What is the Relevant Decision Making Criteria
"A wise man makes his own decisions, an ignorant man follows public opinion." — Chinese Proverb
How will you measure whether your decision will be effective? To make the most effective decisions, you need to know what to measure. You also need to select among alternatives of measurement so that you can truly understand what’s at stake.
In The Essential Drucker: The Best of Sixty Years of Peter Drucker’s Essential Writings on Management , Peter F. Drucker writes about how you need to figure out the most appropriate and relevant measurements.
Key Take Aways
Here are my key take aways:
- Know what to measure. To make the most effective decisions, find the most relevant measurements.
- Whatever you always measured isn’t the answer. Traditional measurements are not the right measurement or there would be no need for a decision.
- It’s about judgment. Finding the right measurements is risk-taking judgment.
- Have alternatives. Insist on having alternatives to choose from.
What are the Criteria that Matter?
The most effective decisions are made by finding the appropriate measurement. Drucker writes:
Perhaps the crucial question here is, What is the criterion of relevance? This, more often than not, turns on the measurement appropriate to the matter under discussion and to the decision to be reached. Whenever one analyzes the way a truly effective, a truly right, decision has been reached, one finds that a great deal of work and thought went into finding the appropriate measurement.
Finding the Appropriate Measurement is Risk-Taking Judgment
Effective decisions are about making judgment. Making judgment means having an opinion, going out on a limb, leveraging your experience, and taking risks … the risk to be wrong or surprised. Drucker writes:
Finding the appropriate measurement is thus not a mathematical exercise. It is a risk-taking judgment.
Effective People Insist on Alternatives of Measurement
Judgment and decisions are about making trade-offs. The key is to surface what’s really at stake or what is really on the table and what you are trading against. Drucker writes:
Whenever one has to judge, one must have alternatives among which to choose. A judgment is which one can only say yes or no is no judgment at all. Only if there are alternatives can one hope to get insight into what is truly at stake. Effective people therefore insist on alternatives of measurement – so that they can choose the appropriate one.
The Traditional Measurement is Not the Right Measurement
The traditional measurement reflects yesterday’s decision and you need to know what’s relevant for today. Drucker writes:
The effective decision-maker assumes that the traditional measurement is not the right measurement. Otherwise, there would generally be no need for a decision; a simple adjustment would do. The traditional measurement reflects yesterday’s decision. That there is need for a new one normally indicates that the measurement is no longer relevant. The best way to find the appropriate measurement is again to go out and look for the “feedback” discussed earlier – only this is “feedback” before the decision.
Example of How Traditional Measurements Can Be Irrelevant
Drucker provides an example to illustrate how traditional measurements can be irrelevant for making effective decisions:
In most personnel matters, for instance, events are measured in “averages,” such as the average number of lost-time accidents per hundred employees, the average percentage of absenteeism in the whole workforce, or the average illness rate per hundred. But the executive who goes out and looks for himself will soon find that he needs a different measurement. The average serve the purposes of the insurance company, but they are meaningless, indeed misleading, for personnel management decisions.
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