How a pragmatic approach to decision making is still the best approach
Gordon Moore, co-founder of Fairchild Semiconductor and Intel Corporation who is credited with the observation that became known as “Moore’s Law” always insisted on making decisions based on verified data. He did that as a chemistry student trying to make ends meet and as the CEO of Intel, one of the world’s largest technology companies. He had good reasons for that and the results of his decisions, though not always accurate, proved that you are more likely than not to make a correct decision if it is based on reliable data, properly collected, presented and analyzed.
The future of a company is often a direct result of its senior management’s behavior. Part of this behavior is making bad decisions and the processes driving these decisions. It is unreasonable to expect that all decisions are going to be correct under all circumstances. However, a larger than normal number of bad decisions over a period of time can eventually seal the fate of an organization. Some of the biggest failures in business were a direct result of a flawed decision-making process.
So how do managers make good decisions? Do they use their managerial experience in a variety of companies, maybe in more than one industry? Is intuition a major factor? What about communication from lower management (divisional managers, plant managers, etc.)? Is there a fool-proof formula for consistently making the right decision when faced with that challenge?
The answer is no. There is no such thing as being 100% correct on every decision you make. Not in your personal life and certainly not in your professional career. Experience and intuition play a major role in the corporate decision-making process. Managers with decades of experience in a certain industry or as a manager or leader of several enterprises are likely to be more accurate in their decisions than novice managers that somehow rose to decision-making positions.
However, experience and intuition alone are not enough and sooner or later even the most seasoned managers will be wrong. Fortunately, there is another form of input that is as important, or even more important than experience and intuition. That input is information.
Information takes many forms and is frequently more abundant than many of us realize. It resides in the databases that house our ERP static and transactional data. It can be found in CRM databases and in data warehouses that store our web-based applications data. It can be massive and constantly grow as the business grows, yet it is readily accessible and waiting for us to tap it.
Since storage systems are inexpensive and continually increase in capacity and at a lower acquisition cost, it makes sense to store as much usable data as possible. The real challenge is using these data sources intelligently.
The CPM (Corporate Performance Management) software category was created just for that purpose: Access your data, bring it into an environment where you can sift through it and sort it in a pre-determined manner, then present it to those who need to see it, exactly in a way and format that they can relate to, and do it periodically.
Data analysis of both actual results and plan / budget data, if done frequently can reveal insight into both the current and forecasted financial health of the organization.
Analytics, once only available to the Fortune 500 group of companies and subsequently to upper mid-market organizations has finally become commonplace even in smaller companies. A direct link from the ERP general ledger is established and data is periodically transferred to the CPM or FP&A software so analytics can be performed.
The output from this process is what managers on various levels receive. The output, consisting of data tables and graphs, in whatever format has been established for the report recipients is ideally sent right after each accounting period is closed. Some of the modern-day applications can perform this in almost real-time so managers can immediately analyze and understand the presented data.
Equipped with such a system, the process of measuring, analyzing, understanding and making more accurate decisions is becoming a reality in a growing number of companies.