fabricated pretexts, populate key positions. In the long run, this consumes the organisation, which ceases to function effectively. We must therefore complement the seductive ease of negative policing with something that is more dynamic. Otherwise, pitiful champions of meaningless rules and procedures will pacify the whole operation. Once this condition has become permanent, there’s no longer any incentive to develop the business, and it diffuses into a growing bureaucracy that devours more and more resources. Those with the wealth of initiative leave or become pacified beneath this carpet of stifling bureaucracy, and slowly but surely the organisation collapses. Some people become so pacified that they don’t even want change, preferring instead to sit and snivel behind closed office doors. It is imperative to look for the best opportunities instead of merely avoiding the worst. We must be allowed to take calculated risks and try new ideas. Then we’ll discover new ways of solving problems and achieving results, and instead of becoming an organisation riddled with suspicion, hostility, and intellectual oppression, the business can really develop. The ability to diagnose problems must be transformed from kneejerk resistance into a focus on new initiatives that can ultimately generate more gain. The reluctance to make decisions using the strategies of Chapter 2 can be used as a basis for the dialectical opposite in Chapter 3, where we simply avoid the general negative attitude described in Chapter 2. If we create an environment where we encourage ideas, initiatives, and new approaches, then a new way of exploiting operations takes a form where the accumulated resources from the strategies described in Chapter 2 can be used to exploit upcoming available opportunities. Within a reasonably stable framework, we should dare to take controlled and considered risks.

The Bureaucracy Problem The problem with prioritising stability and safety is that this often leads to more innovative ideas and decisions being held back and the organisation getting stuck in a viscous bureaucracy. On the other hand, the principles of Chapter 2 are reasonable and have to be heeded. We need some kind of

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reasonable and conscious balance between opposite strategies in any welldeveloped kind of decision making. So how can we try new solutions under stringent security requirements? How can we have structures and norms while remaining responsive to new ideas and opinions? How should rules be formulated without them draining power from real initiatives? A little sloppily, we could say that the whole thing is really about solving the problem of bureaucracy and that ultimately, solutions are about mapping the boundaries of risk taking.

A Solution to the Problem of Bureaucracy: Flexibility within Limits The activities described in the previous chapter easily create strict procedures that we believe will ensure safe conditions for decision making in an organisation. Important here is that the boundaries for decision making must be clear, well specified, and justified. We must also be given the opportunity to understand why those boundaries need to be limited and what we hope to achieve by these limitations. Besides the fact that clearly defined and well-motivated boundaries are easier to accept, they also reduce the risk of a perception of pointless rigidity. The regulations must also create frameworks focusing on what is important, and also be at a reasonable level of abstraction. Then it will often be possible to act creatively within the framework and understand if what we’re doing is in line with previous decisions. Suppose someone wants to send a letter by courier service because postal express mail is too slow. Using a courier service shouldn’t be controversial, and it shouldn’t take long to get done. Detailed regulations at this level must be removed. Higher-level regulations need to imply that the letter should arrive on time at the addressee in an efficient and cost-effective manner. A bureaucratic structure easily becomes increasingly meddlesome and pathological when the organisation begins to regulate in detail things that don’t need it. Rules of control need to be structured into a hierarchy that specifies a framework for various levels of decision. Within any given level, mandates should be clear. That way there’s little risk of serious complications arising. Trying out new ideas must be permitted within predictable and strategically formulated frames of reference, in which the overall business objectives remain in clear view. In short: one should have clear and meaningful limits, and as long as you stay within these limits you should be able to try different variations of spontaneous ideas. The organisation can now confidently accept that new ideas can be tried without that careful impact assessment we

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advocated earlier. Obviously, such an acceptance must be done within a well-designed framework. If anything shows positive results, it should be allowed to continue being developed in various guises without going through resource-guzzling verification processes and risk analyses. Constant testing of new varieties of activities can be likened to a pleasurable and harmless game as long as it is done within reasonable limits for the organisation. Testing new opportunities probably also adds a dimension of pleasure and enjoyment to daily routines, thereby countering the all-too-common alienation processes that so easily arise in an organisation. Under favourable circumstances, a playful atmosphere can lay the foundations for a functioning climate of innovation. If something still does go wrong, it becomes easy to correct because the business is being run within a clear framework with well-thought-out routines. Even if things go wrong, a learning process is taking place that can modulate procedures according to a well-founded basis. We learn to take chances when they arise without thereby having to challenge the overarching decision-making structures. In general, the most tangible benefits with such opportunistic playfulness are that the execution of decisions is made more effective and the organisation doesn’t stagnate in a guarded and meaningless bureaucracy. But note that there are always people in organisations who cannot resist creating small regulatory structures and who love to pursue details while failing to notice that they’re missing the broader important issues. They are usually destructive to the organisation but in practice difficult to oust. On the other hand, there’s often a risk that completely unnecessary changes are implemented just because some narcissistic or emotionally frustrated employees need to apply their energy by applying their potential creativity in a useless and energy-sapping questioning of well-functioning, reasonable structures or, depending on their position, they complicate structures and embed unnecessary regulations. These types of employees are not uncommon in any organisation, and they can devour the time and effort of others. If they aren’t disposed of, which, as we already stated, can be unexpectedly difficult to do, then as far as possible, keep them out of all the organisation’s important functions without this taking too much time.

Solving the Problem of Bureaucracy: Informal Networking So, how can we ensure that processes for change really are relevant and not just a pastime that creates recurring illusions of action? There is of course a plethora of possibilities for action, but we are currently most

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interested in what can be carried out reasonably easily within the framework of the regulations and established procedures. It’s a good idea to network while initiating new activities. The networking may be done as an informal referral process. It’s well known that people have a great need for affirmations, so most of us are continuously carrying out such informal referrals in various forms, more or less unconsciously. The referral might be done during a conversation at the pub or during a discussion in the break room, but even such a referral can be done in a more deliberate and structured way. For example, we might initiate a discussion of our thoughts on a new product that we’re unsure of. Our questions may well be posed simply: “Can I suggest this to the top dog?”; “Should I show my prototype to this customer?”; and so on. Informal referral of this kind is uncomfortably close to daily chit-chat, but if we accept this format it can save a lot of time. For example, you might realise more quickly than others that certain characteristics of an idea are interesting for the company, and they become even more relevant after input from colleagues, rather than following a more formal approach and waiting for a written response. Maybe we thought we knew the criteria for how an alternative should be evaluated but realise that there were new angles we hadn’t thought of but must take into account. Perhaps, following some small talk, we might note, “Whoops, this was a touchy subject. Perhaps I shouldn’t suggest my idea.” or “Imagine that! So many of us are thinking the same thing. I’ll use this to justify my idea.” Usually there are people who’ll stand in your way, but through this informal process, you can gather a lot of information about them and reflect on how to set out your strategy. For example, often you can easily test whether a person might conceivably accept a proposal or at least be persuaded with a deliberate line of questioning. Tune in to this and exploit it. In general, people with talent for networking collect a good base of information for making decisions, and just through a little chit-chat they can also gain an excellent basis for action. If they understand how to use chit-chat or even gossip, they can often create the conditions for effectively developing their career, regardless of whether the people around them react strongly when they realise they’ve been targeted for information seeking, or have even been used or manipulated. However, there is great danger in networking too intensely, because it may just devolve into pure gossip that has no bearing on relevant problems but rather reflects the character of repugnant entertainment at the expense of others. Or it may become an attempt at raising one’s own status by oppressing others in a little power game. The dialogues are also easily reduced to a valve for expressing one’s frustration over a work situation

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and thereby some kind of excuse not to act forcefully to bring about real change. Here, networking is reduced to a way of just promoting oneself and perhaps of impressing one’s central connections, in spite of really being only an insignificant nobody who likes to spread rumours and slander about friends and colleagues. In the worst case, networking can turn into a kind of trench warfare. Networking must therefore be used in a structured, effective, and rational way so as not to steal time. Do not be drawn into the scheming and plots that always exist within an organisation unless you clearly see how to productively exploit them. Otherwise, you’re just participating in something pitiful and disgracing yourself, contrary to what we argued in Chapter 1.

Solving the Problem of Bureaucracy: Scheduled Networking A more structured form of networking occurs when we openly declare our intentions when embarking on a focused and informed conversation with someone. That someone might possess some form of knowledge we’d like shared in some way. We should then ask specific questions while revealing the reason for our questions. Such scheduled networking is facilitated by first selling something that is interesting enough for the other party to justify providing us with enough knowledge in exchange. Regardless of our romantic notions about the nature of human relations, they are an exchange of direct or expected benefits. If we’ve nothing to offer, we’ll quickly discover our prized subject quickly tiring. But if we have colleagues or friends who understand that we’re offering and giving at least as much as we require and receive, then planned networking can be an effective way to both acquire information and to build a benevolent atmosphere for our allies. One advantage of this networking strategy is that we accumulate large amounts of superfluous information that can become a commodity when looking for new opportunities. But do be aware that structured networking can be difficult and time consuming, especially if we happen to end up on a collision course with someone. A great danger is that we end up in a destructive relationship of loyalties that easily leads to negative and uncritical groupthink in order to avoid conflict within the group. Usually a good strategy is to try to avoid the most adhesive bonds of loyalty if they’re not absolutely necessary in this continual trading.

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Solving the Problem of Bureaucracy: Communicating Without Disclosing Intention Listening instead of talking is a good strategy and a significantly more elegant form of networking. However, it requires being able to deal with emotional relationships, both our own and our counterparts (or perhaps we should say partners in dialogue). The listening can be based on allowing the other parties in the dialogue to speak and act according to their own needs while not disturbing them with your seductive posturing. We definitely win great benefits from accepting the other’s narcissism rather than exploiting our own. It’s like at a formal dinner where it’s often a good idea to talk about things that you know will engage your dining partner. There are many effective seduction and negotiation techniques, but there are some important ground rules that ensure the other party will be happy to continue the conversation. x We should not disclose our real intention with the dialogue unless there are obvious advantages in doing so. x We must steer the conversation. This can be done by affirming, flattering, or leading the other party to talk in the direction we want. x We show gratitude and appreciation by summarising what the other has said and affirming the accuracy of this. Naturally, punctuating the conversation like this is surprisingly easy. But the margin for error is surprisingly large. The advantage of these conversation strategies is that we can get people to spontaneously share their knowledge, but we need to exert ourselves. It often requires surprisingly little positive response for a person to spontaneously become very communicative. The disadvantage of this kind of manipulative behaviour is that we don’t get any feedback on our own real intentions—on the feelings and desires that we have to hide in order to get the other party to talk in the direction we wish. There’s a large risk that although we like to flatter ourselves for being in control, we actually stagnate things in the long run if we never get any real feedback on our own needs and plans. This type of socialisation strategy thus requires the executors to have real ability to see themselves from the outside. Even if there is a risk of alienation, we must therefore be able to divide our attention so that one part is following our strategy, and the other is evaluating it.

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Summary x When things are moving too slowly, we must react. x Efficiency requires a reasonably stable framework, but one that’s dynamic and adaptable if we’re not to sink into bureaucratic idiocy. x You can avoid the boredom and stagnation that occur in bureaucracies if you’re capable of exploiting those opportunities that do exist. x Communication through networking is an excellent method for ensuring that no opportunities are missed.

CHAPTER FOUR MAINTAIN YOUR COMPOSURE

In the previous chapter, we described some advantages to being opportunistic as long as you can manoeuvre reasonably well within the limits described in Chapter 2. Opportunism can mean significant benefits and an active network of contacts, creating even more opportunities for opportunism. The dialectic in restraining the opportunism is that there’s a great risk of opportunism being taken too far. The success of people and organisations that are too opportunistic may become short lived because new routines are created from ill-considered and spontaneous ventures. There is no continuous build-up of the business, so it easily becomes too focused on unstructured risk taking without reflection or analysis of the estimated consequences from taking a chance. It may even lead to decisions that, in turn, lead to activities that counteract each other.

The Human Need It is important for all people to build an awareness of their own directions and needs. Based on the direction we have in our life, we must reflect on and question what we are really doing. Even when we should be experiencing life in a positive way, we often discover that something is missing. Time is never enough, our monthly accounts were not as we had expected, Susanne became director, the neighbour’s cat is sleeker than ours, and the sourdough rye bread was sold out at the local market yesterday. It feels as though life is veering off to one side even though we thought we could steer it. If we feel that we cannot steer our lives, then it’s high time to decide where we actually want to go, and analyse which of all the possible directions is more likely to lead us there. Many people somehow do this automatically and unconsciously, simply by ignoring certain commitments while realising that other commitments that they’re more personally engaged in simply must get done. They’re hardly aware of this. On the contrary, they can be too open and positive toward getting involved in something that they think could be fun and exciting. Such a spontaneous strategy rarely works in the long term and annoys those around them. These unreliable people fail on too

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many commitments, and those who are let down have to bear the consequences of work being poorly done or not done at all. Conflicts arise from their not communicating their real priorities at an early stage— largely because they didn’t understand how to prioritise and instead allowed the practicalities to determine the priorities and thereby become an expression of an unconscious and usually arbitrary ranking. Even when we understand intuitively which tasks we should focus on, maybe we can’t understand how these relate to the organisation’s goals. We have to evaluate why we’re where we are. We have to reflect on successes and failures and what we most value and how this relates to the overarching objectives. We have to be extra self-critical in order to detect adverse effects of some things going well while preventing others from being done well. In this situation, we may need to ask ourselves, in all that we’re doing, what is most valuable of all, and what we should really pursue and what we should bring to a close. With a modicum of insight, it is easy to identify what most interests us. For a company, it can be much more difficult. Usually comprehensive analyses of the business are needed in order to be able to define what its core should be, which can be particularly difficult when businesses outside our own appear more promising, but then the entire business idea needs reexamining.

Destructive Cultures Under favourable conditions, and in the shorter term, even the most deranged opportunists appear rational and business can be allowed to continue, because no one has noticed how dysfunctional it actually is. This kind of lucky success can create entire cultures where luck, coincidences, and lack of information are confused with competence and where directly harmful behaviours are rewarded. This type of success becomes very clear where there’s plenty of money in the business, such as in the financial market, or in so-called “exits”. These are sales of start-up companies with real or claimed future profits, which embody a large portion of chance but are subsequently found not to contain so many repeatable components. More long-term projects suffer, and project management becomes badly implemented. Even with small changes in our surroundings, operations can plummet and conflict can arise, and there may be no natural recovery mechanisms. Even on smaller scales at the personal level, this becomes problematic. Without supervision or coordination, it may not be enough to work longer in order to keep up with all the tasks. There’s not enough time

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for the very reason that all the extra commitments result in our becoming more stressed and less effective. So, the question is, what do we do in this situation? Obviously, the destructive culture must be subjugated. Activities are mismanaged to a greater degree under poorly coordinated structures, while an efficient framework of analysis and follow-up more quickly indicates what is falling behind. We must therefore systematically examine what it is in the business that creates the most value in relation to its set targets, identifying synergies and following up each part of the business. In many cases, objectives need to be spelled out and anchored. We must highlight what needs to be discontinued and what preserved, shifting from opportunism towards long-term objectives. An example of this could be found when the local government in Sweden invested in a new super hospital, although the old hospital worked well, and at the same time ignored the fact that local primary care and emergency services proved to be in deep crisis. This chapter showed the importance of reflecting on what is most important in a situation. Later chapters describe the necessity of continuously analysing the goals of the organisation as well as analysing the possible effects of synergy among various work tasks.

Summary x Maybe it’s not so surprising that when we’ve lost track of the goals and activities of the business, we need to pause and think. x “Sutor, ne ultra crepidam” (“A cobbler should stick to his last”) is not such a bad policy to counter a divisive lack of coordination, provided that it unites this with effective analysis. Otherwise, in a rapidly changing world, it can become destructive. x Once you know what you want, provide it with adequate quality. x Tasks that aren’t going well and aren’t important for the long-term development of the business should be eliminated as soon as possible. x It’s a good idea to handle carefully that which generates the most value for the business.

CHAPTER FIVE STATUS AND RESPECT

In the previous chapters, we primarily argued that one must be aware of why we do what we do, and do it well. This is a kind of perspective on production, independent of position. Now we’ll forge ahead to the perspective of leadership. We have already discussed the importance of assuming responsibility for our decisions and for who we are. The core idea is that we have to be conscious of what we want in order to be able to use our will. In this chapter, we emphasise the importance of presenting ourselves, our will power, and our contributions to the world, in order to make our leadership as clear as possible. Talent is not always coherent, even though one might sometimes think so. A person can develop a very high level of expertise in delivering value but not understand at all how this can be exploited from a position of leadership. Many competent people believe that their competence is also sufficient to control others, but don’t realise that their own role and views need to be advertised in the business for them to have a real impact. They don’t know how to attain status in their leadership role. The status that is necessary to secure is that the decisions have an impact on the co-workers. Some people are phenomenal at delivering results and yet don’t have a dramatic career. There may be good reasons why they have no interest in a career, but it’s often because they lack an understanding of how to use their skills and resources in a broader context. They miss this mostly because they’re totally engrossed in analysis and implementation; they’re completely focused on personally attending to important local decisions and never learn how to motivate others in this process. Both good and bad decision makers enlist others, but they need to market their status as decision makers. In this chapter, therefore, we discuss the dialectical opposite of having developed a high level of expertise in delivering high quality in the details. Here we refer to a claim of a general status, which can be seen as a complementary opposite to just focusing on coordination of details as described in Chapter 4. We describe how to move on without getting involved in the details and the immediate responsibility of implementation. Instead, we describe how we can get others to carry out decisions by demonstrating how they should be

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executed. Basically, if we can convince those within our environment that our capacity to make decisions is superior, it’ll be easier to get others to carry out our decisions. But this has nothing to do with how we perceive our own capacity for decision making; this is about a capacity to objectively demonstrate and exhibit real quality.

Advertise Individuals can be secure in themselves, be competent, have a remarkable capacity for work, possess deep integrity, and yet be completely ignored by those around them because they don’t sufficiently emphasise the significance of their role. People are often unaccustomed to asserting themselves in their decisions and actions. A company may have developed outstanding products but lack commercial success. The market has not been able to discover the products because the market simply doesn’t know they exist. We can always accuse our surroundings of having an unsympathetic attitude, idiotic market forces, and senseless consumers, but that won’t change anything. Instead, we must act to promote ourselves. This applies to both individuals and organisations.

The Role of Leadership The approval of others is necessary in order to be able to motivate them in the direction we want. Once we’ve successfully marketed and promoted a decision, we attain more power to execute both the decision and the business direction that we want to achieve. Surprisingly often, we set an example for others to follow, frequently without even noticing the transition. There are some important things to consider here. Be aware of the image those in your surroundings have of you. The image we have of ourselves is largely shaped by what others express about us, through their appreciation and accolades, or their criticism. There’s nothing strange about that; people need affirmation from their flock. Most people who are self-aware also realise that the image they have of themselves to a high degree also reflects wishful thinking about themselves. It’s quite simply difficult for us to see ourselves as we are. We all have probably run up against situations where the image we have of ourselves doesn’t quite correspond to reality, but nevertheless we aren’t keen to jeopardise the picture of ourselves that we value and cherish, which is good reason not to see it as immutable and accurate. Most people

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are reasonably reactive to their surroundings, and there is every reason for us to have a clear idea of the image we have of ourselves as well as that which the world around us has. That’s also how we can influence how we’re perceived. Of course, there are people for whom a static picture of who they are is so important that they choose to persist in their illusions rather than deal with the imperfections they dare not notice, let alone confront. You are not one of them, so we can pass them over. A more general tip, though unrelated, is to keep away from such people as best you can. They’ll see to their own downfall in time. You are in competition. Many peers see our shortcomings as a competitive advantage. For example, there is considerable risk that competitors present and reinforce a picture of us as conceited, naïve, egocentric, or inexperienced, all depending on the needs of the situation. An image grows within the organisation of a person who’s not in control of the situation. This is particularly worrying when, due to the point above, we begin to doubt both ourselves and the value in what we’re doing and communicating. And we lose what’s left of the limited confidence we once had. Some managers have a poor underlying self-image, an image that they’re fighting against, and they can therefore be monstrous in their opposition as soon as they feel offended. Don’t enter into pointless victimhood, but try to see the situation for what it is: a war that we can choose to participate in or not. If you’re surrounded by incompetent people, note this and deal with their weaknesses. Clear analysis and objectivity still work the best, even though we can feel despondent. In most confrontations, we have an opportunity to excel if we only find the right format and can present it. Then we’ll appear as a pleasant contrast to the slanderous types. Don’t present yourself as the absolute authority. Be generous and invite others to participate in both the work and presentations. Being generous is surprisingly profitable. Someone who has many ideas and knows how to manage them needn’t fear sharing. It’s a sign of strength and gives us status as a role model; thus we’ll win loyalty. This assumes that we really have something to contribute, and are aware of this. If we’re stingy and secretive, others will punish this behaviour. If we steal other people’s work without giving them the attention they deserve, it becomes even worse.

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Aside from the moral content, this action is one of the most deflating that you might normally commit. There’s a blatant risk of detection. However, there are some common behaviours that border on this. Sometimes when someone has been given an idea by someone else, with time they tend to forget who actually came up with it. Interestingly enough, this is particularly true of ideas that prove to be successful. The idea integrates within us, and the originator’s contribution just dissipates into nothingness. This is common and is related to the first point above. People who do this sooner or later find that the ideas they think they have become fewer and fewer. Present the various options or interpretations you consider relevant to a sufficient number of people. An open approach gives a good impression if it’s well founded. If we have a more specific agenda for what we do, we can be clear on selected parts of our presentation and a little vague on other parts (and the underlying agenda). Sometimes it can be appropriate to completely hide the most vulnerable parts, but a serious drawback with this strategy is that it’s more difficult to obtain status as a role model if people around us understand that we’re overly cautious. Someone who doesn’t clearly stand behind the entire message, including its downsides, rarely becomes as respected as someone who dares to take risks but who shows an awareness of them and can manage them. Whichever you choose, make sure to understand what you do, and have full control over which parts are suitable to disclose and which ones are not. However, if there’s only one predetermined and unchanging strategy, this can have strange consequences. Suppose a ministry has provided a directive of transparency and participation to an authority. Such things do happen, after all. Now one of all those small or large officers launches into this with a supposedly open approach. The officer collects lots of suggestions and ideas from employees, which are discussed and debated at one staff meeting after another. But nothing actually comes of this, and any decisions are disconnected from these discussions. After a while, the employees grow angry when it dawns on them that the management has been withholding what for them was the only viable option. Whatever thoughts you may have about hierarchical structures, this is unsuitable. Tell the facts as they are, and address directly what can actually be influenced. There’s always something employees can get involved in, or channel their discontent into.

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It is wise to distinguish between oneself and the issue. If we confuse our own identity with factual reasoning, we can easily fall into ridiculous affectation and reveal perhaps too early in the discussion which strategy we believe in. This dramatically reduces our creative freedom. Apart from it being tactically wrong to reveal our own preferences at the wrong time, we can often make ourselves look ridiculous if we appear to bear some kind of ideological identity. We can respect someone we dislike who dares to stand for objective, substantiated, and thoughtful opinions, even if we don’t share them. But it is easy to become suspicious of someone who is politically correct but obviously hiding something. If the people around us are uncertain, we must carefully assess whether the time is really ripe to advance a particular proposal. Businesses and political parties devote substantial resources trying to survey this. People who consistently push an issue regardless of public opinion can also command respect for having strong integrity. It probably takes a lot of time and resources always to be open with what we really believe. We usually perceive it as pleasant when people state their opinions and feel they can afford to clearly represent themselves and stand up for their opinions. Respect thus gained can sometimes be exchanged in other contexts, and in this way we can gradually build up enough status so as to afford to be clear later on even in very sensitive situations. This is wonderful when it works, but it should be used with much forethought. And remember that if you choose this strategy, don’t plunge vigorously into every issue that engages you. That will dilute the effect, and people won’t be listening anymore when you really do have something to contribute. There are a multitude of these kinds of persons in the public arena. You can see how little real impact many of them have. Assert continuously in relation to obvious opinions, in order to examine which way the wind is blowing before the sensitive parts are presented. If we do that, we can gradually both adjust ourselves and modify our presentation into what appears to be a way forward. Then when we’re convinced that those around us will agree that a strategy is better, truer, or more promising than anything else, we can assert our views with full force, and in the course of things dramatize our own role as having been in the midst of things the whole time, so to speak.

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We can never be loved by everyone. Remember that we don’t have to recruit everybody. This is impossible, almost without exception. But on the other hand, this is very rarely necessary.

Balanced Clarity People who have learnt to master this game tend to also learn that they can impose their will on those who lack the strength to stand up for their views. Anyone who has attained high status through integrity also dares to take risks towards those who dare not or cannot afford to do so. Decisionmaking processes centre around the person who has received this status and who can easily become unpopular for a while, but who in the end usually rakes in the whole game. Therefore, we should use a conscious approach to our status and our explicit agenda as an instrument when the decisions are discussed, as long as we believe we have the strength to carry the whole thing through to success. Those who dare to challenge their surroundings in a balanced way by exposing their preferences, in context and in a controlled manner, will eventually have the people around them dancing to their flute. Individuals who learn this develop an increasingly subtle communication with those around them and come to be seen as strategists able to delegate the parts of decision making that are resource intensive. Others are obliged to discuss the issues as dictated by the interpretative prerogative that you have acquired. Most people are anxious and need authorities for their sense of security, a need that facilitates and accelerates the process. They quickly fall into line when they have reached a certain status. In the meantime, we can refine our capacity for gathering information towards decisions precisely because we learn to understand, anticipate, and manage reactions to the proposals that have already been presented at various levels of abstraction. We definitely won’t be loved by everyone, but in time all decision makers must learn that there are always some people who’ll despise and counteract what they do, some simply because they actually do something. In any case, the main thing is that we retain our interpretative prerogative, and those around us generally follow our lead. We just need to make sure that those around us don’t have sufficient resources to dare to systematically oppose us. If too many people get upset or ask too many questions, it is often easier than you think to modify a decision while maintaining authority.

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In all of this, remember that clarity requires facts and arguments, especially initially. Pure, unsupported demagoguery and analysis always lose in the long run—even though it sometimes may not seem that way.

Summary x Use resources as soon as possible once enough have been accumulated. x If we cannot be clear about who we are, then we won’t be seen; and if we’re not seen, we’ll attain no status. x Who we ultimately become is the person we’re accepted as. x When we present what we want, we must also be prepared to defend it, so as not to lose status. x The status we acquire becomes an integral part of our ability to achieve what we want. Status integrates our surrounding into decision making. x We should argue clearly and analytically for what we want to do and keep emotional affects at bay. x Be generous! This is perceived as dangerous by unimaginative people, but in the long run it’s actually incredibly effective.

CHAPTER SIX CONSCIOUS DECISION MAKING

In the previous chapter, we described how decision makers with high status become role models and set the agenda for when and how decisions will be taken. We also mentioned that leaders no longer have to take as many low-level decisions but can leave the details to employees. When we have reached the required status, it’s often enough to set a framework so that employees are able to make decisions and implement these themselves. Here we can say that in some sense ready templates emerge for informal processes of decision making. What is interesting is that these templates are created by a leader’s behaviour when the behaviour has been brilliantly marketed. However, a common problem with controlling the basis of being a role model is complicity. Entrusting a business to an authority alone is therefore particularly problematic. The organisation adapts too much and too uncritically to its great leader’s perception of himself or herself and of the business. The division of responsibility becomes unclear, and nobody makes a real problem analysis any longer, whereupon underlying information becomes filled with flaws. Ill-considered decisions are made according to the perception of the leader’s ostensible image. But that image almost certainly rests on only a fraction of the truth. Such leaders often become careless with time, lulled into overconfidence in their own capacity from seldom or never encountering any real resistance. Argumentation and justification were needed during the accumulation of status but then increasingly could be relinquished, if not entirely abandoned. The leader doesn’t need to think so much, for it is often enough to exert pressure in a given direction. In the end, it is more about manipulation and politics than about analytical decision making of reasonable quality. We earlier described that in a dialectical evolution every new process will be automatically counterbalanced by its opposite as a part of the evolutionary process. In this chapter, we’ll discuss the dialectical opposite of big decisions, as described in Chapter 5, where the grandiose leader presents himself or herself as a model of decision making. We describe the work needed when integrating the parts of a complex business in an

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orderly manner. We also discuss how these parts can be classified and structured so that employees themselves have an overview of scenarios and consequences. The structuring is necessary for allowing employees to be critical while participating in decision making that’s based on available facts and transparent models, instead of basing decisions on their perception of the management’s intentions.

Frames and Structures We previously discussed the benefits of an organisation that provides a framework for its employees and managers. Such a framework should specify objectives and underlying values, as well as express an organisation’s risk tolerance. It provides a kind of freedom, with a management structure that specifies frames of reference and procedures for decision making. We also described how manipulative leaders consciously use subordinates’ reactions to their management as part of the decision-making process. Unthinking decision making in which nothing is justified or ventilated is fatal to a business, especially if the decisions contain such great complexity that none of those involved is able to foresee the outcome alone. In these situations, it is absolutely necessary to create an analytical basis instead and involve skilled people in order to identify the problems and to analyse and discuss the decision components that are common: various stakeholders, possible scenarios, and possible outcomes. Decision making must therefore be structured and distributed through the organisation in order to avoid a group of accomplices and uncritical puppets making poor decisions with disastrous consequences. A leader must extend his or her function from being a role model with status to one who pervasively motivates employees to present structured, fact-based, and well-considered bases for decisions. The organisation as a whole must possess control over the details of decision making and use elaborated models at a sufficient level of detail. This is done far too infrequently but must nonetheless be done in order to be able to understand what we are doing and to make sure that we really understand what the decision will lead to. The grand leader’s role should focus on coordinating the whole, not enforcing the leader’s will at all costs.

The Main Parts of the Decision-Making Process Many situations are complicated, and we have to take some responsibility for managing them with the methods required. We can’t get away with

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having traditions of one kind or another, or with avoiding analyses because they might be laborious. Difficult problems often have difficult solutions. But a lot can be done even within a limited time, and there are excellent tools to support this. So there are no excuses for scrimping on the analysis of decision making. Inefficiency in certain sectors is neck breaking, and lots of businesses expose themselves to risks they neither try to understand nor control, and they give away the competitive advantage to competitors that have a better handle on their decisions and decision processes. Decision makers must quite simply make informed decisions, and if we have clearly defined work processes, then the basic elements of making decisions are apparent. Having a good overview of the decision material really does improve our overview of the underlying problem. An important part of this is that the basis becomes clearer as the information needs are better defined, that is, in which areas more information is needed before a well-informed decision can be made. Furthermore, the decision can more clearly be documented and the decision data more easily reviewed and adjusted. The benefits of doing this should be as obvious as not doing it is grotesque. So how is it done, this analytical decision making? On an abstract level, it’s very simple. We do as much as we can to understand the situation and where it might lead. We must have a clear picture of the organisation’s goals. These are formulated as criteria that are prioritised in relation to each other—“quality should cost”, “design trumps functionality,” etc. This initial stage is often done through an intuitive process in which less emphasis is placed on the various calculations. There are various more formal methods for capturing the value system of an organisation, but years of research on these tools can be simply summarised by stating, “they work so-so”. Based on our view of targets and problems, we try to construct possible policy options that we then analyse. And we do so by trying to understand how the options relate to our targets and how well they can solve the problem at hand. To do this, you need to make impact assessments to understand the impact of what we do. We must also understand what may happen through so-called scenario analysis. We simply create for ourselves as good an image of the basis as we can within our timeframe and budget. Then we can weigh it all up according to well-tested techniques. So on the overall level it’s quite clear what to do, but in practice it’s more difficult.

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The Difficulties To gain an overview and understand a decision situation, we obviously have to first have the information that’s relevant to the decision. However, it is not so easy to get an overview of an extensive business when there may be many causes for why things look the way they do. Thankfully, supporting techniques exist. A common one is to try to sort and classify all parts of the business in a consistent way, after which it becomes easier to structure the background information—for example, by creating a simple description of the relationships among different parts of the organisation. We find these techniques in areas like enterprise control and conceptual modelling, areas that can be worth looking into when building up or reforming organisations. If one describes all subunits as processes, it becomes easier to see how information flows within the organisation and which tasks depend on others. General processes should be divided into sub-processes, and complex objects into simpler components, which can be done without losing simplicity in our model. In the end, we get a fairly detailed map of our business, which can be studied at various levels of abstraction. In some sense, we can zoom in on the model and see how every little task results in something that is used by another process. This is a relatively simple method. You may well ask why it’s necessary to create models and diagrams of the business to make a decision. Isn’t it enough just to concentrate on what is most important and currently most relevant in order to understand what needs doing? No! If we try to make decisions without understanding all the components and how they fit together, there is a real risk of missing important information and how to use it. We have to understand how all the parts fit together before forming comprehensible and thoughtful decision alternatives, but we can’t illuminate how all the parts fit together if we don’t see them in context. One consolation is that several models already exist that can be helpful both for this work with structuring as well as in the decision process. We just have to take them in turn. First create the conditions that allow us to gather the information we need to make decisions. Several generations of decision models exist: older, traditional ones, and new, more modern ones that fit better with processes. Characteristic of most traditional decision models is that they require relatively well-structured problems. Don’t let this discourage you from using models to analyse ill-structured strategic problems. In that case, the analysis has to be part of the process.

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By working with clearly defined work processes, the basic elements become clearer. The decision maker also gains a good overview of the decision basis. The global perspective on the problem improves. Through clarity in the basis, the need for additional information in some areas is easier to see. This is important for resource allocation. Everything can and should be documented, clarified, and reviewed.

It Is Wrong to Avoid Process Modelling Many people think it is farfetched to start modelling activities prior to making decisions. Typical comments tend to be: “Why get bogged down unnecessarily?”; “Why seek problems before they occur?”; “It’ll take ages to create these models”; “Isn’t this an awful lot of work?”; etc. Let’s be clear about this. Of course it takes time. It usually involves complex decisions in complex businesses in a highly changeable environment where there are a plethora of different intentions and preferences from scores of people. Of course it’s both difficult and often time consuming. This kind of process also includes a large number of small decisions in order for it to be possible to agree on how things really fit together. Of course it takes time to structure this so that we may know what to do. But equally obvious is that it must be done if we are to understand what we are doing. Anything less is irresponsible.

Public Procurement A clear example is public procurement. In Sweden, for example, public procurement constitutes a turnover of approximately 18 per cent of the Swedish GDP and is often managed with surprising ineptitude, both regarding the methods used and the content itself. The literature recommendations at the end of the book suggest further reading on this subject, but in short, here are three observations. x Realise that weighted criteria, which reflect what is considered most important regarding price, quality, etc., can be handled in various ways. Often a simple priority ranking works well enough and is not difficult to create. We don’t really need to squeeze in weighted criteria, because they don’t have any semantics apart from providing an order. This is sometimes done, which makes sense, but it isn’t enough on its own. x Realise that without being systematic it’s rarely possible to insert precise values for alternative suppliers under different criteria—at least not without knowing exactly what we’re doing.

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x Recognise the correspondence between weights and our choice of scale. To determine which tender offers the best deal requires primarily a thorough needs analysis and extraction procedure. Expertise in procurement is usually not based on facts, and shortcomings in the three requirements above significantly affect the models that are normally used in such situations. The problems are so serious that procurement often becomes pointless and leads to large and costly blunders. But by understanding this, you can deal with it and thereby improve the quality of the analysis, even when using intuitively more natural assessments of suppliers’ proposals. We obtain a result that provides a fuller analysis of our information basis and that yields a much clearer picture of the situation and indicates where the critical points in the analysis are. Buyers and other decision makers clearly need support tools beyond those that only support formal requirements being met; that is, they need tools with adequate calculation functions that can handle assessments of uncertain values and different types of values and weighted statements. These features can then be easily integrated into a complete support tool to assist with both the formal process and the stages of calculation. There are tools like this that fairly easily and accurately handle values and criteria weights.

Complex Decisions Enough of that. There’s consolation, at least for complexity. Great decisions rest on a large number of smaller decisions that have been made over a long period, and the better we are at small decisions, the clearer the information we can gather for the big decisions. In order to avoid having to take big risks, it is good to try to ensure that all minor decisions are taken as far as possible before embarking on major decisions. This can often be done continuously, in good time, before it becomes necessary to make these big decisions. When we’ve done this, we clearly see the context, and making the big, important decisions becomes much easier. Furthermore, we can easily update the decision basis we’ve captured in our structures. It is easier to collect supporting data from a context later on when everything’s in good order. And if our structures are ready, it’s easy to incorporate new information and evaluate the results. Certainly there’ll be situations when you are forced to take a risk due to insufficient information for making a fully informed decision, especially if we know that there’s no way we’ll acquire all the information we need

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before the decision needs to be taken. But we still need to build up as good an understanding as we possibly can. It’s all about taking control of our risk exposure and the impact of the decisions we make. Failing to do so is nothing less than pure negligence.

Summary x Don’t rely on a grandiose leader to make the best decisions. x If you can’t make a decision on the grounds that the information is unstructured, then you should begin the process of making decisions based on what the processes should look like and how the available information should be structured. x Many small, partial decisions create a structure that facilitates subsequent information gathering and decision making. x Your business will support the development of clear criteria for what is good and bad. These should clearly express and detail the goals of your business. x If the criteria are well defined, you can hand over control of all the operational functions to the employees. Then management assumes a coordinating function. x An intelligent management need not be concerned with losing overall control. The management will probably be uncontested as long as it retains the initiative of goal formulation and can set the criteria on which the organisation bases its values. x The decision-making basis should rest on a reporting system with as standardised values as possible. x Standards must exhibit clarity about what’s good and bad. x All reporting is delegated to the employees who must take responsibility for advertising their achievements. This also makes it easy to evaluate business decisions systematically before they are made. x Do not confuse these recommendations with a comprehensive and suffocating bureaucracy. It is much more dynamic than that. It involves formulating objectives and criteria for business. It involves formulating reasonable options for actions. And it’s about understanding what can happen and with what probability it can happen. This process should be distributed to employees with different expertise. If this is well specified, then the employees can describe the extent to which they have met the requirements for a decision basis.

CHAPTER SEVEN A DEVELOPED BASIS FOR DECISION MAKING

In the previous chapter, we described how we need an overview of both the details and the big picture for our decisions. Once we’ve realised which decision components are important and how they fit together, it becomes possible to understand what we’re doing. We might make a tentative analysis, and so become aware of new components and relationships that we were oblivious of until we gained this overview. Once we’ve got a clear picture of the entire operation, it’s possible to see how things are actually connected. We often discover anomalies in the business that need dealing with. x People are oblivious of the overall strategy, which may also be misdirected. x Scores of sub-activities bear no relation to the organisation’s central idea. x Many initiatives consume excessive resources in relation to what they actually deliver. x Similar tasks are performed in several different places without those concerned being aware of this. x Things are done twice because no one noted the first time they were done. x Some departments do nothing but impede the work of others. x Important information is stored in the wrong place and no one can find it. x Some routines are senseless or so incomprehensible that it is impossible to understand whether they’re actually needed. x On the whole, decision-making processes are in miserable shape. x It’s easy to drown in details and superfluous information. We can be in possession of masses of information without knowing what to do with it. Console yourself; this chapter discusses the dialectical opposite of managing detailed relationships in the business. We’ll show how you can

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use detailed knowledge to discover what needs to be modified and corrected. From there on, you can rebalance the business so that the flow of work and information harmonises in an effective way.

The Parts and the Whole As we discussed before, scores of businesses are run dreadfully inefficiently—in some cases, to a degree that stuns even the most seasoned of us. The organisation is full of senseless bureaucrats and righteous, obstructive sticklers who stifle all productive work, often because they don’t understand its purpose. Procedures don’t work and in many cases are so badly formulated and dysfunctional that no one understands them. Resources disappear with neither a desire nor an ability to analyse what effects this has. No one has an overview. Neither the whole nor the goals of the business can be seen. In some cases, there may be an overview of the details without understanding how they interact. Even worse is the ability to make a reasonable analysis of the overall business; nothing is visible, everything being obfuscated by small details that are embraced until they end up suffocating everything. We need to form the parts and their relationships into a whole in order to make systematic analyses. Often we’ll discover distortions and stupidity that weren’t visible until we’d acquired meaningful and effective policies and procedures. In recent years, the concept “business intelligence” has been introduced, which aims to identify what is going on in a business and to present this. A basic idea in business intelligence is to properly illuminate a business in order to show how to use its resources in achieving its objectives, and to show what works well and poorly when organising and processing. When used correctly with proper analysis, it can detect redundant and flawed processes and reveal which processes should be prioritised, reformed, or revised. In order to implement this reform and coordination of the business’s functions, it is important to have not only a clear picture of the business but also a sense of what is working well and what isn’t. We need the courage to deal with conflict, with the grumpy employees who aren’t productive, and we must be able to support activities that work well. A wise way of creating structures and conditions to support this is to group all parts of the organisation, describe them, and understand them. It is not enough to just understand how the business works overall. We also need to be able to evaluate units and activities in relation to all the others. We need to define new concepts and structures that tie together all the smaller

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structures. This is design work that requires a sense of form, structure, balance, and harmony, as well as reasonable capacity for analysis. The general model must be analysed and must not be reduced to yet another useless wall chart or a consultant report. It must not have a complex form that although it describes the existing business in some way is nonetheless useless. It should be as simple as possible, and no simpler. It must be able to answer a number of questions: x Which types of decisions should be made in the various processes of the organisation? Strategic, significant, or rapid? On the strategic, tactical, or operational level? Purely financial? x Which methods are used today? Are there elements from structured methods? Or are things mostly done through intuition? x Who makes the major decisions? Is it primarily the CEO, management team, and board of directors? And what is the division of labour among them? Or are there other decision makers who take important decisions that affect the business in general? x What methods are used today? Are they well structured? x Is there any documented process for how to make decisions? x Which decisions are repetitive? Can the model be used in coming decisions? x Which criteria are relevant, and how are they aligned with the goals of the organisation? x What is the decision basis? How is information gathered? Is there any documentation from previous decision bases? Can we learn from the experiences of others? x Is there a quantification of potential profits? What might be the benefits of introducing a structured process? x Is there enough potential for implementing or introducing a structured process? What should be included in the analysis? What boundaries should be set? When dealing with an analysis of the whole business, we can develop a clearer model by focusing the design work on the relationships among the parts. This skill develops over time, and it becomes all the more obvious. A person who models a business learns to find better and better maps of the business. These can then also function as templates for future analyses. When the templates have become sufficiently comprehensible, the entire organisation can use them for their decision making.

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Creating Comparability If there’s no consistent global model of the business, the chances are that most colleagues won’t understand how the organisation works. If they don’t, then they’ll seldom be able to contribute anything constructive when discussing general interventions. However, it’s not entirely easy to specify what is good and bad in an organisation. Some criteria are obvious in all enterprises, such as being effective and keeping customers happy while, depending on the enterprises, also generating profit. But such generally defined criteria are often bland and have no direct connection to what is actually happening in the business. Instead, we should study the detailed criteria that really are directly linked to the performance of the business and work out how these are linked. People miss this all the time. Yet it is possible to describe the general areas of the business gradually and also possible to create an overall consistent model. This is done by analysing what to prioritise in the enterprise. Then you use the priorities to gather numerous criteria into groups of standard criteria. This at least provides a rough overview of what is good and bad for the various units within the business. The criteria for what is good for the business as a whole can then be ranked and weighted. From this, we can then define objectives that more clearly reflect the current situation as opposed to goal formulations that are more or less detached from reality and are often based on management’s wishful thinking. If we’ve advanced to the point where we can control such relationships and balance the general criteria with their impact on the various subunits, then we can also quantify the importance of those subunits. To a large degree, it’s an art to be able to model a business based on values that derive from interpretations. Even if it’s analytical, this approach assumes that whoever interprets the model and the values has the maturity and, really, also an aesthetic ability to assess subunits based on his or her intuition. We want to be able to clearly express what is good and bad in the organisation and its processes. An important purpose of the models is therefore that they can expose processes and subunits that generate too little added value in relation to other processes and units. If we also have clear criteria for how we assess this, it becomes feasible because all activities will then be assessed by measuring and evaluating in the same way. Then we can examine the details of individual processes and assess the extent to which they create added value, or not. And we can compare processes with those in other parts of the business because we’ve already studied them from the same perspective, that is, the same criteria and the

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same measurements on the same scale. We might also discover that some processes prevent or interfere with other processes, in which case a reorganisation is advisable that focuses on these issues before proceeding with major strategic decisions. This may sound a little confusing, so we’ll try to clarify our reasoning.

Processes in the Organisation An important aspect of decision making is that the management must not make all these assessments itself. Good management dares to motivate employees at all levels in the business to inform them about which decisions really need to be made and why they need to be made. The shop floor is therefore the first place to ask about the decision space. On that basis, we make up a rough process model of the business that clearly shows advantages and disadvantages with alternative decisions. In a similar way, the executive of the business can then continue up the hierarchy, grouping processes, decisions, and criteria up until the highest level in the organisation. The final outcome is a model of where the organisation is headed and what the critical decision points are, both for strategy and ongoing operations. A strength with a focus on critical decision points is that we get a more consistent and balanced structure, based on values that come from the lowest level of business operations and that also address any pressing issues. x Are we doing the right things? x What do we do well? x When can we feel satisfied? x What keeps our clients and customers happy? x Which processes are working well and which aren’t? x Which processes can be improved? x Which processes need to be taken away? x Which processes need to be added? If the structuring process is well done, from the bottom of the organisation all the way to the top, based on the organisation’s current situation, then it will definitely be clearer what types of decisions are most relevant to focus on. It is central to the entire process of assessment to begin with the details of the business and gradually work towards assessing groupings of the values thus gathered. We begin with the relationships among the details and so create an overall hierarchical structure with interrelationships.

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Now we can evaluate the business’s various components and obtain some kind of quantification of key elements. x How can these results affect our “image” with prospective customers/clients? x To what extent can the results be used to raise competence in the business? x Might the results motivate our employees? x Can the results be used for marketing our business? x Can the results be used when developing new services? x How might processes be automated? x How necessary is one process for subsequent processes in the flow? Now it also becomes possible to analyse different types of decision options based on more comprehensive and structured decision making. We no longer need to guess to the same extent; rather, we’ve created the conditions for obtaining real data and understanding how these can contribute to the decision basis. Here, once again, management should devote itself to coordinating the handling of the information and proposed decisions rather than trying to rush decisions before they’re well anchored in the big picture. Unanchored, rushed decisions generally require a disproportionate amount of administration and frustrate employees. Decisions that are already anchored in the business are relatively easy to implement without the need for any artificial superstructure. The picture is idealised. There are scores of executives who wouldn’t dare ask their subordinates what decisions should be made because they’re afraid of losing control. These executives have not understood that we get much deeper control if we have the courage to ask the subordinates to make decisions based on our interpretative prerogative with accepted criteria for what is good and bad. Furthermore, it is easier to agree on what work is to be done and in what order if we have specific criteria as reference points. The assessment of the value of alternative actions can be determined at any level in the organisation where there’s the expertise, while the employees’ use of the criteria in their daily activities should be extensively decentralised, documented, and regularly reported.

Distributed Decision Making There are even more benefits to formalising the criteria so far, namely that employees themselves can make most of the decisions. The employees’ decisions are largely more or less automatically coordinated with the

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central management’s decisions because they’re based on general criteria shared by all. An experienced pickpocket is good at seeing what people have in their pockets, an experienced robber recognises whom to attack, and an experienced decision maker immediately sees what needs to be done in the business. It’s about training and habit, both in destructive and constructive routines. That intuitive decisions are guided by the perspective on life is true both at the organisational level and at the individual level and is important to understand. If we’ve managed to coordinate our preferences and life’s goals, we no longer need spend so much time making many small decisions because most decisions are made automatically as part of a clear direction in life. We get a kind of flow precisely because most decisions were made and coordinated beforehand. They’re based on an awareness of what’s most interesting and important, which means we needn’t be blinded by small problems that we believe to require deep thinking; in those cases we lose momentum. This awareness emerges from how we see reality, which in turn grows from fundamental preference structures. At the risk of using a mystical metaphor, we might say that the awareness of available decisions becomes a kind of automatic vision that often makes it obvious which path to choose at each crossroad. There are many reasons for checking decision options with subordinates before making a decision. A decision affects the totality of the organisation in ways that are hard to anticipate. It’s not enough for management to believe that it understands the totality of a situation. If the organisation is to work with a decision in a balanced and motivating way, its subordinates must be able to understand the decision from their own perspective. The simplest way to achieve balance between management and subordinates is to design a consistent structure of activity criteria. Then the subordinates are more likely to cooperate with a difficult decision even if it’s painful for them to implement.

The Model’s Usability Using a simpler model that everyone can understand is better than relying on advanced models that can’t be applied in practice. They’re better for that very reason, whatever we may think of their mathematical rigour and all that. There are countless examples of models that have been developed to solve difficult problems and that also do so quite well. But if employees are unable to continue working according to such elaborate models, then the models lose much of their value. So make sure that those who’ll be

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using a model become deeply involved in developing it. This dramatically increases the probability that it’ll be understood and used. And always bear in mind that a business must be modelled with the simplest possible means, but no simpler. Hard problems are still hard.

Summary x Inharmonious and poorly coordinated models should be redesigned until they become harmonious, beautiful, and functional. x Building a structure of criteria for what is good or bad in a business is the basis for developing decision models for a business. x The criteria will form the business’s values. x Criteria that govern the business’s decisions should be formulated so that they apply to all levels in the business. x Reporting should begin with the employees and be based on comparable criteria that describe what is good or bad in the business. x The work of modelling a business must always involve its employees.

CHAPTER EIGHT DISTRIBUTED IMPLEMENTATION

In the previous chapter, we outlined how an elaborate model of a business was able to detect anomalies in the business. We discussed how to define targets and fundamental values so that most employees perceive them as attractive, and also how these facilitate the introduction of new ways of working through the emergence of common frames of reference for the business. At best, management can reduce its control and increasingly distribute decision making to more autonomous parts of the business so that management has more time to devote itself to strategic planning instead of getting stuck in micromanagement. To make a long story very short, once everyone can understand and use a model of the business, a large part of the decision making can be delegated to employees. They become more autonomous, happy, and all the more effective. However, in a business where employees are increasingly autonomous, there’s an increased risk that some people begin to optimise their individual situation at the expense of the business. This is particularly important to understand when external forces initiate collaboration with employees without management being in control of how and why this happens. We’ll explain how to ensure that the intentions behind decisions will be met and how to ensure that each employee contributes to the performance of other employees. This is about how to allow a high degree of autonomy and at the same time ensure that no one deviates from common values in a detrimental way. We describe further how to check, cost effectively, that the organisation’s employees work within the established limits.

Power Corrupts Even if a business is guided by well-defined values like those we have described, there is always a risk that some employees will exploit the system. In general, whatever system a business sets up to motivate people to work together, there are always some wily individuals who learn to use their power to prioritise their personal interests rather than working

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towards the organisation’s objectives. The more power a person gains, the greater the temptation for abuse. Sufficiently creative individuals may have the expertise to exploit the system to their advantage, regardless of whether the business suffers or not. When management uses soft metrics to measure performance, it may well be that employees discover how to attain high values for their performance indicators without any effort, even while thwarting the business. With no fear of being discovered, they can report events with no substance. Some of them may even succeed in finagling a high bonus by conducting counterproductive changes. If you cannot measure a contribution with some kind of quantitative measure, it can often be made to appear excellent. If the meaning of performance indicators can be redefined in a subversive way, then sooner or later someone will manipulate the system to acquire more freedom and power. In the worst case, wayward employees build their own micro-empires that are opaque to both colleagues and management. All of these are anomalies that can be avoided by specifying operational criteria that are measurable and visible at all levels, including at the management level. Suppose management has succeeded in establishing clear criteria for how employees should evaluate their activities. These criteria can be used to reward employees and to determine whether they’re performing the work that needs doing. What should management do if it notices that some employees have developed new procedures that bring them personal benefits? The remedy is to impose restrictive rules that prevent employees from using a permissive system in adverse ways. The rules must consist of passively setting boundaries and not in costly bureaucratic procedures. Rules should therefore be designed so that they can be enabled any time you suspect someone has exceeded an established limit; otherwise they shouldn’t be noticeable. This works much the same way as when the law is used in countries with a reasonably well-functioning legal system; that is, laws are only activated when violations occur. Of course, it’s neither realistic nor desirable to have police officers constantly monitoring everyday events. Nor is it reasonable that authorities be able to directly check whether citizens always act within the law, at least not in a social system where we want citizen integrity. Rather, the system should motivate employees to not tolerate violations. The system should create a culture that gives employees the opportunity to make demands on each other. The rules can be designed so that cooperation becomes a mandatory part of the social game.

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For example, a passive boundary might be activated by someone asking her colleague whether there is any documentation describing what he’s currently working with. If she receives no intelligible answer, this could indicate that her colleague has partially withdrawn from responsibility towards a culture characterised by cooperation, dialogue, and openness. Boundary setting is not about building up a control that provides various kinds of egocentrics with free rein, but is rather about creating a climate in which cooperation and helpfulness become normative. It’s also about creating a sense of security in knowing what’s expected and what’s unacceptable.

Clarity, Accountability, and Incentives Hard-working employees are often frustrated when they don’t gain the trust of management or other employees, and they may, for instance, lose motivation from lack of acknowledgement. Other employees may have so much free time that they can more or less sleep through their workdays or pursue a private business during working hours. After some time, hardworking employees also come to realise that there are greater dividends in creating their own agenda after they have discovered that responsibility for the business doesn’t pay. We end up with an organisation of frustrated, unproductive egotists who are out of touch with what is going on. In order to avoid this, it’s important to put structures in place that ensure that those who take responsibility are as visible as those who do not. This is actually quite easy to accomplish. A rule can simply consist of an elementary duty to communicate what one is doing—a rule that is easily obeyed simply by keeping those concerned up to date. It might also entail our documenting all projects in various fora so that the people who are interested in the projects can easily contact us, or keeping a calendar that is open for others to see so that employees who have an interest can plan their work in relation to what we do. We could also have an informal requirement to present our findings in a meeting. These are a few examples of how to deliver reports fairly informally in an organisation. We again emphasise that the aim should not be to create formalised structures and bureaucracies for creating organisational cultures. Strict regulations that force people to behave in a certain way are often destructive, unless they correspond to structures that motivate people, in which case these structures can apply directly and without bureaucratic intermediaries. People become motivated by fulfilling their promises, first under external duress and then gradually voluntarily. This later phase characterises a well-functioning organisation.

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A completely different way of preventing employees from becoming egocentric and poorly focused on the organisation is not to accept fixed responsibilities and territories. If someone claims to be able to do a good job in one area, there is nothing to say that he or she should be prevented from doing so just because someone else has already laid claim to that area. A balanced internal competition may be enough to prevent people from exploiting bureaucratic rigidity to push their own personal agendas or their own private micro-empires. Instead, employees should be allowed to assess and evaluate each other’s performance, and different groups should be allowed to take over parts of each other’s activities. The effects of substantial learning and the distribution of risk outweigh any redundancy. A rule could be formulated such that if you aren’t welcome to participate in a project on the same terms as others, then you have the right and support to initiate a parallel activity. Then you’d have the opportunity to demonstrate that you can handle it better than your territorial colleagues. Measures that are more direct exist, but the kind of passive rule making we’ve described is often more dynamic and can generate great creativity. And because we’re discussing this, we can forsake the mistaken belief that competition is necessarily detrimental to an organisation. Good incentive structures can be a blessing, provided they’re constructed from the principle of equity. Incentive structures require standardised processes for performance evaluation. This evaluation does not have to be complicated. Employers normally conduct performance reviews with their employees at least once a year. If they work, the talks focus on what has actually been delivered, the manner in which that aligns with the organisation’s goals, and a great deal more of a developmental nature. However, an appraisal should focus on deliverables more than is usually the case. Dispense with the nice, empathetic dialogue even if such dialogues can be important in other contexts. We want mature colleagues and a good clarity in the distribution of responsibility. Essentially, the appraisal should be a negotiation about what the employee wants to do and what the organisation wants employees to do. Once the negotiation is over, we should draw up a contract so clear that there is no longer any need to check up on what employees are doing because it will soon become apparent if the employee doesn’t live up to his or her contract. Something else worth establishing is structures that reflect performance evaluations more systematically through regular reports without bureaucracy, although in a form that stimulates collaboration and the sharing of knowledge. Naturally, there are many opportunities to make this happen, some of which may involve employees posting all the decisions and work processes they initiate to an open calendar, like

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motions in a meeting. The calendar could be a public blog or an open diary. Another scenario is an obligation to document the methods used and results achieved in projects. There are lots of opportunities to stimulate the exchange of knowledge and ideas. The only basic requirement is that the information should be publicly available. Random sampling can give management an automatic overview of how much an employee is committed to collaborating with other employees and with the business in general. Furthermore, in general, random sampling is a cost-effective and statistically well-founded method that should be applied to far broader aspects of society than this book addresses. All this also leads to an incentive system with reduced arbitrariness, the latter being an annoyance to many. Soft regulatory structures often work well because you can take advantage of people’s herd mentality. Knowing they can be discovered discourages most people from swindling the system, provided we’ve developed a good working culture. People refrain from egocentric behaviour partly because in general they prefer to do what everyone else is doing, and partly because they realise that although they may well succeed in prioritising a personal agenda that runs counter to the goals of the organisation, there is always the risk of being found out and stigmatised. And having been caught once, the egotist comes under greater scrutiny in the future. These patterns of biological and social behaviour are very powerful and should be exploited. For instance: x Bestow awards and bonuses on employees who have evidently supported the business and its employees. x Call attention to general business problems that stem from too little sharing of information. x Take note of those who don’t live up to expectations, and manage them through performance reviews. x Hold planning meetings that clearly communicate what is being done and what information employees are expected to deliver in the future. x Introduce reasonable reward and punishment systems based on clear criteria for what’s expected. x Follow up on everything, and rectify what doesn’t conform to the business’s goals. x Remove people from management who lack the necessary skills, who cannot communicate a clear set of requirements, or who have been pacified for fear of conflict. x Never delay the above interventions.

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Reservations about Restrictive Rules As with all boundary setting, there are risks. If the rules are applied pedantically, or if they’re communicated in an unfortunate way, a culture of fear is easily created that limits employees’ spontaneity and propensity for innovation. There’s a constant danger of creating a sinister system of control that gets taken over by the very people it was designed to combat. Unfortunately, there are always people who love to get involved in such systems. Control systems are easily corrupted when some self-appointed inspector receives positive attention for finding fault in others. This is particularly destructive when these inspectors exalt themselves through excesses of control and penalties instead of trying to find constructive solutions to any violations that might have occurred. In this context, it is worth noting that there are organisational theorists who point out that trying to govern which culture emerges in an organisation creates a culture in which management completely controls the culture, with no help from employees. This obstructs the emergence of the more trusting and dynamic culture that we’re advocating. Although we have argued against restrictive rules under certain circumstances, a tightly steered culture may be necessary until rudimentary cooperation seeds the development of an informal, selfregulating culture. Naturally there’s always a risk that the culture does not emerge automatically even if you follow our simple and rather obvious instructions. This is particularly true in businesses where the culture is already deficient and where management is more or less incompetent. Then the promotion of culture creation will be more difficult because you have to start integrating a culture that isn’t integrated at all. Sometimes constraints alleviate a lack of collegial trust. However, the rules we’ve proposed should be applied only when needed, and removed as soon as they aren’t. Employees will be more effective if the organisation transitions to a more permissive culture based on trust between employees. Hard rules can be introduced only when they’re clearly needed. The kind of rules we’re advocating shouldn’t be monitored by management. Instead, they should provide employees with the possibility to oversee each other in a gentle and informal way. Policing shouldn’t be necessary in a functional organisation.

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Summary x In a permissive organisation, it’s fundamental that a culture is created in which everybody shares responsibility, feels motivated, and is committed to each other’s work. x Even a system that is in balance and harmony needs a function that protects it from being exploited by those who don’t adapt to its rules. x A management that frequently puts out fires should consider whether the incentive system actually works or whether it’s being abused. x If the system is badly exploited, we have to act with force in order to coordinate efforts to establish a culture of cooperation. x There should be only one set of rules and one method for measuring attitudes, initiative, and teamwork in an organisation. x Coherent and clear standards reduce the chance of conflicts and facilitate communication.

CHAPTER NINE THE IMPORTANCE OF ABSTRACTION

In the previous chapter, we described how to obtain a strong and sturdy organisation that will withstand minor interference and unforeseen events as well as destructive employees. It can create a self-regulating way of thinking about security that can handle discrepancies when these are not good for the organisation. Self-regulation in this sense gives employees security when they challenge each other, and people are no longer afraid of conflicts. They dare to challenge and question each other. But here too we have a contradiction that must be dialectically resolved. The contradiction is that everyone is keeping everyone else so much in check that no one dares to deviate from the norms. The organisation may stagnate. x An organisation that’s strong and has the opportunity to grow as it becomes more permissive may regress just as quickly into fear if its strength is used to suffocate people through unjustified conformity. x The quantity of informal rules can be overwhelming and impossible to assimilate or apply spontaneously. This is common because the regulations tend to grow by adding norms that are more or less well considered, without adjusting the rules or reducing their previous quantity. x It can also be such a complicated process to modify norms that many of them tend to become permanent. This is especially true if they gradually become so obvious that they’re no longer questioned and instead turn into hard-coded routines. People may claim, “This is what we’ve always done”. x Then the organisation loses its innovative capability. People monitor each other in subtle and unconscious ways to such an extent that differences cease to be accepted. Employees become fully occupied with adjusting to what they think is expected of them. Those who cannot adapt in this way are perceived as rowdy. They are isolated because they are considered too disruptive, like a bull in a china shop. Gradually timidity and fear of conflict sneak into the organisation.

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People need to have structures and rules. They want these to be upheld and monitored. But they want to be able to understand them and to have freedom within the framework. So we need to find a way to avoid getting stuck in unconscious norms that are no longer relevant. We need a set of general principles that are not hard-coded norms—principles that we accept and expect others will accept. A set like this describes a framework that we can relate to and that allows for more flexibility. Within the framework, we would like to be able to act, feel free, and have control mechanisms to allow rapid decisions, even for complex issues, and even if some of our actions would be contrary to traditional norms. Throughout the history of mankind, we have used generalisation as a way to simplify what we perceived as complex. Often, we generalise towards stereotypes. We can generalise towards standards in various forms. As time passes, we even generalise towards moral principles. The driving force behind generalisation is the need to understand and control complexity at an abstract level by using a limited number of general policies. Abstraction enables us to see more clearly. This doesn’t mean that we can dispense with all the detailed rules in every context, but if we want to organise our business efficiently, the detailed rules should not be binding in the same way as the general policies. When we encounter a new business or a new problem, we want more detailed control, but when we want to develop our competence, we don’t normally want to follow a compulsory set of rules. Instead, we can be motivated by finding new solutions to complex problems that we were unaware of when the rules were established. Otherwise, our business becomes a straitjacket that we want to get away from. It no longer motivates and we probably produce less, of poorer quality, and life becomes a little more impoverished.

Policies Instead of Rules When the rules are complex, we often try to formalise and automate because we believe that the organisation thereby becomes more effective. But the formalisation and automation mean that modifying the control functions of the system easily becomes even more difficult. Then we permanently have a structure that in the long run may prove to be inadequate, and we expend a great deal of resources without seeing what can be done about it. Especially in large organisations, this becomes expensive, and the business can be greatly disrupted. These issues are even more emphasised by the introduction of information systems. Today, virtually all large organisations have ITbased enterprise systems to collect different types of decision support for

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management. Enterprise systems are usually developed by external consultants or software companies, which often makes it difficult and costly to adapt them to the business. By implementing information systems that are not developed together with our co-workers, we create rigid and erroneous routines. When an organisation is forcing its employees to use bad information systems that automate incorrect procedures, it is headed down a costly road. There is no hope for a business that uses an enterprise system to compensate for poor procedures and regulations. Instead the enterprise system consolidates and aggravates the poor procedures. We must change the regulatory system before automating it and must also insert flexibility in any systems that are automated. Enterprise resource planning consultants are sometimes aware of this, and therefore they often offer a package that involves helping the entire organisation to change so that it fits relatively standardised enterprise systems, but this is putting the cart before the horse. It isn’t reasonable to require that externally developed systems should determine business rules or introduce new procedures. It’s not unusual even for multinational companies to undergo periods of poor performance due to problems with their enterprise systems. These problems indicate the tremendous importance of first thinking things through, simplifying and standardising the general principles before starting with implementing an enterprise resource planning system. Again we state: An organisation’s regulations must be thought through and made effective. In general, they must also be simplified so as to provide an overview of what needs to be done without their complexity becoming unmanageable. The systems must also allow both flexibility and creativity. All this needs doing before any automation is begun. Computerisation should be about providing tools for managing and analysing unwieldly data, not micromanaging business processes. The question is how to simplify control systems without losing overall control. The solution is to formulate norms that are few yet understandable. Policies can simplify and streamline work processes while releasing the creativity of employees. By replacing many rules with a generalised formulation, employees gain freedom and space to take the initiative. They become less afraid of deviating and instead may be motivated to innovate within the framework of the new general norm. The rules become comprehensible and usually reasonable to relate to. Raising employees’ thinking mode to a more creative level requires motivating them to continuously plan their work on the basis of general principles and standards rather than assuming control at a detailed level.

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This will obviously have an impact on the organisation’s decision making. It’s important to realise that a decision at a general level makes it easier to make decisions on a more specific level within the same area, precisely because the general decision often creates a context that more directly relates to the business’s overall goals. When we know where we’re headed and have already taken the necessary policy decisions, we’re significantly less likely to get caught up in the details. Many people loathe this, but that’s because they aren’t able to abstract their situation into something more universal, and these people must be handled separately without allowing them to obstruct the organisation. General decisions often create a context that makes it much easier to collect relevant information, given what you want to achieve. The forest reappears as our gaze widens its focus off individual trees, and the road ahead becomes much clearer than when it was embedded in individual decisions, the majority of which were probably irrelevant in the end.

Rules and Adaptations All societies are governed by laws, and the need to adapt these to global changes is ever present. This is dealt with on the broader scale of society through legislative changes. For smaller businesses, rule changes can actually be handled in a fairly similar way, through deliberate, systematic, and balanced review and by modifying existing standards. We all have examples of how this can be done. x In many businesses, there are lots of different rules for how employees should handle external relationships. These can be about how to respond to e-mail, how to answer the phone, what kind of correspondence is needed, when to be reachable, how to answer questions about work, and so on. All this can be generalised to a principle that says you should always respond to inquiries correctly and as concisely as possible within a certain time limit. If we cannot answer an inquiry directly, we should promise to respond later. And that response too can be made in the same way as stated above. This general policy requires a maturity and a sense of responsibility from the employee as well as instructions for training new employees. x Travel and expense accounts are another common example. In many organisations, employees devote an astonishing amount of time to specifying details in their travelling expenses and to associated control mechanisms in order to prove they’re not travelling or living too expensively. Instead, one can generalise the

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regulations to a general principle specifying a fixed sum per travel day that must cover all costs. Based on that amount, it is clear that the authorities won’t foot the bill for Petula’s lunch at La Tour d’Argent on her business trip to Paris. Any unnecessary costs that the organisation might incur are more than compensated for by the savings made by reducing the administration of travelling expenses that highly qualified staff with high salaries sit and diddle with. In addition, employees are more satisfied when they can devote themselves to a greater extent to their specialised tasks and not be treated as though they have to be monitored down to the last trivial expense. If you also add to these costs the expensive and often inefficient IT systems that usually handle travelling expenses, the benefits of a more efficient policy are even more obvious. Policies are obviously not without their problems. We described earlier how an overly permissive structure easily creates people who abuse the system and requires the addition of another kind of general principle. In an actual case where we handled travel bills, as in the example above, it turned out that only those who made local business trips within the country received excessive allowances. But that was easily and naturally resolved without expanding the rules unnecessarily, by defining a different rate for local trips. Even general policies may need continuous modification. However, it is easier to modify a limited number of policies than to modify a comprehensive and complex set of rules that has all sorts of inconsistencies and bureaucratic control with no meaning. A psychological reason for problems arising in the control of human behaviour through rules is that we feel bad if we don’t have the opportunity to use our competence in the way we want or to feel that we control our own work. If we can’t determine how to be effective, then we won’t be innovative either. We defend ourselves from being a small gear in a machine, and we want to maintain a feeling that we can choose and govern ourselves. Having developed a control system, it becomes necessary to introduce enough overall system flexibility. Ideally, we should be performing tasks because we want to, not just because a rule says we must—in the worst case, a rule that we neither believe nor sympathise with.

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Government agencies are often ineffective. But there are exceptions. At the reception of a clinic run by the local county, many staff members were in charge of booking their own patient appointments in a (fully visible) electronic calendar. Others left it to assistants to schedule appointments in the calendar. Suddenly a proposal was put forward by the clinic management that all calendars should be open (that is, bookable by others) in order to ensure that everybody received at least the minimum number of visits by patients that management had decided was reasonable. This caused great irritation amongst staff who immediately felt controlled, limited, and distrusted. Previously, this intervention applied only to those people who weren’t receiving the minimum number of visits per day. Suddenly everyone was affected. However, management was forced to listen to the staff, and they realised that they had to revise this new rule, an unusual occurrence, when they actually understood that what the medical staff opposed was how the rule would make those who already had the capacity to handle many patient visits less effective. This is because they could no longer control the day’s patient combinations themselves. For example, a doctor who has worked for a while at one surgery will know instantly (without having to read each medical record) that Mrs. Johnson is on the mend and that she is a woman of few words whose next visit will take fifteen minutes, while Mr. Brown is struggling and will require a full forty-five minutes to redirect onto a new treatment plan. This doctor can squeeze both patients into one hour, while an assistant would have booked each for forty-five minutes, which would’ve been a waste of resources.

Generalisation and Standardisation What we need is to find a way to simplify regulatory structures so that employees can focus on their work without having to do too many individual assessments of what’s important and unimportant in different contexts. Ideally, employees should instead find support from a few general principles and then act based on how the framework can be applied in a particular situation. Then they can create a culture that makes fast processes possible. We should also remember that businesses exist in which employees should not be too creative—police, courts, tax, criminal justice, social insurance, health care, etc.—but where general rules are nevertheless important because employees often have to make many small decisions quickly. They certainly don’t have time in each case to consult a personnel manual. In organisations with many rules, people end up becoming afraid of acting in emergency situations because they become paralyzed if they

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cannot follow the rule book and they think they would risk too much if something goes wrong. Even if there exists a personnel manual for how to act, there is still a need for a regulatory structure that explains why it exists and which rules are the most important so that they’re automatically prioritised in an emergency, for example. In such a situation, it is more important to ensure physical safety first and thereafter contact management for an assessment of which section of the instructions is applicable. Again, you need a clear, simple, and consistent regulatory structure. Production operations of a business constitute another domain that is suitable for generalisation. The major advantages of generalising a large number of activities into a smaller number of more overarching types of activities are that we won’t have to make as many partial assessments. Procedures become standardised that take less time to complete. To a large extent, this also applies to decision-making processes, as we’ll see below. Under the right conditions, a culture of experience and expertise is naturally created in the organisation that deals with how to make decisions based on general standards, policies, and tools. This kind of culture rarely evolves from detailed frameworks that have been formalised and computerised into obligatory information management practices, not that this is impossible, but rather that few organisations or suppliers succeed in doing so. Generalisation allows for standardisation, which in turn allows for the centralisation of overall control, while at the same time providing considerable freedom to employees. The general policy allows management to modify the control system simply by emphasising the value of a policy while giving more freedom to co-workers. It is undoubtedly easier both to communicate and to understand that priority is being given to the use of a new general policy than to create a device to change the logic of an intricate incentive system. Internal communication in the organisation can become much more effective after such a standardisation because we develop a common language for how to assess the value of different activities. In the terminology we introduced earlier, you could say that the business acquires a unified culture, and it becomes easier to delegate all the detailed decisions to the level where they belong. Management no longer needs to deal with the details, precisely because all parties comprehend what needs doing. Everyone also has the approval to do what they want, the way they want, within designated limits. The understanding of what needs to be done is based on the clarification of the global perspective. The clarification generates creativity as a result of allowing shared views about

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what applies, which helps us to avoid endless semantic discussions about what is actually meant by this or that. We avoid such misunderstandings and can focus on finding solutions to real setbacks. During the heyday of Taylorism, when production was streamlined using assembly lines and time studies, production was simplified by removing a large number of sizes of the various components, replacing them with a small number of standard sizes. Doing so established a standard that covered all possible cases with a sufficiently large difference between the options so as to make it very easy for individual workers to determine which screw to use in every case. The screw needed was obvious, and people therefore found fewer reasons to blame someone for choosing the wrong screws. There was no longer any decision to make because they were already taken by the general principles. Of course, Taylorism has other aspects that work very badly because it alienates people from production processes and prevents them from seeing the big picture. As we discussed earlier, that thought must be balanced with the other components so that employees acquire greater responsibility and approval for getting involved and finding a context for themselves. Even so, Taylorism did have the advantage that the semantics of different actions were crystal clear, and it was difficult to make wrong decisions in such a constrained decision space. Standardising at a general level thus facilitates communication among employees and creates fewer misunderstandings. Simplified communication therefore breaks down the partitioning of an organisation because actions are based on general policies and definitions that are shared by all the involved employees. If all parties in a business are aware of the policies and the conditions that apply in a process, then synergistic effects emerge in other parts of the business because the different parts share the same standards. Employees understand what everyone else in the business is doing, and it becomes easier and faster to find solutions, even for new problems. To a large extent, the efficiency of the human brain is dependent on its pattern-matching capabilities, which daily underlie thousands of small decisions. In a similar but more conscious and obviously structured way, an organisation can ensure that a decision situation satisfies the criteria for making a high-quality decision. Each such decision is then a building block for larger and more complicated decisions. When a decision situation is associated with generic principles, decisions pass to the level where they are best processed instead of being based on more or less diffuse guesses.

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General Decision Principles Standardising and generalising are preconditional activities for rational decision making. Even when people are not systematic, they base their decisions on mental models and preferences acquired earlier. Some of these mental models result from emotional experiences and some from rational conclusions via empirical investigation. In this way, a decision process becomes an interplay between detailed background information and the general principles we discussed earlier. All decision makers in complex activities would benefit from designing abstract decision principles for how the organisation should be managed. For this to work well, it is necessary that available information as well as the general decision rules are well structured and have a sufficient degree of generality. Later we’ll describe a framework for such decision principles, which can support an organisation in handling complex decision processes efficiently. It also enables an organisation to quickly discover whether a decision is aligned with its goals and the empirical context as described by the decision’s background data. This is facilitated by documentation from earlier decisions based on the same generic principles and can be used to efficiently classify new decision situations as they arise. With a database of successful decision cases, the organisation builds up a kind of qualified intuition. A rough principle is to determine the maximum cost a decision may have. If we can bear the cost of maximum misfortune, then we can act according to a strategy that pays off in the long run. The majority of small decisions in organisations are not particularly dangerous, and general policies can normally handle them. This general insight will increase efficiency dramatically, while reducing the need for micromanagement. One condition, however, is that the skills of management be sufficient to deal with the complexity of the business. And, where it’s really needed, that we can produce both strategic as well as well-thought-through, wellstructured, and well-analysed general decisions. A management must be very clear about the organisation’s values and how they should be handled. It is from these values that a number of alternative strategies must be evaluated while also weighing in different scenarios and outcomes. There are a number of questions that need answering before we can make decisions of reasonable worth. x What are the relevant strategies? x What are the relevant consequences? x What opinions or people are important to consider? x What perspectives are important?

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x x x x x x

How important are the various people and their opinions? What values are important to consider in the current situation? How can we estimate values? How can we evaluate different scenarios? Do we need more information? What decision rules are applicable in a given situation?

Analyses using systems theory conclude that a controlling system must be able to handle as much complexity as exists in the enterprise that the system controls. Thus, generalising rule systems does not mean that we need less comprehension and knowledge, rather the opposite. But it is important not to get lost in the details that often don’t mean anything and only obscure what we’re aiming for. When it comes to actual decisions, we can clearly streamline processes around them by not starting the decision processes until a number of conditions are met, the advantage being that then it’s often possible to reuse all of the policies, methods, and conditions that we previously defined for occasions when similar decisions were made. Instead of trying to carry out calculations with seemingly precise values or less educated guesses, we can express something that we can actually be quite sure of. For example, we can use ranges and comparisons that express qualitative estimates. In any event, the precision we often use is pointless because we don’t really have any information that deserves to be called precise. So instead of cheating, it’s much better to state something that’s defensible.

The Usability of Conscious Decision Making We have worked with these techniques in a large number of real cases over the last twenty-five years. Surprisingly often, we’ve found clear indications for what should be done even when we only had relatively imprecise background information at our disposal. We’ve worked in all manner of areas, from nuclear safety and international energy strategies to national security strategies against disasters and effective mine clearance. We’ve found that the apparent safety of the underlying information that’s normally used is meaningless or directly misleading in most cases, which indicates that there is a need for clear decision principles as discussed above, principles that should also include methods for how to handle the information. In the light of this true but vague information, the calculations that we need to perform become more complicated, but we’ve

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developed computer programmes that do this for us. We will discuss this more thoroughly in Chapter 12. In any case, we often do far too few or completely wrong analyses because we don’t really know how to go about them. Or we believe that they’re not worthwhile. Or the ignorant think they have such good intuition as to render analyses unnecessary. This is almost always quite wrong. When we make conscious decisions, all of us base them on our beliefs and preferences. Some of our beliefs are based on emotional experiences and some are based on more rational deliberations in relation to some form of empiricism. A decision process is about the interaction between background information and more general criteria for where we want to end up. A strategic decision maker in a complex business must therefore develop models that describe not only the empirical aspects of the business but also the abstract general principles for how the business should be run. The decision maker should start at a general level that can be granulated or more finely specified if that proves necessary after analysis. Decision making becomes more efficient if the available information is structured and has as high a degree of generality as possible. Well-defined decision making is to create good standards, guidelines, and templates, providing you with much better control over the decisions. Decision making based on general principles is effective because it supports an overarching perspective. And of course the opportunities to communicate about the decision increase. In an organisation that works consciously in this way and has standardised decision processes and templates for types of decisions, the decision-making processes go fairly quickly after a while, and we soon see whether a potential decision is in line with the organisation’s regulations. What makes quick decisions possible is that most decisions have already been made in advance because the organisation has already taken a position on the general policies, which can then be used to classify a decision situation as soon as it occurs. Structured decision making is a necessity. Otherwise, it is easy to get into trouble, as in the following example. A mega-construction project called Bypass Stockholm was quite controversial for a while, and early on we were curious about the decision methodology used in the project. Already in its infancy the project appeared to be suspiciously deficient. The problem was obviously complex, but it was actually quite easy for thoughtful people to see which option was the best among those proposed. Designing and defining the alternatives is often the real difficulty.

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The background to this project is that car journeys in Stockholm were expected to rise dramatically by about 40 per cent over the ensuing fifteen years. The problem was clear. For some time, the Swedish Road Administration had been investigating how best to link the northern and southern regions of Stockholm. The investigation described two options for extending the road network—Bypass Stockholm and Diagonal Ulvsunda—as well as an option with an emphasis on public transport and toll systems called the Combination Option. These options were compared with each other and with a null reference option. Depending on the selected option, the cost of the network extension was estimated at 1.7–3.2 billion euros at 2003 prices. On 16th August 2007, Stockholm’s County Administrative Board adopted the Bypass Stockholm option. Because rather a lot of money was involved, we wanted to understand why this alternative was supposed to be the best—something we couldn’t comprehend. The decision basis consisted of about eighty valuations of the alternatives under nineteen different criteria. What the board claimed to have evaluated was how well the alternatives satisfied the criteria, including accessibility, environment, regional infrastructure, traffic safety, and economic growth. Naturally the decision was complicated, and the intention was that the decision basis should provide a picture of the most essential factors. The evaluation was reported on two quite different scales, “Yes” and “No” and a scale from “– –” to “+ +” depending on how well they satisfied the goals. Furthermore, many evaluations yielded intermediate positions, such as “+/–” or “0/+”. For example, with regard to the criterion “Economising energy and materials”, the Combination Option was awarded “+/-” and Diagonal Ulvsunda “-”. As far as we could understand, this was interpreted as the Combination Alternative being better than Diagonal Ulvsunda under this criterion. Already in this summary certain difficulties became apparent, for it was unclear what was meant by these scales. The scales’ properties were not stated, something that’s extraordinarily important for knowing which method to use for a balanced assessment of the values. Nor was there any account of weighting, let alone a reference to it, so they probably hadn’t even realised that particular pitfall. We might well ask why they didn’t just throw dice, bet on horses, or draw lots rather than conducting very costly investigations. Another problem was that the criteria weren’t assigned proper weights for ranking them according to their relative priority. There wasn’t even an indication of what might be considered a reasonable priority order. Oddly enough, these issues were completely bypassed even though this was absolutely pivotal for the decision, because none of the alternatives were

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best for the majority of criteria. All this resulted in a decision basis that was even more difficult to evaluate. The actual evaluation wasn’t done in any more qualified a manner either, and because of this, the lack of criteria weights wasn’t revealed. The resulting information base was the only decision support available to the politicians. Could it have been the case that this process was so complex that reasonable methods for dealing with it really didn’t exist? It would certainly excuse the Road Administration if that had been the case. It would also support the odd structure that they used, because in some sense it did at least function as a kind of support for the decision. But no, this was not the case! All the components of the decision methods were readily available at that time, too. The Road Administration stood within easy reach of methodologies fully capable of dealing with exactly these kinds of decision situations. They could easily have opted for a state-of-the-art methodology that could have dealt with the situation’s lack of precise data; with opinion and subjective impulses exerting an essential influence; with opinions varying considerably over time and from person to person, or between organisations. However, from the material presented, we can only conclude that they didn’t make use of any of the available apparatus. Before the decision was taken, we looked into how the problem should have been analysed in a more reasonable fashion. We allowed first-year students doing a basic course in decision analysis at Mid-Sweden Polytechnic to carry out analyses with the information that at that point was available from the Road Administration’s website. What was most surprising was that the students had no difficulty at all in producing very informative analyses that indicated which of the alternatives should have been promoted. We could establish that Diagonal Ulvsunda appeared the best alternative in general, at least under a number of reasonable weightings, and we confirm the students’ correct application of the methodology. Furthermore, this alternative was at least equivalent to Bypass Stockholm even when the criterion “accessibility” was given the highest priority. The environmental goals for Diagonal Ulvsunda were relatively well fulfilled, even though they weren’t as good as for the Combination Option. Even so, the other weightings showed that Diagonal Ulvsunda was the best option under the whole set of criteria. In comparison with Bypass Stockholm, it transpired that because the roads were to lead across the island Lovön, the criterion “environmental impact” made Diagonal Ulvsunda the better alternative. Pivotal for the result was how the various criteria were weighted, something that didn’t appear to have been done.

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We take no stand on which decision should have been made. We’re less bothered about that than about the tragedy of the situation. We find it remarkable and worrying that such huge public investment is carried out without employing modern expertise and decision apparatus, where weightings, ranking orders, and values are openly expressed and taken into consideration during evaluation. One would like authorities in general to take complex decisions more seriously and actually use the methods and tools available. It is both unfortunate and undemocratic if the decision mechanics are not understandable to the taxpayers who foot the bill. It’s even worse if for this reason, wrong decisions are made. The most serious issue is how major decisions in society should generally be handled. In this context, Bypass Stockholm is but a minor issue.

The Communication Process General principles are of little value if they can’t be communicated. Effective communication is dependent not only on a sufficiently clear communication strategy but also on basic human needs. As humans, we’re torn between our need for structure and our need for freedom. We want security, but not to be disciplined by an unjustified external obligation. This greatly affects the organisational context in which we find ourselves, independently of what is communicated to us. Finding a balance is difficult and requires considerable thought and maturity. We’ve all encountered extreme cases of people who are unable to judge what is relevant in different situations. In consequence, these people cause a great deal of trouble for both themselves and organisations. The gradually deepening understanding that streamlines an emotional relationship between maturing people is not at all different from the gradual improvement in communication that occurs in a business based on a culture of universally accepted policies, when one has been developed. It may therefore make sense to look at this more closely in order to better see and understand both ourselves and our surroundings. What do we do when we initiate and deepen a relationship with another human being? What happens when our eyes meet? Naturally, the context of the meeting strongly affects this. Often, we’ll say “Hello” and be greeted in the corresponding way. After that, things become more complicated. Maybe one party asks, “How are you?” During the extended dialogue, the relationship is continuously structured according to a pattern that involves both parties gradually settling down into a common platform of shared understandings. Initially the agreements can be about trivialities,

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such as beautiful weather or a colleague having done this or that, continuing towards much more advanced agreements such as their being happy to see each other and possibly having certain common goals. Then if a power balance of mutual recognition continues and reaches higher and more general levels on their common platform, both parties become interested in listening to more complex and more revealing messages. This is when they jointly begin to create a living relationship that in itself can be seen as a kind of common identity composed upon their common platform. There is a reciprocity that motivates both parties to invest in their dialogue and in trying to understand the evolving structures of their shared mental models. If the sense of identifying ourselves with the relationship grows strong, it can become so motivating that the very experience of being understood, seen, and affirmed in turn motivates a continuously increasing acceptance of risk from both parties. They thereby create a common identity in their new relationship. If the process continues, they might even dare to compare their actual assessments of the outside world, comparisons that they normally don’t want to declare because they fear being perceived as foolish or intrusive. This in turn may lead to both parties confirming sensitive ideas they weren’t even aware they had before they started to communicate. The experience of “I’ve never felt this way before” begins to take shape. The reason for the emergence of a greater motivation to communicate in a relationship is that the fusion and the generalisation of information release energy. Just so that we have a term for it, let’s call this energy “emotional” or “mental”. An energy that was previously tied to experiences that are often trapped and complex is set free when it’s generated on a common platform, where what previously could not even be understood is now suddenly clearly visible. The generalisation provides redemption and additional motivation for continuing to compare thoughts, feelings, experiences, and values. The relationship becomes a productive process of fusion that liberates the participants from themselves precisely because together they can see themselves as something more than trapped individuals. Under fortuitous circumstances, a similar generalisation process may continue beyond the participants’ direct control, one where general agreements are generated at an accelerating rate, until there’s an experience of near total consensus and understanding between the participants. Then they share not only the experience of having common thoughts but also more deep-seated feelings. If this experience is also spiced with a sexual attraction and results in a sexual union, reinforcement effects come into play that can be so powerful that the participants

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altogether dispense with their experience of personal identity and instead devote themselves to a new fully shared identity, which in turn may entail that they perceive themselves as completely renewed and liberated people. In a rather strong sense, they give up their individual identities for their passion. A prerequisite for the whole process to be completed, however, is that there’s always an unspoken contract that regulates the balance of power between the participants. If this balance is disturbed and one party extends unconscious territory and thereby breaks the unspoken contract, there’s a risk that the other party will feel exploited without that person’s consent, resulting in the relationship regressing to the initial starting point of mutual suspicion. On top of this is added a sense of grievance and of having been abused, or the like. Feeling this way prevents communication and can be very difficult to repair.

Generalising Thought and Higher Order The foundation of this somewhat abridged description of a love process is precisely the power of merging information into the general common concepts that make it possible to communicate and share experiences and thereby dissolve dysfunctional mental models of reality and instead develop models that facilitate continuous communication. That is to say, these models are not unlike what we’ve discussed as characterising a more mature organisation. We can see this clearly if we look a little closer at the economic aspect of merging information. Most people seek explanations for general issues that we consider to be fundamental. We seem to be predisposed to continuously seek answers to challenging questions. Part of this is to find general explanations and theories that enable us to better grasp, comprehend, and control the world around us. General explanations create more efficient management of information, thus increasing our capacity to make complex decisions when required. The more we understand this, the greater our ability to behave intelligently, which means finding a new balance at ever higher levels of abstraction until we reach our local maximum, where we’re no longer able to generalise our mental models any further. Let us imagine that we’re facing the conceptual world of a new group of people whom we’ve not met before. The group’s conceptual world is quite different from that to which we’re accustomed. An experience of this kind almost always leads to an alienation. Our instinctive reaction is to see what’s new as a threat. However, if the new group can present something that’s attractive, then our benevolence can increase, thereby opening

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opportunities for communication. Historically, many multicultural and prosperous regions like Athens, Sicily, and Constantinople developed on a basis of common platforms that were created there because trade required dialogue and genuinely respecting the other party. This generated huge effects, well documented in the history of the development of civilisations. But back to our foreign group. Let us assume that rather than to respond to us with equal hostility, the group follows a principle that involves trying to convince newcomers to participate in joint activities. After a while we’re likely to stop feeling bothered by how different the group seems. This is because a context has opened up in which we’re invited to participate. Without our really being aware of it, we now gradually experience that the thoughts, ideas, and experiences that occur in the group feel more and more comfortable and natural. We get used to them, and we become part of the new group and begin to share its values. We have now established a common platform that isn’t established on the basis of rational considerations but instead relies on continuous rewards in the form of an intensive commonality. The participants have now created a platform for sharing their experiences, and the mind adapts to this in a united world of ideas with a common language. Such a platform is based on the effective management of information because it’s based on a unified experience that is also confirmed by the group we have learnt to like, respect, and within which we find acknowledgement. This is how organisational culture is created and also something that the Swedish integration policy would do well to contemplate. It’s important to keep the power of shared beliefs in mind. If we base our attitudes and decisions on an awareness of such beliefs and understand how these changes occur, then we’ll more easily understand organisational contexts. But if we aren’t aware, and only grow into relationships on a purely emotional basis and imagine that it isn’t about common platforms, affirmation and context without the group’s beliefs being absolute and objective truths, then we can easily become destructive and create group conflicts in a broader guise. It’s then that we begin to confuse our identity with our views, and any attack on the latter is an attack against our person—an attack that must be counter-attacked by all available means. We can see how people confuse their views with their identity in different organisations and communities, and not least in the public debate, in which various prevailing forms of xenophobia are particularly egregious examples. It cannot be emphasised enough how important it is to maintain a critical approach to our own beliefs; otherwise we risk being bound to a way of thinking.

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Both organisations and individuals who don’t understand or control their own way of experiencing and generalising may have to face a crisis before they’re able to change their beliefs when these no longer work. The crisis then becomes a general method for questioning the value of one’s business. For the individual, the crisis can be a way for the unconscious to protest against a lack of coherent purpose in what we’re doing. For an organisation, it’s often internal factors that force crises. But a crisis is obviously not a good solution, and it means that mischief has been allowed to fester for too long without being addressed.

Summary x Restrictions in an organisation must provide a framework and be both well motivated and comprehensible. Do not change big, efficient structures due to the existence of one or another misguided person who’s made a mistake. x Decisions at a general level facilitate making decisions at the specific level. If you have an overview, it’s easier to see where we’re headed. x When dealing with general concepts and principles that are then used to classify the activities in a business, complex decisions can be more easily made than by someone who feels compelled to make large numbers of partial decisions before anything can be done. Abstraction is the key to understanding and effectiveness. x Our capacity as decision makers must be trained. Nobody has unschooled intuition that’s useful. On the contrary, we’re constantly being lured into traps where we surrender rational thinking. x General beliefs are very powerful and can therefore be difficult to deal with if they aren’t monitored in a conscious and rational way. x Collapsing belief systems become fundamentalist, and the result is a collective regression. Therefore, the importance of continual critique towards norms cannot be underestimated.

CHAPTER TEN FROM DECISION TO STRATEGY

In the previous chapter, we discussed how general frameworks and principles facilitate decision making and how such abstractions can increase the understanding of problems with decision making as well as making the solutions more effective. In this chapter, we will investigate what may happen if the general principles are transformed into specific and concrete long-term goals.

Long Term Beyond the Vision In a world of competition, someone who can think long term gains a great advantage over those who cannot. There are many anecdotes about how people who have accumulated a certain amount of wealth find it much easier to multiply the value of their wealth than people who in spite of making great efforts don’t even manage to accumulate enough for an initial investment. There are several explanations for this, because it is easier to become very rich if you already own a basic fortune. But one characteristic of those who are very rich is often that they can make longterm investments. When we are able to make long-term plans, we liberate mental energy that no longer needs to be absorbed by ephemeral and often insignificant problems. Simultaneously with this liberation, entirely new issues unfold as well as numerous opportunities and options. The dialectical complement to the general principles described in the previous chapter will be to design a systemic long-term strategy for our operations. We often arrive at a vision for our business as a result of our efforts to generalise operations. The visions show how the principles can be communicated in an emotional way, but a business must have a real and elaborated vision beyond the attempts of communications departments and PR consultants. Otherwise, the company may miss the opportunity of having a shared frame of reference among the employees. But visions also need to be materialised into concrete plans, and doing so requires decisions of a completely different character than when you chose more emotional visions of the future, regardless of how attractive these might be.

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In an organisation, there are often many promising opportunities, and it can be extremely difficult to decide more precisely which of all promising directions should be selected and what should be done, because in some cases it will affect a very distant future. Making decisions about complex problems in the present is hard enough to deal with. The difficulty increases dramatically for decisions about complex problems in the distant future. There may also be numerous attractive final goals, and we don’t want to commit to only one of them if later another one turns out to be better. The hardest part is that the distant future is relatively unknown, and it’s extremely difficult, often impossible, to obtain reasonably reliable supporting information. Also, we may not have the resources to follow several strategies simultaneously, which greatly limits what we can do. Yet we have to do it if we want to exploit the opportunity for lasting success. As we’ll see further on, there are both formal and informal techniques to facilitate strategic visualisations about future scenarios so that both the final target and the effects continually become clearer. For example, it’s possible to evaluate the available information in relation to an ongoing story that’s perceived as if it’s a reality in itself. Possible scenarios thereby become assessment tools that reflect how much we manage to make different goals, strategies, and scenarios concrete. Even people with less insight into the various issues may then have a chance to imagine what different decisions might entail. The more reliable the available information is, the better the decisions that can be made. The further away in the future the goal is, the more difficult it is to acquire reliable information, even though there may be a hope of things becoming clearer as the future draws nigh. Then it becomes easier to make informed decisions when these are necessary. The road itself in this sense shows us where we’re headed. For this reason, we should try to maintain as much flexibility as possible in long-term projects and avoid lock-in effects. If we succeed in this, the details become of minor importance. The important thing is the long-term plan, which also makes it easier for people to choose what activities they want to engage in during their journey.

Making the End Goals Tangible We’ll now explain some of the art of developing and making long-term strategies concrete. For this art, it’s not enough to have a visionary devotion to general principles and to be able to make vague promises. Those principles need to be bolstered in a hierarchical structure with a

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clear description of how that structure relates to the long-term goal. It must also be clear where responsibilities lie. It can, however, be difficult to determine which strategies are preferable, even if, in principle, the various stakeholders have the same values. This is because those stakeholders can have quite different ideas about the future. We discussed in the previous chapters how concrete agreements were necessary for a business, and that general agreements make it more efficient. In this chapter, we’ll study how these general arrangements can be integrated into a stable business in a way that’s also specific enough to be presented as a credible and acceptable long-term perspective. In the last chapter, we described the process of falling in love. That process requires various promises and affirmations if it is to hold together a relationship that’s still fragile. We also discussed the experience of intimacy. On a personal plane, people may use a priest, of one kind or another, who tells them to be steadfast in their faith, whatever that may consist of. In a more complex business, you may need a strong regulatory system that in some sense is guaranteed by an authority to ensure that general plans can be transformed into a stable and concrete structure of strategies. Centralised control is needed where long-term planning is guided by an overall vision, while the details at different levels are coordinated according to a clear schedule. We also argued that there’s great strength to be found through generalisation of processes and criteria. Generalisations make it possible to structure and obtain an overview of available and relevant information. The better the overview we have of a situation, the better we can plan how to gather information. Now we face a completely new problem. Visionary thinking has resulted in our becoming aware of many more opportunities in the future, opportunities that we weren’t aware of before we’d managed to generalise our choices and values. More centralised control is needed in order to guide long-term strategies towards our vision while coordinating the details on various levels as a continuous development. x How can we represent a distant future that’s full of new opportunities? x How can we develop a model of reality that describes reasonable approaches to the future? x How can we be sure that the world around us will allow us to execute our long-term plans? In this chapter, we answer these questions by describing how scenario descriptions can make concrete something that only existed as visions of a

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distant future. More informal scenarios are similar to what we find in fiction, where, by creating a plot and identifying with a train of events and people, it becomes possible to evaluate the impact of different strategies in the development of that plot. In a story, it’s also often apparent what information is important and what information is missing—a feeling we wouldn’t have unless we’d created an intuitive scenario for a hypothetical future. The results from these scenarios can then be the basis for a more formal analysis of problems and possibilities.

Scenario Analysis We need to understand the future in order to see what effects our longterm strategies will have and to acquire a preliminary picture of what outcomes those strategies might render. We also need to decide what is most important for the long-term development of a business based on the goals we have. Then we can make a preliminary plan for the long-term goals and align this with the scenario analysis. There are more or less well-executed attempts at doing this in different businesses. One example is practical scenario training for fault discovery and learning in hypothetical but realistic situations. In the authentic scenario exercise, just before the opening of a brand new ultra-modern hospital, a physician claimed that there was so much confusion and so many technical flaws that he later resigned in protest against the hospital management for not putting off the inauguration of the hospital so that deficiencies could be better addressed and staff better prepared. If we are to get any kind of picture of how we should act in the long term, we must understand both our goals in a more concrete sense and whatever future scenarios we may be reckoning with. Then we can start thinking about which set of strategies is appropriate to the goals and scenarios. Working on long-term strategies is often complicated, and there’s rarely an opportunity to choose from a clear picture of all the implications and possible scenarios. In many cases, people give up and carry out their analysis using the same method they apply when voting for political parties or when choosing a marriage partner: they choose the one that seems to be most attractive at the time, without really knowing why. Or else they choose after having consolidated a tangle of feelings into some simple, unqualified judgement. This is obviously not the method we would recommend.

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It’s better to carry out the analysis on the basis of a well-thought-out model, even if the analysis is sketchy and highly subjective, in which we mix educated guesses with any empirical information we may have. For reasons we discussed in the previous chapter, it’s appropriate to work with vague information in these models, also. Sometimes we use different types of simulation models to gain a better idea in these contexts. And sometimes we try to create concrete visualisations through storytelling in order to get a better picture of the situation. As the stories build, it becomes possible to collect more concrete information, and the stories gradually become clearer. This may sound diffuse, but it often works amazingly well for the purpose of gathering information about opinions and attitudes. It’s been used for planning and design of scenarios throughout the ages, and many people have influenced history simply because they’ve managed to turn abstract visions into concrete, communicable stories. In a famous speech, when Martin Luther King Jr. described his dream, he based it on very concrete situations in a future scenario so that the people at the rally could engage in his long-term and comprehensive plans. This worked well as a form of communication and as a method to help people understand what they really want. But of course it should be combined with a more analytical approach. As a story gradually emerges, it becomes easier to make it detailed and to visualise it more clearly. The process may continue iteratively, and we can always reassess a story for how attractive and credible it is. Through this kind of storytelling, large and complex stories often develop an abundance of opinions about what’s right and wrong. In this way, we can obtain an ever-clearer picture of the most critical parts of the objectives and scenarios we’re dealing with. Normally, the longer we do this, the clearer it becomes, and when it’s become sufficiently clear, we can transition into decision analysis. A concrete visualization of a scenario should not be confused with some form of introspection or autosuggestion, but rather as a way to visualise and see parts that we might have missed in our models. The visualisation can be supported in having groups of end users discuss the scenarios. What makes the scenario method so powerful is that it becomes easier to continuously gather information because we can focus on what information is relevant to explaining the events in the scenario. It can be very difficult to discover what’s missing and where to look for it in all cases when we don’t have a perfectly planned structure to work with. The scenario method is not unlike the way that many people make decisions. We don’t choose between options; rather, we spontaneously do

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what seems best until we run into trouble. Most of the cognitive functions of the brain do not seem to make use of rational processes; instead, they mostly use recognition and pattern matching. The advantage of building on recognition in the form of a concrete visualisation of a train of events is that it becomes easier to use more of our mental resources to evaluate the story. Pattern matching can be carried out with the support of many parallel processes in the brain while it simultaneously creates more elaborate patterns. Pattern matching requires no sequential logical reasoning, which takes longer to do and is more demanding to carry out. The downside is that we easily get stuck in habitual thought patterns and preconceptions. When decisions are complex, the human brain has a limited ability to perform pattern matching on rational sequential concepts. Therefore, we haven’t a hope of dealing with pattern recognition in a more critical way from an external perspective. We must therefore combine recognition with a more structured analysis if the pattern recognition is to work in more complex decision situations. And as we said before, this can preferably be done in groups. In a similar way to how the brain matches patterns, an organisation can allocate resources to the selection of a few preliminary scenarios among a larger number of initial ones, and then gradually develop and continuously change that limited number of scenarios until they appear to be sufficiently acceptable. Then the more formal decision analysis begins, but based on a far more informed starting point. It’s worth noting that if we were to continue this storytelling process instead with the purpose of selecting only one outstanding future scenario, something unusual happens. All the energy and attention that we devoted to the other scenarios are released, and we experience an interesting sensation of communion and unity, whereupon the usual groupthink censorship takes effect. We quickly wrap ourselves inside this single solution almost as though we were in love. We have to be careful about this tendency, because great misery can arise from such closed groups with common and limited storytelling in which people construct their own more or less hare-brained myths about one thing or the other. When a story about the future becomes clear to the degree that it would be possible to illustrate it with media such as art, theatre, or films, further opportunities unfold for gathering reactions from a wider sample of respondents. Once we’d managed to visualise in detail what Slusssen—the spaghetti junction in central Stockholm—would look like after its renovation, large groups of people were given an opportunity to understand what that entailed, to react and to push through revisions to the original plans.

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The Decision and Its Execution In the business context, human decision making is largely about control of financial resources. It takes time and resources to implement processes. But it may be worth investing in those resources. If stakeholders succeed with their investments, energy is released that can be invested in new challenges. After stakeholders have been involved in the formulation of a concrete description of a decision, they may well be able to energise the creativity needed to make it happen. When the decision continuously becomes more concrete, it creates even more drive for investing resources into its realisation. It becomes a self-reinforcing process. If we’ve combined scenario analysis with a proper decision analysis, things can sometimes turn out really well. A very clear example of combining scenario analysis with decision analysis is when the people creating the conditions for a project start implementation before the final approval decision is made. This may be based on a strategy that doesn’t necessarily require the project to be completed in its entirety, and it also doesn’t imply that once a strategy is started the project can’t be stopped. Deceitful strategies like these make it extremely difficult for people who are opposed to the decision to influence or stop it. Nor can they leave the project. Instead they become hostages who have no choice but just to keep abreast of the project and perhaps try to slow it down as much as possible. An example of this is when the architect Antoni Gaudi began building the church Sagrada Familia in Barcelona. The project started in 1882 and has not yet been completed. Early on, Gaudi was aware that he would never manage to mobilise enough resources to sanction a decision on the overall implementation of the project, so he began construction anyway, knowing full well that it would probably be enough to construct only a small part of the building for construction to continue once concrete evidence emerged that it was worth carrying on. Similarly, in practice, decisions and implementation are often interwoven into a whole, and decisions are made accordingly and continuously throughout implementation. Major software development projects often follow this pattern. More and more advanced prototypes are developed, and in the end there is no turning back because so much development money has been invested in the prototypes. This strategy highjacks another human weakness, which is that it is hard to stop something once we’ve begun to invest in it. This can sometimes be effective; after all, Sagrada Familia is inescapably present and has been good for Barcelona in the long term.

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An important point is that we have to combine these useful but all too seductive tools with the more analytical decision making. We must also be careful that rational analysis is not just used as a post hoc justification, by calculating variously until the results match what we’d already attached ourselves to during our storytelling process. When we do this, we tend to consider only the positive aspects of the desired outcome. The negative aspects are neglected to a much greater extent, and alternative solutions gain no interest until the intended, preferred alternative proves impossible to implement. The lesson: conduct proper analyses without deceiving yourself!

Summary x Really big decisions emerge as part of a process, one that must be managed. x Maintain flexibility as long as possible during an extensive decision process. Once we’ve advanced beyond a certain point, it’s difficult to turn back. x Exceptionally strong arguments are required for initiating a new scenario and a new resource-devouring decision process. So if we want to oppose something, we should do so early on. x In order to make decisions about things that have long-term consequences, decision makers need to be able to imagine themselves with a concrete, overall experience of those consequences. x Scenario descriptions and storytelling are classic ways of giving people an opportunity to be able to visualise and imagine themselves in complex situations. x A scenario based on circumstances that are similar to other successful ones has greater credibility. x A proper scenario analysis, especially when using multimodal impressions, continually increases clarity and motivates stakeholders to add details appropriate to gaining an overview. x Carry out an extensive analysis without deceiving yourself.

CHAPTER ELEVEN FLEXIBILITY

The acceleration in the flow of information, our dependence on the outside world, the global economy, and the ever-increasing pace of change have meant that old business models such as service and support structures are becoming increasingly obsolete. They must therefore be revised, developed, and renewed. Working with change is constant, and so new, extensive decisions must be made. Obviously, this places high demands on both organisations and individuals. In the previous chapter, we discussed the benefits of gradually developing and refining a long-term strategy so that increasingly it gains a concrete, stable, and clear direction that the business can follow. We also argued that the process must be combined with an analytical approach. That requires a fair amount of work, but when an organisation has found a workable long-term strategy, it has its stage set for developing and formalising all its strategies and attaining a highly efficient organisation and management by building up the capacity for using a method and for making decisions. The entire organisation becomes clearly formalised and streamlined with clear regulations. Everyone sees the big picture clearly because it’s uniformly described, and the description characterises the entire organisation. Competitors who don’t have the same ability to be effective fall far behind. This isn’t limited to companies with a profit requirement. Inefficient authorities and administrations can go far by creating stringent and well-thought-out routines in their activities.

Long-Term Strategies Can Be Devastating Nevertheless, the dialectical dilemma after discovering the antithesis, i.e., that the long-term goal might be wrong, is that long-term goals in streamlined organisations can be almost impossible to change. If a multinational company bases its leading global position on sticking to a single, clear strategy, it becomes very difficult to convince management that perhaps they should modify that strategy. This kind of smugness is a big risk if the company doesn’t notice a dramatic loss of effectiveness when things are going “well enough”. To recognise the validity of the

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antithesis becomes especially difficult if management has fallen for the temptation to become effective by formalising all aspects of the company so that it works like a machine at high speed. Why not continue betting on a winning horse? Why change something that works so well? We appear to be maximally effective as things are, and we’re not going to change now that we’re running at full steam! The deficiencies are often difficult to detect until the organisation has already begun to falter. It can be difficult to come up with good arguments for changing something that appears to be going well, especially because the degree of decline can be very difficult to measure. A critical co-worker who claims that a change of direction is needed will be seen as destructive. Deficiencies become apparent only when things start to go really bad, and then it’s often too late. History is full of examples of very successful businesses that make the wrong choice when they face decisions that will determine their destiny, whereupon they lose their leading position or are even completely eliminated. They simply weren’t competent enough to change their own hard-wired routines. Consider computer manufacturers during the late 1980s that continued to focus on mainframe computers because microprocessors seemed to be just a fad. Or think of the Swedish typewriter factory Facit AB, which had huge success on the international market for a decade, but which refused to adapt to computerised word processing and dissolved. They simply don’t have sufficient power and structure to depart from their own hard-coded routines. On top of this, sooner or later, the bureaucracies of large companies acquire so much inertia that changing the way of working becomes almost impossible. Systems scientist Peter Senge has described how most of America’s 500 most successful companies (known as the Fortune 500) that disappeared from the market did so because they clung too tightly to a long-term strategy that suddenly turned out to be bad when the rest of the world changed. They realised too late that they had to change. Ironically, it often is the very thing that makes the company so successful that leads to its downfall. In the Nordic region, we noticed how Nokia first became a world leader in the mobile phone market due to a superior long-term strategy and how it then virtually disappeared from the market precisely because it could not let go of its strategy. Nokia just could not accept that its established way of designing the user interface was not as good as the publicly available Android interface. The basic problem is how to start thinking along new lines when everyone else in the business has become so invested in a set structure; those who think any other way are considered to be a destructive element.

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In this chapter, we describe how a business can avoid being annihilated as a result of clinging too hard to its success. We describe how it’s possible to make radical decisions for change in obviously stable structures even though they’re not perceived as necessary in the current situation.

Maintain Success We will now discuss how to achieve a continuous willingness to change by standardising all the abstract control and decentralising it into those units that are often better at detecting change. The basic idea here is to abstract, quantify, and standardise control principles in the business. Within the framework of these abstract models of what is necessary for the organisation to continue growing, management can act to modify and change the business. Ultimately the whole thing is about defining principles for how to enable qualified and comprehensive assessment of the whole business, even in a very large organisation such as a multinational corporation. An important part of this is to introduce methods to quantify and analyse the activities and various parts of the business. We’ll focus in particular on how to design measures of contribution that are aligned with the general standardised principles. Such continuous monitoring is necessary to be able to prioritise what should grow and to dispense with the ineffective and bureaucratic superstructures that have grown without control. If this is done properly, the organisation becomes a learning organisation in which the most creative are those who form the core of the business and survive in the long run. We’re merely describing a functional alternative to centralised bureaucratic control structures.

Quantify and Compare An important general principle is that one should quantify the contribution of each independent unit in a business according to a global standard. Then changes are easier to detect. The results should then form the basis for continuous updates or radical changes to the long-term strategies. It is easiest if each unit functions relatively independently, bearing responsibility for its own results. It may well have its own accounting department even if the accounting staff members formally belong to the central finance unit. It may well have its own personnel department, even if recruitment is done in collaboration with a central HR function. They’ll have to run their own accounts for expenses and revenues for it to be possible to carry out thorough benchmarking. By benchmarking we mean

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analysing one thing in a well-specified way against something else, everything else, the best, or a standard; through this, a company can base global reallocation of resources in existing operations or decisions about new initiatives and termination of existing ones. The same applies at the project level. If it isn’t possible to compare the contributions of different projects, it becomes difficult to decide whether to invest in a project or pull the plug.

Principles of Performance Management Chapters 9 and 10 described the value of a shared understanding within an organisation, and this chapter follows up with the dangers of this kind of understanding. Business policies must constantly be monitored and prioritised in relation to the current situation, and we have to be open to change. This gives us control over the most sacred regulation under evaluation, just like the rest of the business, making it easier to focus on the right things. A simple analogy is the production of different index values for listed companies. Some companies that simultaneously have great potential but little profit generation can still have a high value on the stock market because investors believe themselves to have enough insight to prioritise those areas of the business that demonstrate the potential for change and for the future. This example from the stock market demonstrates that it is possible to arrive at (albeit sometimes disputed) quantitative measures in combination with soft evaluations.

 A known priority for organisations has been to manufacture cheap mobile phones with high quality and that also meet buyers’ minimal requirements. We can imagine the company not being able to change its production if the market were to change, and that the company can’t run as a streamlined mass producer if the basic business strategy is suddenly changed. But when we evaluate and prioritise the principle in relation to current changes in the market, we discover that price is not the deciding factor in the sector; rather, the most important thing turns out to be completely new demands from consumers. If flexibility is built into the organisation and its basic principles, the firm can quickly refocus its business and transmit this reorientation all the way from upper management down to the R&D department without needing to initiate a painful reorganisation. The approach is simply to introduce meta-dimensions to decision making that don’t change the basic business models but instead change the priorities of the principles that govern the business’s activities. This can be

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straightforwardly integrated with available computerised decision support systems. In any event, measurability is a key idea, and in quantitative terms we must be clear about x The estimated cost of the change x The estimated contribution (profit) resulting from the change x Whether priority should be changed, as well as why and how much x The effects of the new priority of the proposal in relation to how we used to prioritise this business operation x How the change is related to the company’s general objectives Measurement is the basis for a more analytical approach based on critically examining and testing existing beliefs. We collect evidence and eventually create a hypothesis upon which resources are deployed in order to formally evaluate it. The organisation can try out production operations by allowing employees to quantify what is good or bad, important or unimportant in their work. If we can also quantify how important something is in a given context, it becomes possible for management to accumulate information in a qualified way that is likely to be important for the future of the organisation. This can be described as a strategy for quantitative and analytical monitoring of the business environment that extends far beyond that maladroit domain called “business intelligence”. Instead we conduct integrated, systematic, and analytical decision making based on qualified empiricism and reflection. Measurements of effects also makes it easier to integrate computer-based decision support systems.

Economising Your Way to Ruin? A common reaction from management, when sitting with spreadsheets and trying to understand what has happened after discovering that profits are sinking, is to cut down on all expenses in order to maintain profit levels. Common themes when choosing this strategy are that it requires no imagination and that management is under the impression that the organisation is already optimised for the market. Consequently, a simple and quick way to ensure continuous profits is to save. The following is a cautionary tale from everyday Sweden:

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A workplace manager decided to remove the newly installed coffee machine because it proved too popular among employees and the extra coffee purchases led to increased costs. How many of us have not discontinued the workplace fruit basket in times of crisis? We start looking at every cost that can be cut in order to initiate a more or less vague sense of crisis in the organisation. This creates many additional problems. Suddenly there is insufficient expertise to solve business problems because those staff members who may have alternatives have become demotivated and new problems appear in the form of reduced quality or delays in production. Dynamism and innovation also disappear when people feel worried and insecure, which leads to decreasing production volume and quality. When management belatedly realises that it isn’t possible just to save its way out of the newly discovered problems, it might make a more qualified analysis of where savings can be made without the rest of the business suffering. If management doesn’t know what decisions should be made, then experts may be consulted. But even if the company manages to improve performance without inordinately losing quality, similar problems will soon resurface. Slightly modified routines are embraced with greater fervour, but this doesn’t solve the main problem. The situation even becomes worse because it takes a long time to rebuild a skilled workforce. The main problem remains: the business is too rigid to continuously adapt to a changing environment. Organisational rigidity makes it difficult for management to make reasonable decisions. Everything went so well, yet suddenly the organisation must become more innovative in order to find new solutions in a changing world. Because the board has little contact with the business, it forgets to ask the staff what they think about the situation and decides instead to employ increasingly sophisticated and expensive management consultants to craft innovative plans and systems for the organisation to make it more flexible and creative so that it can adapt to new market demands. The only problem is that the most dynamic employees have already left, and the organisation is full of middle managers and employees who think this is completely wrong and see their little territories as threatened or even disappearing. They don’t understand why wayward consultants should have free rein. Those who still try to be innovative discover instead that it becomes a kind of war in which everybody is the enemy, with grumpy employees who have no confidence in the management, which in turn is increasingly blind. Changes are continually introduced, and although they may shake signs of life into even the most apathetic of employees, there will be no substantial improvement. The colossus is too big and heavy for its foundations to be changed with the help of management consultants.

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Because there is a lack of ideas on how the problem can be solved, an internal research unit is created. Its sole purpose is to encourage innovation and new ideas that can solve the problem. In principle, the unit would be able to function reasonably well, but it is difficult to force an innovative atmosphere into being. The research unit wants the organisation to carry out a large number of costly changes, but the organisation doesn’t have sufficient resources, and further conflicts arise that only accentuate differences. Now the organisation really starts to fall into crisis, and everyone starts to accuse each other for having caused things to go bad. The blame game is in full swing, while the motivation to make innovative changes disappears from the acquiescent employees, who’ve lost both their coffee machine and the fruit basket. More or less symbolically, the board sacks one subsidiary’s managing director and appoints a new one who cannot reasonably be expected to find a quick solution. Now the company spirals down towards ruin.

And Its Opposite There are other solutions, even when things have been allowed to veer way off course. In the extensive crisis situation that now prevails, imagine that together with a new management team the board finally realises that it has to read this book and then see that it cannot blindly introduce changes unless these are supported by their employees. The fictive example in the text box illustrates how we, the authors, think the situation should be handled: They now proceed to systematise and formalise the handling of suggestions. Employees who develop rational arguments for changes to production are rewarded, and those in management who coordinate proposals for change must respond with an elaborate justification for the decisions made on the basis of the proposals. A cultural dynamic has now arisen in which employees tell management what decisions need to be taken. The new dynamic also includes a routine that forces management to respond to all proposals. An important effect is that employees can recount which of the company’s policies have acquired a new meaning, sometimes to the degree that they become impossible to live up to. The process actually reveals that there is extensive competence among the organisation’s internal experts, and that many employees have a much better idea than the managers about certain issues, particularly operational ones.

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These staff members’ excellent suggestions might have been available all along, but the ideas weren’t previously expressed because employees weren’t allowed to speak or they didn’t see any sense in doing so. Gradually the organisation becomes more flexible because upper management broadcasts directives that intermediary levels of management should not be the ones to create command structures out of formalised procedures. Instead, these intermediate managers should merely coordinate proposals emanating from employees. The middle managers who don’t accept this new role are given other tasks, and many choose to change employer, and they won’t be missed. Fortunately, guidelines and priorities were designed that could now be used as a reference frame (Chapters 6–9). Similarly, scenarios could be refined and formalised (Chapter 10). The company then acquired the tools to gradually change the whole based on thoughtful, rational, and critical processes. And it acquired the tools to evaluate the fundamental business principles in relation to the current context. It now has a way out of that prison of continuous procedural stagnation. It no longer needs to resist change, because changes can be utilised. Satisfied employees now exist within a learning and interactive organisation. And don’t forget that a prerequisite for all of this was that there was enough of an information base and enough decisions to point out where and why changes needed to be made. The organisation was transformed after employees had been made responsible for change. It created a completely new type of interaction. It became more receptive, and ever larger groups became involved in which decisions were the most pressing. It created a common platform for public discussion. A culture developed in which the employees who were best at removing unnecessary bureaucracy and replacing it with new creative but realistic solutions received the highest status in the organisation. The basic structure could remain stable precisely because of its dynamics. To suggest that some subunit was so meaningless that it should be replaced was no longer perceived as destructive. On the contrary, critics received attention as soon as they came up with constructive suggestions for improvement. But they could not shirk their responsibility. They had to provide well-founded arguments and also be able to present quantified proposals for improvement, which in turn led to a quality grading of proposals. Those without well-founded arguments were ignored. At the same time, there was a considerable requirement for expediency from those who coordinated the processes. This would not have worked if at the same time middle managers had not systematically administered and coordinated the proposals for changing priorities. The newly acquired

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decision support system could now work much better than it did when management had been using it, precisely because employees themselves were the ones to produce the bulk of the basis for decisions. The management had the necessary detailed knowledge of what worked well or badly as well as how important the details were for the products and services produced. The employees had detailed knowledge that management lacked, and which they lacked for good reason. Because this knowledge was quantified, it could be communicated all the way up to the upper management. As part of the continuous critical analysis, employees attempted to explain to each other what it was that had made the organisation become better adapted to the outside world. The conclusion was that after having given the employees permission to tell their bosses what decisions needed making, a new identity was created throughout the organisation. This identity lay on a higher and more encompassing level. Because rational arguments were demanded from the employees who proposed change, it was possible to carry out reforms through the entire organisation. Rational models were applied overall to ensure that decisions could be made through quantified assessments of costs and benefits. (See the next chapter). Qualitative information could be handled systematically and balanced. Additionally, employees began to deal more analytically with the probabilities of different outcomes as real entities rather than pure guesswork. From an organisation that acquired its identity from the visions defined by management, a new fact-oriented organisation emerged that could handle the indicators from the outside world efficiently and analytically. Through the new structure, it was possible to manage all the processes, procedures, goals, and meta-principles governing the organisation, which acquired a new identity, and the employees got back their coffee machine and their fruit basket. This scenario might seem simplistic, idealised, and even a little ridiculous. But it isn’t at all. This development process is a very real possibility, and it can dramatically improve organisations in all manner of ways, as we have described.

Summary x Centralising the coordination of the organisation guarantees that working towards change becomes more efficient.

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x Priorities should be communicated and justified in the entire organisation. x If management chooses to decide how its vision should be implemented, this will dramatically reduce the organisation’s capacity for innovation. x Management gains the freedom to focus on long-term strategies as long as it stays receptive to employees’ proposals for change. x If the management rewards qualified and quantified decision support from employees, the organisation attains a stronger identity at a higher level of abstraction, because major strategic decisions can be based on accumulated quantitative data. x Incentive systems strongly contribute to an organisation’s identity. x If the incentive system stimulates quantified decision support, then productivity increases while the organisation can avoid settling into a rigid and efficiency-obsessed way of thinking. x Do not control an organisation from an Excel spreadsheet. At most it’ll show the effects of what already exists—if that. x For God’s sake, keep your miserly fingers off the coffee machine and fruit basket.

CHAPTER TWELVE DO IT RIGHT

Decisions and the process of decision making are, as we have seen, fundamental to individuals and organisations. In the previous chapters, we discussed different aspects of how to develop operations. Sooner or later, everything boils down to decision making. Both for individuals and organisations, decisions are a matter of choices, and also how and why you make them. As we have seen, it is pertinent to understand the rules of decision making and decision processes, and also to understand how to shape rules and methods for making decisions. In earlier chapters, we found that organisational structures must, in a deliberate way, make it easier for people to conduct their business and, on the basis of clear evidence, find models to handle this. A well-managed organisation can offer a decision-making power that individuals usually lack. In the previous chapters, we discussed the benefits of progressively developing and refining a long-term strategy so that in a measurable way it becomes an increasingly concrete, stable, and clear direction that an operation can follow. Conditions are created for working long term. The entire organisation becomes clearly formalised and streamlined with welldefined rules. Everyone can see its goals, because they are uniformly described, and this description characterises the entire organisation. This is not limited to companies with a profit claim. Similarly, inefficient authorities and administrations can achieve a similar success by creating stringent and deliberate organisational models and practices in their operations. A well-organised operation is equipped to provide effective and systematic decision making, but the dialectical contradiction here is that even if you have developed a strategy, which you believe corresponds to the organisation’s goals, there are often many shortcomings in its implementation and in how its importance is emphasised. The situation today is that most organisations are in dire need of structured methods to handle this. They often have a lack of structure and knowledge to identify and analyse even quite simple problems. Already in the last chapter we argued that measurability must be combined with more analytical decision making for good results to be achieved. So let’s look a little closer at this

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combination. Decision analysis requires work, but if an organisation has found a working model for making decisions, the chances are good that all levels of decision making can be formalised. Decision makers who acquire a reasonable overview of the basics of decision making can significantly improve their ability to form a complete picture of the problems and to disregard feelings and delusions that cloud the making of well-thought-out strategies. Moreover, as the basis for a decision becomes clearer, the possible need for more information becomes more obvious, i.e., which areas require more background information before a well-founded decision can be made. Furthermore, the decision can be more clearly documented, and the decision background is more easily examined and adjusted.

Intuition and the Decision Process Making good decisions may require awareness of some of the cognitive shortcomings of the human mind. This requirement, awareness, or shortcoming—or any combination of these three referents—becomes clear when the situation contains a large degree of uncertainty. A way of handling uncertainty that is often used is to try to estimate the probability of future scenarios. It may be possible to assign probabilities to some of the consequences, but not to all. Many people give up here and believe that they can handle the decision problem in an intuitive way, or else they simplify the problem to something that they are able to understand. Intuition is characterised by being able to capture a situation as an entirety without having access to all facts. It is based on two basic factors: information and experience. All information is processed with only very basic filters to limit the information itself as well as the impressions that flow in. The ability to react instantly to unexpected and dangerous threats without needing to think is a matter of survival. Thus intuition has been a very useful ability for humanity. The impressions that flow in are far more than reason alone can structure. Functioning in complex environments requires that an intuitive decision maker is well informed and experienced, as well as having a wealth of direct experiences of similar situations. Many people believe they meet these requirements, but in fact they rarely do. When we encounter a situation in which we must make a decision, we may try to grasp the situation as well as we can, or at least create an overview. We try to use past experience and knowledge to arrive at a good decision, or at least one that is not too bad. This may be problematic. If we have never been faced with similar situations, as may be the example with

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large reorganisations, we use our intuition, and in such cases it is not often a reliable companion. In addition, if the decision situation is poorly structured, the decision maker encounters even larger difficulties in grasping the situation. Many decision makers consider themselves good enough at decision making and believe that they do not need any training or methods. For those who think they are doing well on their own, only learning from experience remains. However, this is an expensive and ineffective teacher. It is also unreliable, as decision-making situations can be markedly different in nature and there are often few points of contact between the decisions in different cases. Despite this, one can learn to be good at making decisions. The issue is not what is decided but in how the decision-making process is structured. Thus, a decision method must be used to structure the basics and handle the inevitable uncertainties connected with decisions. Such a process is not a formula that automatically leads to the right solution. It serves as a tool for systematising and managing decision making. Individuals must learn such a process as leads to the best decisions with the least cost in time, money, and power. And it is up to the organisation to actively support this process.

It’s All About Structure Even if people aren’t solely relying on their intuition, they may consider it unnecessary to work using formalised decision-making processes. They may think that immediate action demonstrates power. It is claimed that decisions must be taken directly and that there isn’t time for more comprehensive considerations. This approach, however, has many drawbacks! Experience from many fields tells us that the less time there is available to make a decision, the greater the need for a structured decision-making process. Do not fall for the temptation to start improvising. The possible time gained by making intuitive decisions often disappears when compared with the time taken to correct mistakes. Time wasters such as incorrectly defined problems, forgotten vital parameters, and overlooked alternative solutions may also be added to the drawbacks of intuition-based decision making. Systematic decision processes are available today that can be used to collect the information needed. The process works as a tool to systemise information. It’s not about how the decision should be made but rather how the information can be acquired and structured. There are several generations of decision support models that are more or less useful. But

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they require well-structured problems that decrease their usability because managers in real life usually need to take care of ill-structured problems. The solution is to view decision support in a context where the basic elements of the decision process are used to get a good overview of all the information related to the decision. As the overview of the information becomes clearer, any additional information needs are easier to locate, i.e., in what areas the problem requires more background information. This is important when allocating resources in the decision-making process A decision process can be described in a top-down manner. First, we should review how different decisions are taken in the organisation today. It should be initiated with a zero-state analysis, and after this, potential strategy candidates should be identified to assess the improvement potential. Thereafter follows a structured decision-making process. The first step of this process is to reflect on the goals of our own or of our organisation. A decision situation generally contains a number of options. These options can lead to different things depending on a variety of factors. Often we do not know exactly what one’s actions will result in, but we should try to estimate the likelihood of the different consequences occurring. Also, we must try to form an opinion about the values of the different consequences. These values depend on the goals we have formulated. Needless to say, there are a lot of questions when we are forming a decision. Some are particularly pertinent: x Which are the relevant options? x Which are the interesting consequences? x Which opinions or people are important? x Which perspectives are essential? x How important are the different people, and their views? x Which values are relevant? x How should we estimate these values? x How should we estimate different scenarios? x Do we need more information? x Which decision-making rules should we use? There is obviously a lot to consider here.

Decision Models The most central part of every decision process describes how we structure alternative options. First, we can try to model the decision situation as much as possible. We can make an easy start of it. Assume that we have a decision situation with two options. The future, however, is often

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uncertain. For example, if we are considering whether or not to bring an umbrella with us on a walk, there are at least two possible future states that are interesting. x It will rain x It will not rain We assume that everything else is equal. For example, we rarely think on a daily basis that there will be a major nuclear attack when we consider our little umbrella issue. In fact, the rain would probably be a slightly smaller problem in this context, despite Figure 1. However, we focus on the relevant issues here.

Figure 1. Rain

Structurally, we now consider the states T1 and T2 that can occur with different probabilities. They are common to both options in such a model. Each alternative may create different consequences, depending on what we are doing and on what conditions the world ends in. If we choose the option of not taking an umbrella and it starts raining, then we get wet. If we instead choose to take an umbrella and there is no rain, then we may be tired of dragging a heavy umbrella completely unnecessarily. Each of the consequences is assigned a value that represents the outcome of the decision. We will denote the first consequence of

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Alternative 1 by v11, which means that other consequences of Alternative 1 get a higher number, i.e., they can be assigned any of the values v11, v12, etc., while Alternative 2 has the consequences v21, v22, etc., as described below. As we have seen, the value can be defined differently, but here we imagine a scale between 0% and 100% where 0% means that it will not happen and 100% means that it will. Similarly, future states can occur with different probabilities, where p1 denotes the probability of state T1. To summarise, we now get a small matrix as in Table 1. State T1 Probability (p1)

State T2 Probability (p2)

Alternative 1

Consequence v11

Consequence v12

Alternative 2

Consequence v21

Consequence v22

Table 1. Decision matrix for decisions, for example, umbrella decisions if there is a risk for rain But future scenarios are often unclear. A decision under risk exists when the decision maker is uncertain but has estimates or opinions about the probabilities of the different consequences. In our case with the umbrella, we have a decision situation under risk with two options and two states. Each of the four consequences is assigned a value. The two states are each assigned probability pj, whereupon we can model the decision situation with a matrix model with probability values for each state. Probabilities deserve further comment. For example, a probability can be based on a series of experiments or observations. An event is observed a large number of times, and it can be noted how many times the consequences under consideration occur. Based on that, each condition is assigned a frequency probability. Another approach is that the probability is estimated by the decision maker. Estimation is usually used when for one reason or another it is too expensive, too difficult, or impossible to carry out experiments to determine the frequency of events. And that is often the case. The probability information is usually weighted into an expression commonly called the expected value and is, e.g., calculated for options A1 as E(A1) = p1˜v11 + p2˜v12, where the p’s are probabilities that the states will occur and the v’s are values of the consequences of option A1. And correspondingly for the second option. The expected value is thus calculated by multiplying the values of the consequences with the

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respective probabilities for them to occur if option A1 is performed. The expected value is used in a multitude of contexts and is normally considered to be an adequate way of evaluating alternatives. The principle of maximizing the expected value means that we choose the option with the highest expected value. This option is thus what is expected to be the best (or at least most favourable to the decision maker if she has been wise). This rule has the great advantage of being unambiguous and easily calculable as long as the probabilities and values are given as numbers. If we return to our previous umbrella example, we can now imagine that the likelihood of rain is 50%. Let’s measure the consequences on a value scale where the worst is 0 and the best is 1. Being dry and avoiding dragging around an umbrella is the best outcome. We assign 1 to this outcome. Furthermore, getting wet is the worst that can hit us, so we give this outcome the value 0. Not getting wet but carrying the umbrella is unfortunate, but not catastrophic, so we assign the value of this as 0.6. All of this is modelled in our decision matrix in Table 2. It will rain (p1 = 50%)

It will not rain (p2 = 50%)

Bring an umbrella

Don’t get wet, carrying umbrella (v11 = 0,60)

Don’t get wet, carrying umbrella (v12 = 0,60)

Don’t bring an umbrella

Get wet, not carrying umbrella (v21 = 0)

Don’t get wet, not carrying umbrella (v22 = 1)

Table 2. Umbrella decision We can now calculate the expected values for the different options by assigning the values from the matrix to the variables in the expression for the expected value. The probabilities were 50% in both cases. To get wet was the worst consequence (0), and to be dry without carrying an umbrella was the best (1). We also estimated the value of being dry but still carrying an umbrella as 0.6. x E(Bring an umbrella) = 0,50 ˜ 0,60 + 0,50 ˜ 0,60 = 0,60 x E(Don’t bring an umbrella) = 0,50 ˜ 0 + 0,50 ˜ 1 = 0,50 According to the principle of maximizing the expected value, you should bring an umbrella because the expected value of that option is the highest. The theory of maximizing the expected value has dominated the decision analysis when considering decisions under risk. It has been

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widely accepted as a normative model of rational choice and is also widely applied as a descriptive model of economic (and some other) behaviour, at least in cases where the possible outcomes can be assigned a monetary value. Where the decision is repeated many times, it is often natural that the total value would be a weighted average of these. So it doesn’t seem to be wrong.

Tree Models However, the matrix model has a lot of disadvantages, and, for the most part, a tree representation is perceived to be more natural, flexible, and comprehensible. Decision matrices only take into account one level at which the decision maker must choose between different actions. Only one option can be selected and that’s it. Decision-making problems, however, are in reality often more dynamic. A decision may lead to another decision problem, and the latter leads to another, etc. For decision situations involving multiple choices in a certain order, or where the decision maker can influence the likelihood of the event occurring, a decision tree is clearly a better representation model than decision matrices. Decision trees are thus very useful in complex decisions. The decision tree provides the decision maker with a graphical representation of the core of the decision and shows all the interrelationships among choices and uncertain factors. A decision tree is thus a drawing. It describes, methodically and relatively objectively, the architecture of the decision. The decision tree contains the same information as the decision matrix—at least when the tree contains only one decision and just one level of events. But the greater the number of nodes, the greater the advantage of using a tree structure. The overview of the problem is not lost. At the same time, it is important to try to limit the number of nodes so as not to make the tree too complex and incomprehensible. If you have many nodes, you can choose to create an overview tree and then several separate partitions where details are shown. A tree consists of three types of nodes. In a decision-making node (the green square in Figure 2), the decision maker chooses one of several options. Then there are event nodes (red circles) that represent uncertainty. Finally, there are consequence nodes (blue triangles) that show the results of different pathways through the tree. Probabilities are assigned to the event nodes and values to the consequence nodes. Figure 2 illustrates a sample decision tree.

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Figure 2. A decision tree for decision making under risk

Decision situations are often much more complex. One event may result in another instead of a final consequence. Figure 2 illustrates two options. Each can lead to different events with their respective consequences. The likelihood of each potential consequence is visible in the tree. The values in the blue consequence nodes indicate the values for each consequence, should it occur. The decision tree in Figure 2 shows the two available options: x A: Invest x B: Not invest We know that investment incurs a risk of 40% that the outcome will be a loss of USD40, whereas the chances are 60% for a reasonable profit of USD30. If the investment is not made, there is still the risk of losing even more money (USD50). But the likelihood of this is only 20%. The remaining 80% is the opportunity to receive at least something, i.e., USD10. Here we can make a decision by calculating the expected monetary value, EMV. This is done in a similar way to the umbrella case, by multiplying the likelihood that a consequence will occur with the monetary value it provides. x Alternative A will thus give the expected value 0.4 ˜ (–40) + 0.6 ˜ 30 = USD2, where 0.4 is the probability of losing USD40. The remaining 60% is the probability of earning USD30. x Alternative B will give 0.2 ˜ (-50) + 0.8 ˜ 10 = -USD2, where the probability of losing USD50 is 20%. The remaining 80% is the probability of earning USD10.

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Here we see that the expected monetary value of investing is a gain of USD2 and of not investing is a loss of USD2. The option with the highest value is chosen, which is to invest (better by USD4).

The Problems with Expected Values of a Selected Alternative It seems natural to give different weights to the outcomes, so that more likely outcomes have greater impact on the valuation. If the decision maker is neutral with regard to risk, this seems to be a reasonable rule to follow. A risk-neutral decision maker believes that twice as much of a certain amount of money is always twice as desirable. However, this rule, often referred to as utility theory, has often been questioned and persistently debated among philosophers as well as among mathematicians and economists. Here we will provide a simple example in summary. We assume that Comrade Vladimir Iljitj has the choice of receiving USD50,000 or to participate in a game in which the probability of winning USD100,000 is 50% (and in which the likelihood of not winning anything is 50%). According to the usual expectation rule, he should be indifferent between choosing one or the other of the options, because their weighting values are both USD50,000. But this of course is not always true. Imagine if the comrade is in immediate need of USD40,000 for an operation that has to be completed within a week to save his life and that the money is not available elsewhere. In this case, USD50,000 up front will be worth much more than the chance of winning USD100,000. On the other hand, if the operation costs USD80,000, then the USD50,000 is quite unimportant because in practice the chance of winning USD100,000 represents a 50% chance of survival. Thus, the monetary value of an option does not always correspond to the true value for every person or organisation in all situations. The conclusion is that if the principle for maximising the expected value is reasonable, then we must try to estimate the utility value of the various consequences even when initially they are quantified examples in monetary terms. You will then give the consequences a value on a scale similar to the one we used in the example with the umbrella. These values correspond to the benefit of the outcome to the person or organisation. If the monetary values are considered to be completely proportional, it is easy to fit them onto the utility scale, which then has the same function as a monetary scale; however, this is often an imaginary situation.

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Utility Theory As described above, the expected value principle may be modified by introducing utility values with more specific characteristics. The calculations are still easy to perform and provide well-defined decisionmaking rules in each given situation. Utility theory is extensively used in different contexts, including in classical economics. There are, however, a number of objections to the theory: x Utility functions are unique in the sense that they reflect individual utility based on preferences. Thus there is no easy way to compare the benefits to different individuals of specific outcomes. It may become even harder for organisations, where several decision makers should agree on a joint utility function. x The decision maker often does not know any exact number for the benefit of a certain outcome. In this case, it would be preferable to express statements, such as that “the benefit of event X is between 0.3 and 0.5” or that “the consequence value Y lies between $250,000 and $400,000”. x In many practical situations, it appears that policy makers don’t even want to express utility in numerical values. Rather, we want to relate the consequences to each other in statements like “the value of consequence X is greater than the value of consequence Y” or that “consequence Z is much less desirable than consequence T”. This is also impossible in the traditional models described so far. x The attitude toward estimating probabilities is similar. Decision makers don’t have access to reliable probabilities. x Many decisions are of a one-off nature, or they are so important that an undesirable outcome cannot be tolerated, even though it has a low probability. Then it is reasonable to require that if the likelihood is too high for a very bad outcome, this option should be cleared even if it shows good expectations. Such security rules may, for example, be interesting to an insurance company that rarely wants to enter into insurance contracts where profitability is certainly good but where there is a non-negligible risk that the outcome can be such a big loss that the whole company goes bankrupt. Thus, there is seldom access to precise information, and the requirement for this often places unreasonable demands on the decision maker. How can you (or someone else for that matter) meaningfully indicate the exact probability of a future event? In real life, people usually have severe

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difficulties in estimating probabilities. So the hope of finding meaningful support using exact probability estimates falls. To state this again, in real decision situations, we rarely have access to precise information, such as there is 17% probability that consequence X will occur. When adequate frequency probabilities are unavailable we have to rely on estimated probabilities. It is obvious that these do not have sufficient precision for us to assign them single fixed probability numbers. The same applies to values (or utilities). It is often extremely difficult to quantify them, even if one has found a good measure. Confidence intervals and other types of uncertainties almost always appear. Methods based on fixed values thus become difficult to use in a meaningful way. Some of the largest problems with traditional methods are difficulties in managing intervals and comparisons of probabilities. Nevertheless, we must be able to model them.

What Can We Do About This? Quite a lot, actually. We need a way to specify probabilities in range form, where the range is determined by how confident the decision maker is. Similarly, we can broaden our methods to something much more useful by specifying value statements in a better way. For example, try to estimate the value of a medium-sized genocide, a suitable natural disaster, a fairly large meltdown, or any other devastating activity. All estimates of these in precise numbers will of course be impossible. So we need another formalism for representing the problems. We have to move away from placing unreasonable demands on the decision maker—demands that lead to error. Instead, we want to be able to express claims, such as that the value of a consequence is 0.2–0.9 on a scale between 0 and 1, that the value of another consequence is 35– 50kWh, or that the probability of an event is 5%–25%, that it is less than 15%, or that it is simply more likely than another. There are a number of methods to express uncertainty in the input data, such as amounts of probability distributions, upper and lower probabilities, and interval probabilities, but they are difficult to handle without substantial mathematical knowledge, and computer programmes are needed to carry out the decision analysis. The evaluations of such situations can also use expected values as in the more precise situation. However, because both the probabilities and utility values are now variables that do not have precise values but can have any value within an interval of values, the expected value calculation thus results in a bit more complex expression, called a multilinear

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expression. A simple example is the usual expectation value E(A) = p1˜v1 + } + pn˜vn. But now p from p1 to pn are variables denoting probabilities. Similarly, we denote utility values v, i.e., the consequences of the choice ranging from v1 to vn, without giving them a precise meaning. These are significantly harder equations to solve by hand, and in the past it has been difficult to calculate them in a timely manner, even for computers. The complexity increases exponentially. In really large problems, you would have had to wait for several million years to get the result. Nowadays, there are algorithms and programmes for quick calculations of, and comparisons between, multilinear expected values. We have ourselves developed programmes to handle this. Figure 3 shows what this may look like. In the tree, the probabilities are specified as intervals instead of precise numbers.

Figure 3. A decision tree with interval expressions

We will now briefly (and in a slightly simplified way) explain how this works. This explanation may actually be omitted if you like. You need not understand everything that you use. For example, the authors of this book are unsure of how floor mops work in detail but still use them with adequate results. The basic idea is to investigate the number of values in which a strategy is the best. As mentioned above, in the equation p1v1 + } + pnvn, the variables are a kind of placeholder (instead of precise numbers) for sets of values limited only by equations of the type v1 > v2, p1 > 0,1, p1 > 0,3, etc. By examining for how many assignments of variable values the different strategies are superior or inferior, respectively, we can say something important about the strategies. For example, if strategy A is better than B for 15% of the assigned values and B is better than A for

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85% of the values, then you should of course choose B over A. It is simply much more likely that strategy B is the best in the absence of more information. But to make these calculations, it is often necessary to use a computer programme. To make this clearer, we illustrate it by an example. Suppose that we choose between two development strategies for an operation. One is to invest in a mass market with low-cost products and the other is to focus on a more expensive but significantly narrower product segment. We make the customary market analyses and find that the risk of total failure for a mass-market investment is 10%–30% and the chance of at least a rapid development is 20%–30%. We also estimate that the probability of succeeding completely in this market is 50%–60%. So we have a high probability to be successful in this venture, although it is a fairly costly option as this requires intensive marketing through a variety of channels. If we instead focus on a more exclusive market, the marketing efforts are significantly smaller, and the likelihood of rapid development is at least 70%. If such a development materialises, the risk of total failure is then less than 30%, and the probability for a complete success is over 70%. The problem is structurally simple, but it is still relatively difficult to give an absolute recommendation by just considering the problem intuitively. So we model it instead. As for the consequence values involved, we assume we can agree on the following: x A successful investment in an exclusive market with relatively small costs is better than a successful investment in a broad market with relatively high costs. x A successful investment in a broad market with relatively high costs is better than a rapid development in a broad market with relatively high costs. x A rapid development in a broad market with relatively high costs is better than a failed investment in an exclusive market with relatively small costs. x A failed investment in an exclusive market with relatively small costs is better than a failed investment in a broad market with relatively high costs. The problem, of course, is simplified here, but the point is that even these seemingly simple problems are not obvious at first sight; however, with a clear structure, you can handle them so that the result can be computed. We start by modelling the problem as a decision tree. In Figure 4, we can see the two strategies and their consequences. The probabilities are

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indicated as intervals on the branches of the tree. The worst consequence is assigned the value 0 and the best is assigned the value 1.

Figure 4. Market focus

After having modelled the problem, it can be evaluated. We use the more general expected value as described in Figure 5. As the problem contains both ranges and comparisons, it becomes difficult to figure this out unaided, so we use the DecideIT tool for the analysis. By doing this, we also get more information about the factors involved. A first result can be seen in Figure 5.

Figure 5. A first, rough evaluation of the decision situation

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The programme calculates the result of assigning all possible values, given the estimated interval and relations. We can then see all the possible expected values given the background information. The figure shows how the strategies relate to each other given the values we have defined with our ranges and comparisons. The green bar represents the strategy of investing in an exclusive market and the blue of investing in a mass market. We can now see that the strategy with an exclusive venture is clearly much better than the broader venture, given the information we have. Furthermore, the result is insensitive to changes in input values, which means that it is stable. The advantages of solving problems in this way become even clearer when dealing with large problems, but this example demonstrates the principle of working with these kinds of methods in a structured way.

Sensitivity Analysis As previously stated, uncertainty is inherent in virtually all information in real decision situations. One should therefore investigate how changes in different components affect the final result. Thus, in every decisionmaking process, one must question the models: x Have we modelled the problem correctly? x Have we captured the most relevant strategies? Have we captured the consequences, scenarios, and criteria? x Have we estimated the probabilities correctly? x Have we even understood our preferences? A good tool for studying how sensitive the result is for error estimates is to use sensitivity analyses. They are used to investigate how stable the choice of a strategy is when the input data change. Here we primarily investigate the limits within which the probabilities and values must stay for the decision to not change. This is done by letting the input values vary between possible and realistic values and investigating how these fluctuations affect the outcome. Thus, the values are systematically varied up and down. To illustrate this, we may recall the umbrella example in Table 2. A simple sensitivity analysis could consist of varying the probabilities to see if this changes the decision. For example, we may be unsure of how much effort it is to carry around an umbrella, and thus we want to change the value of not getting wet and leave out the umbrella to see if this has any effect on the decision. So we set this value between 0.55 and 0.65 and get the matrix in Table 3.

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It will rain (p1 = 50%)

It will not rain (p2 = 50%)

Bring an umbrella

Don’t get wet, carrying umbrella (v11 = 0,55 resp. 0,65)

Don’t get wet, carrying umbrella (v12 = 0,55 resp. 0,65)

Don’t bring an umbrella

Get wet, not carrying umbrella (v21 = 0)

Don’t get wet, not carrying umbrella (v22 = 1)

Table 3. A modified umbrella decision When we insert our new numbers above, we get new values on the first expected value. x E(Bring an umbrella) = 0,50 ˜ 0,55 + 0,50 ˜ 0,55 = 0,55 and 0,50 ˜ 0,65 + 0,50 ˜ 0,65 = 0,65 x E(Don’t bring an umbrella) = 0,50 ˜ 0 + 0,50 ˜ 1 = 0,50, as before Thus, it still seems wise to bring an umbrella, meaning that the decision is so far quite stable. However, sensitivity analyses performed in this way are realistic only when we have very few variables and relatively simple problems. When adding more variables, the problems will quickly become unmanageable. Therefore, you need to handle more complex sensitivity analyses more systematically. When we have intervals and comparisons of probabilities and values, we will solve this comparatively easily by assuming all the values that are possible according to the information we already have, which means that we utilise all information that the decision maker has stated as possible. In the example of the market efforts in Figure 5, we saw that an exclusive one was preferable to a broad market. We can analyse this in several ways. For instance, a tornado chart shows how the expected value of a strategy varies when the parameters change. We can see how variations of the probabilities affect the final result in an order in which the probabilities with the greatest effect are placed topmost, as in Figure 6. Similarly, we can see how changes of the values affect the result.

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Figure 6. A tornado diagram

Another excellent way to study the stability is to investigate where the most important values are. Often when we specify an interval, we probably do not believe in all values in the intervals equally, and we may believe less in the values closer to the borders of the intervals. Additional ones are nevertheless added to cover everything that we perceive as possible in uncertain situations. These additions result in a function indicating the different strengths with which we believe in the different values. Figure 7 shows how we might believe in the likelihood of making a success in establishing an exclusive market where we can see a focus on the centre. degree of belief

Figure 7. How much do we believe in different values?

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We might now want to know what the situation looks like if we gradually reduce the points in which we have the least belief and focus on those in which we have the most. We call this contraction, and it is done systematically with all the variables involved. Figures 8–10 show what happens to the expected values during these analyses.

Figure 8. Contraction analysis for establishing a wider market

For Strategy 1 (wide market), we can see how the initial values (at 0% contraction) can be between 0 and 0.9; at 40% contraction, they are between 0.219 and 0.769; and 0.59 is reached at full contraction. For Strategy 2 (exclusive market), these are initially between 0.45 and 1, and 0.792 is reached at 100% contraction.

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Figure 9. Contraction analysis for establishing an exclusive market

Figure 10 shows how the strategies relate to each other. A slightly simplified reading is that the more of the triangle that is below the x-axis, the better the strategy to invest in an exclusive market. We therefore see that the decision is very stable (relatively insensitive to data) and that Strategy 2 really is much better. More precise details are provided in the list of suggested readings at the end of this book. When the area is quite centred in relation to the x-axis, it can be difficult to determine which strategy is best, and then we can choose either strategy or try to collect more background information. In the latter case, we can use the tornado diagrams to establish which information is most important for the decision and how to allocate resources to best utilise these. In short, how good the respective strategies are can be seen by examining how much area is located above and below the x-axis.

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Figure 10. Comparing the strategies

In the calculations, we have used the decision support system called DecideIT. This programme can be freely used as long as it is for noncommercial purposes. Another useful programme is Decision Wizard, when we want to solve decision problems with several criteria such as costs, quality, market shares, and environment considerations. Decision Wizard, which is also free, is used for multi-criteria analyses and used by Swedish municipalities for infrastructure investments. Needless to say, many details have been omitted in the presentation above in order more clearly to show the principles and demonstrate that there are good decision support methods. In the suggested literature list, there are references both to the details and the programmes as well as where they may be downloaded from.

Participation in Organisational Decision Making The idea of thinking about what you do may seem quite obvious, but as we have pointed out many times, even critical decisions are often made without any in-depth analysis. There are various methods available, and many bad decisions depend on the fact that decision makers have not given them proper consideration.

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If we have not used a more formalised method as described above, the idea generation to identification and valuation of possible strategies often take place through an intuitive decision-making process, with no particular emphasis placed on using more elaborate calculations. The calculations are then based on a more or less well-founded feeling, and eventually a rational analysis is claimed rather as a post hoc construction. People who do not consider all aspects described in our proposed approach may calculate until the result is consistent with an essentially premade decision. In such a process, their consideration may primarily be given to the positive aspects of the desired decision, while the negative aspects are neglected. Often this type of work is conducted under the assumption of one specific solution being the best available solution where alternative solutions are not interesting. Many businesses are unnecessarily exposed to risks and may give away competitive advantages to other businesses with more effective decision-making processes. However, as we have seen, more advanced models exist that can be very helpful in decision making or at least in reaching a reasonable basis for making decisions. In this chapter, we have gone through the basic principles for making better decisions, as individuals and as an organisation, and in all kinds of operations. Making good choices is difficult but can be significantly facilitated with good tools. Nevertheless, many decision and policy makers still respond negatively to the idea that decision making should be managed using rational and transparent methods. Why should we have methods for making decisions at all? Should not all decisions be based on experience, intuition, and good judgement? The answer is that this is almost never sufficient for the actual needs of complex and important operations. Most people want to be the best decision makers, but they are probably not as good as they believe they are. Even if we understand how rational decision making can be carried out by following a formal method, organisational mechanisms are still difficult to formulate. They are also constantly changing. Direct decision participation for certain groups and transparency in decision-making processes may or may not exist. In group decisions, it will also be necessary to consider cooperative mechanisms. These should regulate who receives access to the actual power and how it should be done. Those involved must be reasonably able to see and understand them. However, as we have seen, there are large possibilities to do something here, but it is difficult both to understand our individual preferences and to engage wide participation from relevant stakeholders in decision-making processes. The difficulties often lie in the structures as well as in the

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individuals. These structures are formal constructions of organisations and their components. Individuals have different motives for their decisions, and it is difficult to form a commitment to all the decisions that we have to deal with. Many people know a lot about how to shape agendas to get what they want, regardless of whether it is good for the organisation or not. Fewer know enough about how to formulate a good, rational decision basis and how to create decision-making rules that seem reasonable and clear. Systematic processes for organisational decision making need to be adapted, and we can start by thinking about those discussed in this chapter.

Summary x Decision making is central to organisations and individuals. x As far as is possible, decisions should be rational, transparent, and stable. x Our decision making should preferably not be based on diffuse feelings of power and impulses. x Intuition only is therefore not recommended for complex, crucial decisions. x Uncertainties and risks can be handled surprisingly well in formal decision-making methods. x It is unwise to employ precise values for what is really very uncertain. x Even quite vague information may in many cases work well to understand which decision is the best.

CHAPTER THIRTEEN AN AGILE ORGANISATION

In the previous chapter, we described how a decision problem can be handled by using methods and tools for modelling and analyses. In this chapter, we present a synthesis that artfully investigates the truth of opinions and tests the truth by discussion, in order to standardise all performance measurements used by the organisation as a decision basis. We describe how to combine an abstract rational organisation with an agile and effective one. Chapter 11 showed how it’s possible to create a flexible organisation, even though it’s controlled centrally on the basis of standardised principles, and Chapter 12 discussed how to model and analyse decision situations that will occur during these processes. The active ingredient that made that flexibility possible was the fact that the results were quantified, which made it possible to amalgamate the information bases for making decisions. In our discussion below, we’ll show how it’s possible to retain abstract control of a global organisation while ensuring that each employee has the opportunity to take creative initiatives through the delegation of detailed accountability for the results.

Excessive Centralisation Although an organisation can become both more effective and open to change, new problems appear if employees would consider too much of their own personal interests in relation to the abstract guidelines and process recommendations. Employees generally accept being constructively assessed for their performance, but they often have greater difficulty learning how to coordinate their daily decisions using abstract models and decision support systems. They may get involved in providing input on priorities, but they often have difficulties in adjusting their daily work to the new guidelines. Abstract priorities are often perceived as too theoretical for their purposes, and employees can easily lose the view of the big picture that they previously attained.

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The following summarises the supplement to the abstracted organisation: x If the goals set for a team’s work are well specified (and quantified), the work doesn’t need controlling. It’s enough to assess whether the delivered results meet the criteria. This means that the team can manage its own work. x Delegations should initially be done at short intervals, which are gradually lengthened as the work team proves itself capable of being independently responsible for what it’s required to do.

Agility The delegation may go so far as to be dealt with externally by another company or division of the organisation. An agile organisation or an outsourced organisation uses formal specification of its business requirements and a common set of concepts. Therefore, it becomes much easier to delegate tasks to places where resources are available or where they’re cheaper. Specified and quantified requirements are delegated that meet the criteria we have for the business, and deliveries are regularly checked against the specification so that we know we’ll always get what we ordered. Take, for example, an autonomous working team in an engineering company. If we have clear, formalised values for performance and expected results, a project can be communicated without misunderstandings and delegated in its entirety without it encountering conceptual or culturally related complications. Expectations on deliveries cannot be misunderstood. In turn, the team that’s been delegated can feel free to work as it will, because the requirements for the final result are crystal clear. Initially, it is important to wait a little before the team’s performance is measured. It needs time to try out various possibilities and solutions without being afraid of doing the wrong thing when time is short. Nevertheless, it’s important that the team ensures it’s in agreement and understands its targets. There should also be an obligation to coordinate work with other participants in the team according to a specification they’ve agreed on. This obligation should be as simple and clear as possible in order to ensure that no participant will be in doubt of how to communicate. In specific cases, for instance, when it comes to issues related to security, there is a need for a completely formal specification. Specification and quantification of delegation facilitates communication within the team, with considerable help from formalised ways of measuring performance when working together. The team can

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have concrete and precise discussions about its progress, and it’s easy to detect the status of the project and where there may be a need for assistance. Problem solving becomes easier and requires significantly less administration and control. Even when working as autonomous teams, there may still be problems with group dynamics. Even if everyone knows what’s to be done, they still have to decide who does what, and how it should be done in order for it to mesh with all the others in the team. Even businesses that are organised in this way often need some kind of management of the overall company policies. On the other hand, such a management can be done via rotation of roles. People who feel they have a responsibility often play their assigned roles surprisingly well. Ideally, we’d speak about optimal division of labour because team members with time to spare can choose demanding tasks in order to learn new skills and to demonstrate these to others. Some team members may prefer simple tasks because they’re currently engaged in other, important problems. Others may want to concentrate on helping their colleagues. This all flows freely with high efficiency. A complex division of labour can be very difficult if we don’t accept an open marketplace of tasks within the team. If any single member of the team wants to decide who does what, then generally a more extensive type of administrative control is needed, which reduces motivation and negotiation space. The problem with coordinating how work should be carried out can often be effectively solved through short, informal meetings where team members give each other feedback on how they plan to carry out the work and how the various operations should be coordinated. For example, they could require that no one may do anything that might affect the others unless this has been discussed openly. The reason for such a rule is that it is much easier to ensure everything is well coordinated if checks are made in direct conjunction with performing the task. There are no substantial costs for such coordination, because it’s done on the spot. This is possible because everyone knows what everyone else is doing and they all have confidence in each other. A side effect is that all team members learn from each other and create a team identity that becomes a driving force in the work and makes work more effective than if it were planned far in advance. Another advantage is that the management, coordination, and control of complex processes occur in parallel to the work being performed. This reduces the risk that the work gets stuck in bureaucratic processes because all the control is run through the members’ spontaneous and immediate involvement.

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Agility is one of many expressions that crop up in various circumstances, but whatever you call it, you can’t make working groups agile unless there’s already an underlying structure that is very clear about what the team should be delivering. An agile organisation has probably completed most of the evolutionary phases that were described in Chapters 5–12, and it can therefore be very explicit with guidelines allowing teams to work independently from their management. An important precondition here is that everybody must understand how the purpose of team work relates to a general purpose in the organisation and that teams must be supported by the general structure. If there is not a well-defined structure of guidelines, then it’s not possible to have an agile approach. A company that fails in its agile approach may have to return to a more top-down kind of management that recreates a structure that forces everyone towards the same goal. Each person in the team must understand the big picture, and the devices must be supported by the structure in order for this to work. Another misunderstanding is to think that teams can always work in a distributed way. Unless a dynamic group identity is created in the team, or if there are participants who are unwilling to compromise, it won’t work. The model assumes mature and responsible participants.

Organisational Maturity A decision will usually lead to demands on other decisions. Each type of general solution to a decision problem always leads to the emergence of new problems, which although they may be challenging and interesting also require completely new approaches and strategies. When the distributed approach has shown itself to be more effective than other approaches, management should naturally support the whole organisation adopting this approach. Obviously, this also applies to the higher levels of the organisation. The main reason why decision making is so effective is the possibility of directly solving problems at the operational level, combined with assessment being crystal clear in relation to the organisation’s overall goals. This creates a context and a culture that supports effective decision making at all levels. But when trying to do the same at higher levels in an immature organisation, entirely new problems arise. People in upper management are permitted and often expected to be more independent, and there is no requirement that they cooperate with each other. On the contrary, they’re more likely to perceive others as rivals if the organisation is not agile on higher levels of management. The reason for this may be that there’s a set of old requirements for each individual manager that bear no relation to

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the need to cooperate with other managers (indicating that the organisation is the opposite of an agile organisation). In such a slightly degenerate organisation, it can often pay for one manager to thwart another, regardless of the organisation’s overall goals. An important part of the maturation process is to scale up this agile platform to include all parts of the organisation, including upper management, but without being naive. It is not practicable to have managers sit in the same room where they can initiate spontaneous conversations all the time in comparison with a team that continually needs to coordinate its work as a natural prerequisite for success with its project. Instead, other approaches need to be found. We need to motivate management to set a lower priority on its individual preferences and prioritise its need for consensus with colleagues. For managers to reach a consensus, there has to be a design of motivation factors for cooperation. Any bonuses and stock options should be strictly dependent on the extent and quality of the work delivered by their unit and not for the performance of the individual departments relative to their neighbouring departments. “Lean production” is a management method that secures coordination between managers before they delegate to their agile teams. A central idea in lean production is the support of an informal culture where people are motivated to share information. This should be done not only within and between teams but also between managers. Management must also agree on conventions for how cooperation should be organised, coordinated, and implemented. Examples of common coordination principles include the following items: x Everything should be documented continuously. x Even informal communication and commitment are valued. There should be a direct response to messages that are perceived as important or interesting. x Work should take place with multiple models at different levels of abstraction in order to describe complex structures. x Including subordinates in meetings is recommended, in order to allow for a bottom-up information flow in the organisation. x There should be a continuous discussion of business goals in order to ensure a common understanding of them. x All important information must be dealt with. Documentation is central to the agile approach. If the same approach were to be created through a fragmented documentation, passed around in a more or less organised fashion, the need for information meetings would

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proliferate (because it is rare for anyone in upper management to read complex documentation carefully). It is necessary that management from different divisions find common principles for how integration should take place.

Summary x Abstract criteria should be delegated and implemented according to the so-called agile principles. x Teams can work effectively and independently only when their performance can be measured based on standardised quantifiable variables. x For decisions in such a team to be effective, it must be dynamic and tightly knit. x The same applies to management. x Those lacking the ability to cooperate and compromise cannot work in an agile organisation. x The management must be clear, motivated, and transparent at all levels. x All rewards should be given in relation to a team’s performance. x There should be a live and constantly updated documentation of activities. x All this requires structured organisations with conscious and rational decision-making processes. x Most of the decision-making process can be based on templates that have already been aligned to the business. x The fundamental idea of this approach is that it should create an informal culture motivating people to share any information pertaining to their team. The equivalent notion of integration should exist in upper management, who need to agree on conventions for how cooperation in the organisation should be designed, coordinated, and implemented.



EPILOGUE

In the thirteen chapters of this book, we have elaborated on how people usually learn to handle decision making and how an organisation should be designed. In this epilogue, we will extract the most important conclusions. A main issue throughout the book is that important decisions, both in our private and professional lives, are largely based on vague emotional experiences and impulses, filtered through a dense web of preconceived ideas. We often make decisions without having a clue about the issues involved, and we can’t be bothered to check on them. Some argue that this needn’t be a problem because their assessment is that there is no other way to arrive at a quick decision. But that’s often a delusion. It’s natural for people to whitewash themselves, but it need not be this way. We need structures and processes if we are not to maunder off into the chaos of our world. So the first step, if we’re to act at all, is to create structure. Structure then provides prerequisites. The second step is to have a method. With this, we can create the conditions to work through the structure in a way that is more resistant against our shortcomings. For many spontaneous decisions, often the person who made the decision doesn’t understand how to acquire a better picture of the situation before actually making the decision. Then we haven’t acquired the decision skills we need to navigate our increasingly complex reality in an ever-faster-changing society. Therefore, we’ve discussed different opinions and perspectives on what is needed in order to reform organisations and to develop decision processes for them. We also touched on more formal methods for dealing with internal decisions and those for whole organisations. In conjunction with informal descriptions of how to make difficult decisions, we’ve explained how they should really be done. We’ve also accounted for a more formalised and enforceable framework for how to tackle organisational and decision-making problems, a framework that qualifies as reasonably transparent, repeatable, fairly independent of any particular person, and fairly well founded. We’ve described this framework through a staged development in which we’ve followed a process of maturation from a rudimentary, naive, individual, and intuitive perspective to a systematic approach to an organisation’s structure and its decision making. The framework should be seen as a mature and analytical approach to managing organisations as a

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whole and how these should be controlled and coordinated. The educational process to achieve it covers thirteen stages where inherent contradictions lead to one synthesis after another with increasing clarity: 1) The desire to take responsibility is absolutely fundamental to living life to the fullest. 2) We create ideas and must choose the best. 3) When things are moving too slowly, try to be aware of the possible opportunities and act. 4) But pause to consider your goals and what you really want to solve. 5) When this is done, act forcefully, assuming that you know what you’re doing. 6) But use good methods and realistic models. 7) And remove inadequate methods and ones that oversimplify. 8) But remember that systems that are in equilibrium and harmony also require monitoring functions to protect them against being abused. 9) Safety too often wins over freedom. Make sure to have a welldefined vision in mind without undue fear. 10) In the worst case, there are no visions, but when there are several, deliberately select one. 11) Against the background of a clear, overall strategy, a decentralised structure with central norms, methods, and control structures works best. 12) There must be clear, analytical decision processes. 13) But the details must be delegated, and decisions need to reach those who best understand them. Management should focus on coordinating an agile organisation. People need qualified decision support and clear structures to make good decisions, and we hope that you have been inspired by the various perspectives on decision making and that you better understand how to act in order to improve both your own and your organisation’s life. There are undoubtedly obvious instances where you can begin experimenting. Most of all, we hope that you have gained insights into the importance of using structured methods in a process of change. We also hope that you’ve understood the necessity of taking decision making seriously and that you will invest time and effort in it. If you have understood the thirteen points above, you have understood that your decisions create your success.

SUGGESTIONS FOR FURTHER READING

In this book, we have presented material from many years of research and practical applications of ourselves and others. The following reading suggestions are for those who are interested in further studies. The listing contains some key books and papers in the various fields discussed in this book as well as some argumentation and technical details of the topics discussed. Except from some of our own work, we tend to favour references that provide interesting listings of earlier literature.

Chapter One Covey (2017) provides many examples of how the basic attitude towards life influences the motivational factors in the decision-making process. He describes the psychological theories of effectivity with an abundance of examples that make the theories easy to comprehend and easy to apply. One of his basic arguments is that people must learn to focus on the values that drive their decision making. Pink (2011) shows how the learning processes in human beings are mainly dominated by intrinsic motivation. He argues that learning is more driven by curiosity than by extrinsic rewards. There is also a plethora of literature describing decision making in general as well as a strong recognition that decision-modelling and problem-solving techniques are beneficial for attaining good solutions. A still very good and fairly wide overview of the field of multi-criteria analysis is that of Belton and Stewart (2002), and a good general review on decision analysis can be found in Keeney (1982). It’s a few years old but was written by one of the big names in the field and is still completely relevant. Moreover, it is free. At the same time, applications to support decision-making processes are too seldom utilised in real-life organisational decision problems. This can be partly explained by the mismatch between decision makers’ abilities and the requirements for using decision aids. This problem is discussed by many researchers, such as Shapira (1995). Decision makers wish, in many cases, to act rationally, but their limited cognitive abilities and lack of access to complete information naturally limit their possibilities for doing so, which for example is discussed in March (1994).

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Chapter Two Barnevik (2014) illustrates how simple, basic principles can exert major leverage in multinational organisations. He especially points out that the most critical success factor for managers is to what extent they are able to secure the operational implementation of their decisions. Peck (2003) shows that all people can learn to make decisions that will change their way of life if they learn patience. He claims that many problems in people’s lives are a result of their premature decisions that are based on people’s desire to find an immediate solution instead of engaging in a systematic analysis of a situation to secure the best decision. Those who want to study the philosophy of the value of persistence could, for instance, read the summaries in Persistence: Contemporary Readings (Haslanger and Kurz 2006). The relation between intuition and decision making has been discussed in a multitude of works; the extensive book in decision analysis by Ekenberg et al. (2017) is challenging, but it provides a thorough analysis of the uncertainty of decisions and discusses how things might turn out when people participate in political decision making. It contains some lovely pictures and explains the reasons why the demand for numeric precision in decision theoretical models is problematic. Significance information in real-life problems is always imprecise in its nature, and beliefs are therefore not reasonably represented in numerically precise terms. The idea of finding precise numbers is thus an illusion, as highlighted in several works, such as those by Barron and Barrett (1996) and von Winterfeldt and Edwards (1986). The programme initiated by Tversky and Kahneman (1974) also illustrates many of the systematic deviations of our cognitive abilities. For instance, the framing of the problem (which concerns its formulation) often has great impact on people’s preferences. Preferences can vary depending on subtle differences in presentation of equivalent choices, like the order of the probabilities presented, or on the magnitudes of the probabilities involved. These types of cognitive biases are extensively discussed, for example, in Tversky and Kahneman (1986).

Chapter Three How it sometimes can be rewarding to seize opportunities by making quick decisions is described by Wise and Feld (2017) when discussing how start-ups must be flexible to be able to make quick moves when needed. An extreme version of an opportunistic attitude is described by Fritz (1989). He argues that it seldom pays off to choose the path of least

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resistance when you make decisions. A more calculating attitude when looking for opportunities is described by Haigh (2003), who argues that people need to learn to reason with probabilities before they take chances in competitive games. An entertaining overview of how and why we perceive different risks is provided by Slovic (2010), one of the most renowned researchers in the field. A useful source for many probabilistic aspects on risk management is Amendola et al. (2013), which deals with formal aspects of risk and applications thereof. The book focuses on flood risks but has much more general applicability. Many books in risk management are far too simplified, but this book introduces several useful methods for risk management based on decision analytical ideas. Since the 1990s, the dominant city-planning discourses have, in some cases, undergone significant changes and become more collaborative and communicative. There are many approaches that might be of interest, such as communicative planning (Forester 1999), collaborative planning (Healey 1997), participatory planning (Murray and Greer 2002), or planning through debate (Healey 1992). Ideas about the drawbacks with risk management can be found in (Hubbard 2009). A good reference is Allmendinger and Tewdwr-Jones (2002), who describe how these concepts have been used in the planning theory literature to describe and transform the concepts of Habermasian critical theory into a theory of how planning should be done.

Chapter Four Thomson and Johnson (2017) have collected a number of perspectives on the role of workplace culture when processing the available information for decision making. In a similar direction, Richards (2012) argues for the usability of simple behaviour guidelines to avoid bad decision making. Elicitation of people’s preferences is a difficult field, and there is much work done here; several elicitation methods are discussed extensively. A common systematic mistake in practical applications is the absence of adequate elicitation techniques, or the employment of inadequate ones. This is pointed out, for example, by Pictet and Bollinger (2008). In particular, providing preference input has been found to be demanding, and a need for less challenging elicitation methods, which are favoured by users, has been seen as essential for the practical applicability of such tools, as discussed for example by Bottomley and Doyle (2001), Katsikopoulos and Fasolo (2006), and Stewart (1992). The discrepancy between results obtained from different elicitation methods is discussed, for instance, by Corner and Corner (1995) and Pöyhönen and Hämäläinen

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(2001). Some solutions to some of the elicitation difficulties are suggested by Danielson and Ekenberg (2016a; 2016b).

Chapter Five In his 1993 book Influence, a New York Times bestseller, Cialdini describes many subtle tricks involved in making people accept your decisions. In another bestseller, The 1-Page Marketing Plan, Dib (2016) illustrates the importance of marketing one’s intentions when describing a decision. People need to feel that they are part of the decision-making process in order to accept the decision. This is also argued in a book by Chapman and White (2012), which contains many examples of how people cooperate better if they feel that they are appreciated.

Chapter Six Ashby (2015) became famous for his contributions to system theory. One of these contributions was “the law of requisite variety”, which stated that the controlling system must be able to handle as much complexity as there is complexity in the controlled system. A more down-to-earth view of the necessity for a well-planned order to be effective in everyday tasks is described in a New York Times bestseller by Kondǀ (2014). It shows how decisions are easier once there is enough structure in the context. There are also many useful suggestions for the decision process. A work by de Almeida et al. (2015) is an excellent and accessible overview of the field. The probability aspects are less handled, but the book provides an overview of some generally applicable decision methodologies and processes. Borking et al. (2011) address various aspects of decision and risk analytical processes in a simple way and also provide examples of how this can be put into practice. Procurement is an illustrative example of how decision processes can be formulated, and how they can fail. The procurement process is particularly interesting because it constitutes a significant proportion (just under 20 per cent) of the BNP of the European Union. Procurement and evaluation is a large and growing field of research, e.g., Harland et al. (2013). Since the 1960s, the structured use of assessments when selecting a supplier has become more and more common, with a growing number of evaluation methods proposed; an extensive review of such methods can be found in de Boer et al. (2001). An interesting feature is also that public procurement is not merely a way to acquire goods or services, but also an instrument for driving innovation from the demand side or promoting environmental or social values, further

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increasing the complexity. This subject has been the focus of many studies, e.g., Telgen et al. (2015). In Bergman and Lundberg (2013), a majority of 189 public procurement processes is found to be using deficient award mechanisms, and Danielson et al. (2017) reject a suite of foibles that occur during the procurement process and show how the process should really be done.

Chapter Seven Granet (2011) has shown how an artistic, well-balanced design of an information structure will make it easier to evaluate parts of the structure. Horsley (2016) has demonstrated how the efficiency of information processing in the brain is entirely dependent on a well-balanced structure of the memory of the information. Similar ideas are advocated by Lidwell, Holden, and Butler (2003), who claim that there are universal principles of design that facilitate relating the complexity of people to their environment. Contrary to this more holistic approach, decision analysis experts over the years have been obsessed with axiomatisations and technical aspects of decision modelling, making such studies relatively useless for those without a mathematical background, and delimiting their applicability. More practically oriented research has recently appeared, and approaches have been suggested that are less reliant on great precision by the decision maker. One is to use transform ordinal importance information (Barron and Barrett 1996; Katsikopoulos and Fasolo 2006). In such methods, the decision maker provides information on the rank order of the decision criteria, after which this information is converted into numerical values consistent with the extracted information. Several such proposals exist, e.g., rank sum weights and rank reciprocal weights (Stillwell et al. 1981) and centroid weights (Barron 1992). In approaches proposed by Larson et al. (2014ab), Ekenberg et al. (2014) and Danielson et al. (2014), incomplete information is handled by the use of intervals and distribution combined with qualitative assignments. The structures of alternatives then created, where ranges of possible values are represented as input data, are solved by the algorithms from, e.g., Danielson and Ekenberg (2007) and Ekenberg et al. (2005).

Chapter Eight The importance of enforcing decisions in critical situations can be further studied in the book Ruthless Execution by Hartman (2003). How decisions can be enforced in a systematic way can be found in the area of

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management control systems, for instance, in a book by Merchant and Van der Stede (2011). Distributed decision making is really complicated, not the least with respect to representativeness, which is strongly related to motivational factors. There are some interesting studies around this. In a report on a peer-to-patient pilot in the UK (2012), a network of users was created around the service that works for free to gain recognition among peers in the technology area. In wikis like Wikipedia, the motivation to participate on a regular basis often evolves from a common interest. There are several others, but the incentive to participate is often the gain of reputation and recognition among other participants. This is widely studied by a variety of researchers, such as Antikainen et al. (2010), Asadi (2013), Glott et al. (2010), Hoisl et al. (2007), and Schroer and Hertel (2009). Forte and Bruckman (2005) state this explicitly when they compare the motivation among Wikipedia contributors with the scientific community, where recognition among peers is an important incentive to participate.

Chapter Nine In a book by Kahneman (2012), there is an excellent description of people’s shortcomings in terms of thinking that is done intuitively or automatically as compared with thinking that is based on rational reasoning. Kahneman writes very engagingly and received the 2002 Nobel Prize in Economics. In a famous bestseller, Sinek (2011) describes how it is possible to discover the most general and most essential information by asking simple questions. Analyses using systems theory conclude that a controlling system must be able to handle as much complexity as exists in the enterprise that the system controls. This has been described as the “Theory of Requisite variety” by Ashby (1991).

Chapter Ten Both The Power of Habit by Duhigg (2014) and The Art of Strategy by Dixit and Nalebuff (2010) provide many examples of the power of holding a long-term perspective. The latter also illustrates how game theory can be implemented when making important strategic decisions. Regarding practical applications, we have successfully been using our methods in a multitude of contexts over the years, covering various seemingly disparate domains, such as telecom applications and risks for failures (Ekenberg et al. 1995), national insurance policies (Brouwers et al. 2004; Hansson et al.

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2008a; 2008b), city planning (Danielson et al. 2005; 2007; 2008; Larsson et al. 2018), evaluations of education (Kivinuki et al. 2014; 2015), gold mining analyses (Mihai et al. 2015), road infrastructure planning (Ekenberg 2009), demining (Larsson et al. 2010a; Ekenberg et al. 2017), emergency response strategies (Larsson et al. 2010b), and medical decision making (Caster et al. 2012).

Chapter Eleven Senge (1992) shows that systems thinking is the main component for developing a learning organisation that can adjust decisions to an everchanging environment. Kurzweil (2012) describes how artificial intelligence can be used in decision making. He shows how hierarchical structures of pattern matching can be utilised in a rational way to reach similar kinds of conclusions as the decisions made in the human brain. Dennis (2015) argues that large corporations may benefit from combining centralised principles with decentralised implementations of decision processes. Lijphart (2012) offers a broader and deeper analysis of how centralised principles can be combined with decentralised operations, providing examples from thirty-six democracies to show which methods of decision making work best.

Chapter Twelve In recent decades, various computational methods have been developed for formal decision analysis with imprecise information; toolkits have also been implemented for multi-criteria decision making. To learn the program DecideIT, you could, for instance, read Danielson et al. (2003), who helpfully do not delve too deeply into confusing mazes of mathematics. DecideIT can be downloaded from http://preference.nu. If you want to really understand its details and have a relatively extensive mathematical background, you can wrestle with Danielson and Ekenberg (2004). Decision Wizard is fairly easy to use and available at www.preference.nu/pdw. More on decision programs in general can be found on Wikipedia under “decision-making software”.

Chapter Thirteen Collins (2001) describes the importance of selecting the right people for the team in order to facilitate effective decision making. He argues that a critical factor is to determine how well people will function with those

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they will be working with. O’Brien (2015) describes how a set of wellspecified decision routines can help a team to perform effectively in a project.

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BIOGRAPHIES

Love Ekenberg holds a PhD in computer and systems sciences and a PhD in mathematics. He is Professor of Computer and Systems Sciences at Stockholm University and holds a UNESCO Chair as well as an ICDE Chair. He has more than 25 years’ experience of involvement in the development and application of new concepts, methods, and models for decision support, risk analysis, and decision analysis. Furthermore, he has extensive practical experience in a number of sectors in Sweden and internationally with modelling the cost of risk, urban development, procurement, analysis of the telecom sector, and evaluations of energy and flood strategies. Harald Kjellin is Professor of Computer and Systems Sciences at Stockholm University. He received a PhD in artificial intelligence in 1994 and has since applied his research to systems used in public administration in most Swedish cities. His research is focused on knowledge acquisition, knowledge management, and digital transformation. He also has 25 years of consultancy experience in management with specialisations in communication, decision making, negotiation skills, and power play in organisations. Kristina Sygel is a medical doctor with a PhD in forensic psychiatry. She is a consultant at the National Board of Forensic Medicine, Sweden, where she conducts forensic psychiatric examinations on behalf of criminal courts. She has worked for 18 years as a doctor for county councils, as well as for the state in both Britain and Sweden. Her research focuses on simulation in the investigation and treatment of perpetrators of violence and the use of computer-based decision support in psychiatry.