Big Data, Misaligned Incentives, and Bureaucracy Lead to Bad Decision Making

WE Online, Kuala Lumpur, Malaysia?-?Senior leaders are struggling to make the right decisions, with 72% of organisations admitting to at least one strategic initiative failing in the last three years because of flaws in their decision making process, according to a research from the Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA).

Information overload, excessive bureaucracy, lack of trust and incentives that are not aligned with goals were all cited as contributors to poor decision making in businesses globally.

The Joining the Dots: Decision Making for a New Era report surveyed board-level executives at large organisations from 16 countries. It revealed that not only do executives admit to poor decision making, more than three quarters (80%) say flawed information has been used to make strategic decisions, with 42% admitting their organisation has lost competitive advantage because of slow decision making.

The top causes of poor decision making identified in the report are:

Information Overload

Almost 36% say their organisation is not coping with information overload, and 32% say big data has actually made things worse, while 37% say it has helped. For those that can gain greater mastery of big data, there is a significant opportunity to gain a competitive advantage. Among high performing organisations, 86% are already assessing the management information they need by focusing on the key value drivers of the business model.

Bureaucracy

Nearly a third, 29%, say the single biggest barrier to more effective decision making is coordination problems caused by organisational silos and bureaucracy.

Trust and Collaboration

Almost 43% say their level of trust in fellow executives needed improvement and 57% say more active collaboration is required to improve decision making.

Incentive Structures

More than 61% of bosses admit their organization's incentive structures aren't encouraging right decisions for short, medium and long-term value.

Charles Tilley, Chief Executive of CIMA, commented: "Organisations need to treat decision making as a business-critical process to be professionalised then continually improved. Leaders need to think in an integrated way, meaning to have a clear and defined business model and relate all decisions back to it; quickly gather and analyze all relevant information from all parts of the business; and focus on key performance indicators rather than gut instincts or hearsay." (Ant)