Decision paralysis

If you are a Senior Manager in a bank you now have the added incentive of the Senior Managers Regime (SMR) to make sure your decisions are the best they can be.

In October last year the FCA changed its approach regarding the contentious ‘burden of proof’ but the new criminal offence relating to ‘a decision causing a financial institution to fail’ still became law. Proving that a Senior Manager was aware his decision may lead to a failure is a tough call, but that aside, I doubt any Senior Manager wants to spend time in the dock even if they are found not guilty – it would be horrendously stressful and potentially career damaging regardless of the outcome.

One consequence of the new law is that firms face a real risk that decision making will stagnate and become paralysed as Senior Managers require more details, more analysis, more cross-checks and more assurances before they commit.

Nick Tasler, CEO of Decision Pulse and the author of Domino: The Simplest Way to Inspire Change, published an article entitled Make Good Decisions Faster in the Harvard Business Review. The article references the Know-Think-Do framework as a tool that enables leaders to start making fast and ‘roughly right’ decisions.

The term ‘roughly right’ might sound reckless, but let’s face it there is little certainty about the future; so with the right spirit and with the right intent perhaps ‘roughly right’ is the best we should expect.

From a Senior Manager’s perspective does the Know-Think-Do framework relate to SMR? My thoughts are:

  1. Know the ultimate strategic objective

    • Firms set themselves strategic objectives about profit and growth not failure

    • People follow the right path unless they are under duress or have a self-serving agenda

  2. Think rationally about how your options align the ultimate objective

    • There are usually a limited number of ‘core’ options to consider (hybrids excepted)

    • A different perspective (second opinion) is more valuable than additional analysis

  3. Do something with that knowledge and those thoughts

    • Use the information that’s available, don’t use what’s available as an excuse to defer

    • Record the context of a decision in case it needs to be understood at a later date

I think my final bullet is pertinent to both individuals and firms. Those firms that establish an effective and efficient method of recording the decisions of individuals in the context of business strategy and risk appetite, will be more attractive to Senior Managers - it will become a significant factor in talent retention and recruitment.

Decision making is never straight forward, particularly when the risks are high. By routinely applying Know-Think-Do it becomes habit and the tough decisions get easier. It doesn’t guarantee amnesty but when faced with a regulatory challenge I don’t want to be second guessing the approach I took – I would rather be assured that I applied Know-Think-Do.