Two decades ago, McKinsey & Company launched a quarterly publication just as companies were reeling from the dot-com bust and only weeks before the devastating events of 9/11.¹ Twenty years later, in its 80th edition, the McKinsey on Finance headline reads, “Revolutionary innovations, brilliant ideas, and climate imperatives will change everything – except the fundamentals of finance and economics.”
The 20th anniversary issue notes that over the past two decades, “…we’ve seen wars, financial crises, a global pandemic, a substantial decline in trust, and heightened urgency about existential climate change.” With this as perspective, McKinsey on Finance concludes, “we’ve studied, been challenged about, sharpened our thinking on and ultimately reinforced our appreciation of core economic and financial principles, particularly as they apply through very uncertain times.” ²
As the authors point out, “We don’t have a crystal ball. But we do have a compass: long-term value creation.”
During these same two decades, this author has conducted repeated calendar reviews which routinely reveal that the single largest block of time for managers and leaders is spent in meetings. An agenda analysis further finds that agenda items for these meetings fall into one of three categories: for your information; for discussion; for action.
“Organizations thrive or vanish largely based on the quality of the top management team that leads them. ”– Professor David A. Shore, Harvard University
We will put aside the often-perceived ubiquitous data dump of “for your information.” A content analysis of the remaining “for discussion” and “for action” agenda items, concludes much as McKinsey on Finance did, that while there have been transformative changes in virtually every industry and just about every company, the fundamentals of managing a company and by extension of leadership remain constant – problem solving and decision-making. Rather than ‘soft skills,’ we count them as durable skills. The challenges posed by the historic transition away from the global economy’s reliance on interbank offered rates towards more robust reference rates is no exception.
Beyond physics
In physics, the world has a North Pole and a South Pole. However, the legacy challenges of problem solving and making informed decisions are far more complicated. It is a multipolar world.
Organizations thrive or vanish largely based on the quality of the top management team that leads them. Problem solving and decision-making are central functions of management and are principal contributors to the success or failure of an enterprise. The manager, for example, is the person who typically makes decisions, and those decisions are the centerpiece of planning. It can be argued that planning is the first and foremost responsibility of management, as all other functions cascade from it. However, it must be pointed out that prudent decision-making is always predicated on solving problems. Regardless of the decision-making model, the first phase is always to identify problems which need to be solved. Misdiagnosing the situation leads to a predictable outcome. This is why the first stages of a judicious decision-making process is crucial to all that follows. The sequential connection between problem solving and making decisions is evident in the five core stages of responsible decision-making (Jurina; 2011, 160). ³ These can be further divided into the preparation phase and the decision-making phase:
Similarly, when preparing a business case, virtually every template begins with describing the problem that is going to be addressed. Likewise, for project charters, it is ubiquitous to begin with a description of the problem or opportunity driving the project. It answers the question, “what business problem are we trying to solve?” In teaching case studies, students and executives are provided a detailed case analysis outline for class discussion. The outline includes four steps:
1. Problem statement
2. Decision alternatives
3. Diagnosis (decision criteria)
4. Recommendation
The objective of this article is not to admire the problem, nor is it to make the self-evident business case for embracing and training everyone to use a standardize framework for the two pillars of leadership. However, it is worth observing that organizations move forward or backward vis-à-vis effective problem solving and decision-making. As Peter Drucker noted, “whatever a manager does, it is done through making decisions.” I have found that what distinguishes Higher Performing Organizations (HiPOs) is their capacity to problem-solve and make decisions. Why? Because these skills allow them to transition from a Type S (Static) organization to a Type A (Agile) organization.
It is further worth observing that problem-solving and decision-making skills are not foundational in the professional preparation of most. I will routinely ask participants in professional development programs if they have a standardized process for problem solving and decision-making. For those who indicate they do, the follow-up question is to ask if that process is used routinely, and if so, is it used on an enterprise-wide basis. As you would suspect, those responding in the affirmative rarely number above single digits. Yet, if we were to draw a Venn diagram and place problem solving in one circle and decision-making in the other, the intersection between the two would include several overlapping critical success factors. This article will focus on developing one of these overlapping critical skills.
Q&L
While it is never wise to engage in monolithic thinking, there are few skills that lubricate responsible problem solving and decision-making as does asking good questions. Good questions lead to good answers, which in turn lead to good decisions. Moreover, we consistently find that people have the answers, we just need to ask the right people the right questions and then ‘grow big ears.’ In other words, ‘shut up and listen.’ We learn far more from the questions we ask and in the additional questions they inspire. Why? Although we hear with our ears, we understand and listen with our brains. That said, we have to listen very carefully, because if you have a brain, you have a bias. The ability to be an effective problem solver and decision maker requires real knowledge of the past, clear awareness of the present, and a sense of the current forces in play that will shape the future. This requires that we avoid jumping to solutions. To this end, bankable first-order questions are illustrated in the following exhibit:
Successful problem solving and decision-making benefits greatly from what in Zen Buddhism is referred to as a “beginner’s mind.” The point lesson here is that the difficulty in having an adaptive mindset is a belief that it is your job to have all the right answers, rather than focusing on asking the right questions. Hence the value of adopting a beginner’s mind or shoshin. We can observe that in the beginner’s mind there are many options, while in the expert’s mind, there are but a few. From a Western perspective, we must practice humble inquiry. This is the skill of drawing stakeholders out and asking questions to which you truly do not believe you already have the answers. It involves the trust-building process of developing a relationship based on genuine curiosity and interest in the other person. An effective guardrail to combat an expert’s mindset is to practice active inquiry during which you give yourself and your team space to slow down, reflect on problems and construct novel solutions. In this authors experience, shoshin, humble inquiry, and active inquiry truly are key ingredients in the ‘secret sauce’ recipe of successful problem solving and decision-making.
Another point lesson to recognize is that problem solving and decision-making by definition involve transitions. They involve moving from a current state to a future state; about going from-to. Returning to physics, we are reminded that for there is movement, there will be friction. Indeed, it is astonishingly rare to experience change without experiencing resistance.
Please don’t walk across the grass
To do things differently we must see things differently; both through a telescope and through a microscope. You must be prepared to view issues from the balcony and on the dance floor. When we see things we haven’t noticed before, we are well-positioned to ask questions we were not prepared to ask before.
In strategy, as in medicine, the diagnosis precedes the prescription of a solution. We have suggested that the proper diagnosis is to recognize that problem solving and decision-making are anchors of HiPOs and Higher Performing Individuals (HiPIs).
Navigating problems and making prudent decisions are seminal skills whether you are a new manager or a seasoned member of the top management team.
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Regardless of the industry, the organization, or the geography, when introducing my framework for successful problem solving and decision making, I begin with one plea – “please don’t walk on the grass.” By this I mean, when presented with a critical problem or a strategic imperative decision of major consequence, this is no time for short cuts. At the same time, having a standardized methodology acts as a lubricant and will expedite future problem solving and decision making by not having you begin each initiative de novo.
Possibilities and Pitfalls
There are key questions you and your fellow decision-makers must consider when contemplating any new initiative. Among these questions are, why are we having this conversation now, and what problem are we trying to solve? Along with these questions is what process will you use to turn change into opportunity? A goal of this brief article is to spotlight that to become higher performing, you must build capacity and capabilities in problem solving and decision-making, while considering these skills as a source of competitive advantage. The lack of either of these represents one of your biggest roadblocks to creating value. If you are not satisfied with your answers to these questions, and if you organization does not have an end-to-end process for solving problems and making informed decisions, now may be the time to take action. In so you will turn managerial malpractice into managerial magnificence.
¹ McKinsey on Finance, Summer, 2001, Issue 1
² Michael Birshan, Tim Koller, and Ishaan Seth, Reflections on 20 years of McKinsey on Finance – and three challenges ahead, McKinsey on Finance, June 1, 2022
³ Jurina, M. (2011), Organizacija i menadžment, Visoka škola za poslovanje i upravljanje spravom javnosti, Baltazar Adam Krčelić“, ISBN: 978-953-96539-7-0, Zaprešić
ABOUT THE AUTHOR
David A. Shore is a former associate dean at Harvard University where he continues to teach and lead professional development programs. He is also a member of the SOFR Academy Advisory Board. Shore is the former distinguished professor of innovation and change at Tianjin University of Finance and Economics (China). He served as senior consultant on innovation at the United Nations. Shore offers executive education seminars and facilitates strategic planning and guided implementation retreats.
He is a founding member of McKinsey & Company’s External Implementation Advisory Board which has a primary focus on operationalizing strategy for transformational change. He also delivers presentations and workshops and co-authors articles with McKinsey partners. Please contact David Shore via our Contact Form.
