Learning from the titans of corporate decision making

By Julian Hoelz and Dr. Thomas Reinbacher – www.MakeBetterDecisionsFaster.com
3min read

In our last blog entry we introduced the unlimited time paradox: while we all agree that time is money, we keep acting as if corporate time was unlimited.

Not being mindful of your own time or that of colleagues has ripple effects throughout an organization. Remember your typical weekly team meeting? Every minute of such a meeting will cost your organization 20 EUR. If poorly executed, these meetings have a strong negative return on invest, and if made transparent, no sane manager would approve them in the first place.

Why we need to start treating time as a scarce resource similar to your financial budget? Being mindful about each other’s time and treating it like a scarce resource will have three major benefits for your organization:

1. Decision speed will go up

Setting clear timelines and deadlines to avoid wasting precious time will help you get started on work sooner unblock roadblocks more quickly and, most importantly, lower the risk of taking a ‘wrong’ decision. In companies with high decision speed, it’s easy and less risky to decide as you can quickly adjust course if necessary. This improves decision quality, too. Increasing the decision drumbeat will speed up learning across your organization as you get into a habit of taking decisions, measuring their effect, and improving quickly.

2. Decision quality will go up, too

You’ll start focusing on fewer things more intently as you increase your organizational speed. Prioritizing the really critical decisions and breaking them down into manageable chunks will help you make the call when it counts.

3. More time for execution

Finally, by focusing on where you can have the biggest impact, you’ll learn saying “no” more often to free up time for the really important stuff. This will give you more time for actual work that makes a difference, i.e., execute on the critical decisions made.

So the concept that faster decision-making will help you make better decisions and give you more time to execute on those decisions is all clear and well understood. Now how can we make this happen? Let’s have a closer look at two organizations that excel at making great decisions quickly. In the following, we’ll look at Google’s decision drumbeat and how McKinsey prioritizes and prepares decision-making.

Learning from titans – decision drumbeat at Google

In a recent interview, Alphabet’s Executive Chairman Eric Schmidt revealed how Google’s executes on a one-week decision drumbeat:

“The most important thing to do is to have quick decisions—and you’ll make some mistakes, but you need [rapid] decision-making. We ultimately adopted a model of a staff meeting on Monday, a business meeting on Wednesday, and a product meeting on Friday, and this was organized so that people could travel in the right ways. And the agenda was, everybody knew which meeting the decisions were made at—and so as long as you could wait a week, you knew you would get a hearing on your deal”

Here is another take on the matter by Dave Girouard, CEO of personal finance startup Upstart and former President of Google Enterprise:

“All business activity really comes down to two simple things: making decisions and executing on decisions. Your success depends on your ability to develop speed as a habit in both.”

While working at Google, Dave Girouard observed how Eric Schmidt made it a priority to set clear timelines and firm deadlines:

“Because founders Larry Page and Sergey Brin were (and are) very strong-minded leaders involved in every major decision, Eric [Schmidt] knew he couldn’t make huge unilateral choices. This could have stalled a lot of things, but Eric made sure that decisions were made on a specific timeframe—a realistic one—but a firm one. He made this a habit for himself and it made a world of difference for Google.”

Learning from titans – prioritizing and preparing for decisions at McKinsey

At McKinsey and Company, a typical project has challenging ambition, crazy scope and a super tight deadline. So on day 1 you typically find yourself asking: How on earth will we make this happen? The answer: priorities, priorities, priorities!

The approach is to break down big decisions to their constituent parts and identify the most important ones: where is the biggest gap between the best and the worst imaginable outcome, i.e., where can you have most impact? This leads you straight to the most important decisions that need to be taken.
Now collect all available data, analyze it, and come up with a first answer. The key is to iterate quickly and often with as many people as possible to filter out faulty assumptions or conclusions.

Translating this to our overall question of how to improve the quality of your decision-making, we can see that in order to deal with large, unstructured problems – which typically results in taking the most important decisions that will require most of your energy – you need to get comfortable with three things:

1. Seeking and receiving early, open and factual feedback

2. Coping with uncertainty and deciding despite imperfect information

3. Have a strong bias for action

In our next blog, we will talk about how to excel at executing your decisions, and which tools & techniques can help you achieve this.

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[1] https://mastersofscale.com
[2] https://www.weforum.org/agenda/2017/06/googles-eric-schmidt-on-the-decision-making-advice-managers-need-to-know
[3] http://firstround.com/review/speed-as-a-habit/

The unlimited time paradox

If everyone agrees that time is money, why do we act as if corporate time was unlimited?

“Time is money” is a concept everyone understands and we all get annoyed when someone else is wasting it. Just think back to the last time you were stuck in traffic or had to endure this:
Waiting for Update

Why is it then that, in business, we are not always mindful about each other’s time? Meetings creep onto the calendar with no clear reason, priority or agenda. Suddenly it seems that everything demands your attention. Andy Grove, legendary Chairman and CEO of Intel, wrote:

Just as you would not permit a fellow employee to steal a piece of office equipment worth $2,000, you shouldn’t let anyone walk away with the time of his fellow managers.

Such time thievery happens every day, often unintentionally. Today entry level managers spend more than 50% of their working time in meetings (>24h a week). Yet research from Bain and Company shows that two out of three meetings run out of time before participants can make important decisions. We seem to forget quite often that our time, and the time of our colleagues, is limited.

So why do we go nuts when queuing in the supermarket for 5 minutes but routinely sit through 24+ hours of meetings every week?

The cost of your weekly team meeting

The unlimited time paradox gets even more fascinating when we apply a business case logic to it. While organizations have detailed procedures in place to approve a EUR 100 airplane ticket for employees, hardly anyone thinks about the real financial cost of a meeting. We act as if time is an unlimited resource. Let’s take a typical weekly team meeting with a Product Lead, Engineering Lead, three Project Managers and six team members. Assuming a two hours meeting every week, here’s what you could have gotten as well:

Time unit Meeting costs [EUR] Equivalents
Second 0.3 Calling your customer
Minute 20 3 pizzas
Hour 1,190 10 flights Berlin to Munich
1 Meeting 2,381 Monthly salary of assistant
Month 9,524 Monthly leasing of 10 Tesla Model S
Year 114,286 1 additional team member

Assumptions: Salaries are for illustrative purposes only. Total hours worked per year (for Germany): 1.680 hours, 52 weeks per year. Salaries assumption (Fully loaded costs for employer): Lead = EUR 320.000,  PM = EUR 160.000,  Team members = EUR 120.000

While you need to go through a rigorous process to get your EUR 100 airplane ticket approved – how diligently did you approve the EUR 114,285 spend for your weekly team meeting?

Please note that these numbers are still on the conservative side as we do not consider opportunity costs. Given that two out of three meetings end without important decisions being taken, what is the value meeting participants could have created for the company instead of sitting through all these meetings?

Applied to our example from above, not only do we burn EUR 2,381 a week mostly without taking any decisions, but we create additional costs for follow-up meetings. Most importantly, we delay decisions. As more and more meetings clog up your calendar, cycle times for decisions inevitably rise. When was your last meeting that ended like this:

“Unfortunately we couldn’t reach a decision today, but we’ll continue the discussion in the next available slot in two weeks from now…”

Two weeks? Wait, Google decided to buy YouTube in 10 days!

Learning from the best: How Google decided to buy YouTube in 10 days 

In a recent interview, Alphabet’s Executive Chairman Eric Schmidt revealed Google’s focus on efficiency when it comes to decision making:

I cannot tell you how many people have told me that at Google decisions are made quickly in almost every case, even at our current scale (…). Most large corporations have too many lawyers, too many decision-makers, unclear owners, and things congeal, they occur very slowly.

Schmidt noted that even when Google chose to acquire YouTube in a EUR 1.4 billion deal back in 2006, the decision process took only about 10 days. Schmidt explained:

At Google, it’s clear whose responsibilities are what, and decisions don’t get caught in bureaucratic limbo.

In our next blogs, we will talk about measures to improve and speed up organizational decision-making to reach Google-like speed. If you find that interesting, please sign up to get notified when new content is available:

We would love to hear if you encounter similar problems with decision-making in your organization: over-analyzing, involving too many stakeholders and unclear responsibilities, decision drift.

Thanks for reading!