Respected Economist Thomas Sowell, a senior fellow of the Hoover Institute and a recipient of US President’s National Humanist Medal, is regarded as one of America’s foremost thinkers of the 20th century. Sowell wrote in his book Knowledge and Decisions that “decision making in the real world can be understood only in the context of the actual decision-making units that exist, and the specific, respective sets of constraints and incentives within which each operates”.
Thomas Sowell’s reflections on the elements of decision-making framework correlate with historical corporate success stories. Former Toyota Executive, Taiichi Ohno, is credited for the creation of Toyota’s Just in Time production systems. Ohno wrote in his book Toyota Production Systems, “Is it really economical to provide more information than we need—more quickly than we need it? This is like buying a large high-performance machine that produces too much. The extra items have to be stored in a warehouse, which raises the cost”.
The observations made by Sowell and Ohno highlight the implications of data creating inefficiency rather than improving efficiency. That is, an abundance of data provided in the wrong context can generate wasted effort. Worse again, an overabundance of data can create a sense of overwhelm and initiate an episode of staff analysis paralysis. Distracting data can make decisions harder rather than easier.
In developing Reporting Dashboards, what are the elements required to optimise decision making?
Let’s unpick Sowell’s reflections on a decision-making framework.
- Context of actual decision-making units.
What is the focus of the decision-making unit? That is, what outcomes define success for a dashboard user? From the definition of success, layout the workflow elements that enables the objective.
- What determines the ability to act each stage of the workflow?
- What outcome defines success at each stage of the workflow?
Is it promotion > leads > conversions > volume > product mix and margin?
Or is it supply lead time > inventory value > machine utilisation > production price > usage > material substitutions > finished good inventory.
Perhaps it is marketing > job orders > service capacity > asset utilisation > on-time completion > upsell orders.
- Specific, respective sets of constraints.
What are the boundaries of action for each stage of the workflow? Which functional work groups are specifically responsible at each stage, who do they collaborate with, and what inputs or signals influence collaboration and coordination?
- Incentives.
How is responsibility for decisions rewarded? How are successful decisions measured? How do personal rewards and recognition mechanisms align to the organisational goals? What are the key measures of success of the business unit that are specific to the decision-making authority of the decision maker? Do the key measures underline the alignment of personal and organisational goals?
The questions above provide an opportunity to refine and optimise your key metrics and dashboards. A key first step to improving your decision making is to refine the information presented.
Do you get the most from your Data infrastructure?
Improve your organisational decision making by incorporating Sowell’s insights on decision-making frameworks. Think about the following questions:
- Are your Business Intelligence dashboards streamlined and specific?
- Is the data presented specific to the circumstances of the decision makers?
- Is the measure of success clear and aligned with personal rewards and recognition?
