Decide Better!

I’ve taken some time to look through the Senate Health Care bill – maybe it was a waste of time. It’s more than 2,000 pages with a new 383 page amendment. It seems to include everything anyone could think of: an alternative dental health care providers demonstration project; geriatric education and training career awards; nationwide program for National and State background checks on direct patient access employees of long-term care facilities and providers; federal coordinating council for comparative effectiveness research – and much much more.

This led me to consider this bill in light of decision making and compare it to business decisions (Business Decisions). Why does it need to include so much? The political trick is to add special interests to major legislation so that these get carried along without discussion. The extension of company paid COBRA benefits in the Defense appropriations bill a few days ago was another example. This is really a poor way to make decisions. Each decision should stand on its own merits as is done in business decisions.

In making a decision on such historic legislation like this should senators read the bill in its entirety before voting on it? Yes. In business decisions, executives read major proposals and legal documents before deciding on them. CEOs and directors read 10Ks before approving them. But I doubt that many senators actually read the bill in its entirety before deciding on their vote. How can you vote in favor of something you haven’t read? It’s easy – it doesn’t matter what’s in the bill anyway because the vote is based on your political party: 60 to 40. Nevertheless, I think that senators should be required to read the bill before their vote. Maybe they should be required to take a test on it before they are qualified to vote. At least it would make voters feel that their representatives were actually doing the job we expect.

Recently I posed the question on whether the time it took for President Obama to make his Afghanistan decision was procrastination or deliberation. Now that the decision has been made and announced, we can examine the process itself, thanks in part to the comprehensive exposé by Peter Baker in the December 6, 2009 New York Times. Presidential decision making, particularly for difficult strategic decisions, is one of the most important qualities of a president. Only time will tell, or we may never know, whether this turns out to be the right decision, but it does illustrate the characteristics of a thorough and rigorous strategic decision process; one that can serve as a good case study for strategic business decisions.

Obama made everyone on his team work long and hard on the decision. The process was methodical and rigorous, taking three months of regular work to review and evaluate alternatives. He separated the critical parts of the decision process into steps: deeply understanding the problem, evaluating the alternatives, revising the alternatives, discarding alternatives, considering the implications of the final choice, and building support from his team before it was announced. He met 10 times with his national security team to understand the facts, frequently asking penetrating questions, asking for additional analysis, and suggesting new alternatives. During this process, the president gained a very deep understanding of the situation and the implications of the decision. In a decision this complex it would have been a mistake to shorten the process to a single meeting. Coming to a quick decision based on intuition or gut feel would have rendered a completely different decision and one that may not have been well considered.

The president spent a lot of personal time on the decision, not just listening to the opinions of his advisors but also shaping his own opinion. In too many cases in government and in business, the chief executive is too busy to get deeply involved in major strategic decisions. This is usually a mistake. The leader making the final decision needs to listen to advisors in major strategic decisions, but not let them make the decisions.

Sometimes a complex decision process is too rigid: “here are the alternatives, pick one”. But this one demonstrated the importance of how complex decisions evolve. As this decision progressed, the objective was refined. It evolved from destroying the Taliban to diminishing Taliban insurgency and transferring authority to the Afghan security force. The objective as also expanded to include the timing of withdrawing troops more quickly. Refining the objective is a characteristic of complex strategic decisions. As the alternatives are better understood, objectives can be refined to better match the realistic restrictions of alternatives, as well as the additional possibilities alternatives may present. About half way through the process, the president discarded one alternative, withdrawal, because he believed it wasn’t viable. This enabled attention to focus on the remaining alternatives.

At the same time, it is important that alternatives also evolve and take shape. In a strong decision process, it is not just “pick from the alternatives presented”, the leader making the final decision shapes the alternatives. This is an integral part of this decision. President Obama wanted to consider an alternative for 30,000 troops not just 40,000, and this was called alternative 2A. When reviewing this alternative, he again expressed concern that it would take too long to deploy the troops. He wanted to “move the bell curve” to the left: deploy more troops faster and withdraw them earlier. The team also took time to validate some of the assumptions in the alternatives. For example, General Petraeus confirmed that the surge could be done in six months similar to what he did in Iraq. Afghan president Hamid Karzai confirmed that he was comfortable with taking over security responsibility faster.

On the day after Thanksgiving, the president presented to his team a revised alternative 2A with a different shape of the deployment and draw down bell curve. He continued that meeting from 10:30 AM to 9:15 PM, refining the plan until everyone was in agreement. He specifically asked all of his advisors if they were in agreement, and they all responded positively. Building agreement is another characteristic of a good strategic decision process. In some ways this is the opposite of a consensus. A consensus implies including the opinions that everyone came in with. Building agreement in this case came from participation in the process. Everyone went through the process, made their thoughts known, discussed the alternatives in depth, and reached a common understanding of the facts, assumptions and alternatives. A good strategic decision process builds agreement among those involved in the decision.

The president also used this final meeting to outline his announcement. The announcement of a strategic decision like this itself can refine some of the details of the plan. For example, care was taken to define and present this strategy as very different from the one in Vietnam. In addition, President Obama also established boundaries on the next review of this strategy, making it clear to the military that in December 2010 he would only consider flexibility in the draw down, not the draw down itself.

Whether you agree with the president’s decision or not, or how it turns out in the long run, it does provide a case study of the characteristics of a thorough and rigorous strategic decision process that can serve as a model for complex strategic decisions in business as well.

President Obama intends to announce his decision on plans for Afghanistan on Tuesday. He has taken months to make this decision and consulted with his war council at least nine times. This is a tough decision (see Business Decisions for more on Tough Decisions), and he has been thinking about it for some time. His decision process on Afghanistan has focused attention on the way presidential decisions should be made. Has the president been procrastinating on this decision or deliberating, taking the necessary time to make the right decision? Let’s look at the case for each.

The president has been procrastinating to delay the decision. The Afghanistan decision is a classic tough decision: no matter what he decides it will be unpopular and criticized. Many of his supporters and many from his own party will disagree with sending more troops. Additional funding for an increase will bring more criticism and require support from the Republican Party, as many Democrats will be against it. The chairman of the Appropriations Committee is calling for an additional income tax to fund an expansion of the war. This will make it even more unpopular. If the president decides not to support expansion of the Afghan war, he will be blamed for any subsequent failure of the war and for not having the courage to do what was needed. No matter what he decides, his critics will use it against him, and the division of the American people on the issue will help feed that criticism. Procrastination is common when someone is faced with a tough decision that will be criticized no matter what is decided. The president is procrastinating to postpone the anguish that will come from all the criticism, but in procrastinating, sometimes the situation gets worse, as it may have in Afghanistan.

The president has been deliberating to make the best decision. President Obama has a very different decision-making style than his predecessor, George Bush. President Bush was an instinctive, some say “jump too fast to a conclusion”, decision maker. President Obama’s decision style is the opposite. He doesn’t go with his gut feel; he takes time to think through the alternatives, seek advice, consider the outcomes, and then decide. This more deliberate decision process will usually lead to a better decision because it is more thorough. The decision takes shape over time, enabling a more complete decision that considers all critical factors and assumptions. More deliberate decision making, particularly with tough decisions, is an important characteristic that many Americans look for in a president. A gut-feel decision by the President of the United States scares a lot of people. President Obama’s deliberate decision process on Afghanistan will lead to the best decision because it was thorough, and he took the time to do it right.

In this decision, President Obama will be judged as much on his decision process as the decision itself. After all, since we don’t have the benefit of the information he had in reaching a decision, our confidence in the decision is based on our judgment of the process. So, what is your conclusion: procrastinating or deliberating?

With all the recent attention on Healthcare Reform, it may be appropriate to consider the worst healthcare problem the country faces and think about unanticipated consequences. Medicare will surely bankrupt the American economy! Just like the Ponzi scheme reinvented by Bernie Madoff, Medicare makes promises for future returns on today’s “investments” that it can’t possibly keep. “By paying the Medicare tax today to support the medical costs of today’s retirees, your medical costs will be covered when you retire.” This is eerily similar to Bernie Madoff’s promise that new investors would get the same returns in the future as previous investors, while all the time he was using the new investors’ money to pay the returns to previous investors. The Medicare system is different since it uses the money from those paying taxes today to pay the benefits of those who paid in the past, with the promise that those paying today will get their benefits in the future — oh actually this is the same. The only difference between the two is the size: Madoff had a $50 billion Ponzi scheme while the Medicare scheme is at least $80 trillion!

While the Medicare proposition sounds compelling, here is the problem: the current Medicare liability is more than $80 trillion and the entire US economy is only $15 trillion. The Medicare liability is five times more than the entire US economy! There is no reasonable amount of future Medicare tax that will pay for this liability. Some experts estimate that it might require a Medicare payroll tax of 30% in the future on top of income taxes, bringing the average income tax to more than 50%. Medicare will surely bankrupt the American economy. Those paying Medicare taxes today will be stiffed, just like Madoff’s investors, and will not have the healthcare coverage they were promised.

So a few recommendations. First, legislators should consider the future consequences of health care reform decisions. Second, even though the Medicare problem is messy maybe it should be addressed. Or it could be ignored, just like Madoff’s scheme was until it crashed. Madoff went to prison for his Ponzi scheme, will anyone go to prison for perpetuating the Medicare Ponzi scheme? Third, maybe Bernie Madoff’s sentence should be to run Medicare, since he has the experience to keep it going as long as possible.

In my upcoming book, Business Decisions (October 2009), I discuss how businesses sometimes need to make tough decisions. I define a tough decision as a decision where none of the alternatives are attractive, but the decision still needs to be made. The recent and upcoming decisions to reduce the number of auto dealers are an example of tough decisions that needed to be made. Chrysler announced that it will close 789 dealerships, and GM today announced that it will close 1,100 dealerships with more than 1,000 more expected to be affected when GM phases out or sells Pontiac, Hummer, Saturn, and Saab. Many people are obviously unhappy with these decisions. It will put many people out of jobs and have a devastating effect on many communities, yet it was unfortunately a necessary tough decision.

The US auto manufacturers had too many dealerships for the current and expected volume of sales. This overcapacity caused most of the dealers to struggle and be unprofitable. Their dealerships were forced to aggressively compete with each other on price, reducing everyone’s profits to unsustainable levels. At the same time, Toyota and other foreign auto manufacturers have far fewer dealers, giving their dealers the advantage of selling more cars, sustaining profits, and investing more. In court filings, Chrysler disclosed that it sold 303 vehicles per dealer while Toyota sold 1,292 and sold 1,030.

This problem has been brewing for a long time, as the US auto manufacturers’ market share steadily declined while the number of dealers stayed too high. Why did the US auto manufacturers wait so long to make this tough decision? In part, because it is always difficult to face up to tough decisions. In part, because decisions on slowly eroding problems seem to always be put off. But now with Chrysler and GM facing bankruptcy, they can legally void their dealer contracts without added financial burdens. When GM closed its Oldsmobile line, it paid an estimated $2 billion to dealers.

Tough decisions are sometimes necessary even though unpopular. These decisions were tough decisions.

Every once in a while someone makes a courageous decision that not only warms our hearts but inspires us with the confidence to be more courageous in our own decisions. Susan Boyle from Scotland is the most recent example. At 47, unknown, unfashionable, and unglamorous, she made the courageous decision to try out for Britain’s Got Talent (the British version of American Idol). As she came on stage everyone, especially Simon, was ready to laugh at her and put her down; after all making fun of these untalented wannabees is part of the entertainment. Susan risked the embarrassment that would surely come because she was so different from the other contestants. She was too old and unattractive. She was an easy target. That must have been a brave decision for her to make to take that risk and try to achieve her dream. But the instant she started signing, the jeers turned to cheers as she sang an utterly magnificent version of “I had a Dream” from Les Miserables. The audience and judges were beside themselves with their own reversal of feelings as they stood and cheered. Even Simon broke out into a big spontaneous smile.

Even more than being a very talented singer, Susan Boyle inspired me and millions of others to make more courageous decisions in our own lives. If you haven’t seen her performance, look it up on You Tube. Ironically, Susan Boyle’s courageous decision reminded me of another courageous decision by someone who also lived in Scotland. J. K. Rowling, a single mother on welfare, diagnosed with clinical depression, decide to write a novel (not an easy task). She wrote the novel in cafes in Edinburgh as her daughter slept. Her Harry Potter books became one of the biggest success stories ever, and J. K. Rowling is now one of the most deserving rich people in Britain. I don’t know if people in Scotland tend to make more courageous decisions, but here are two that serve to give us all the confidence we need to make our own courageous decisions.

Jiverly Wong walked into the American Civic Center in Binghamton N.Y. with two handguns and murdered 13 people. How does someone decide to do this? In the last month there have been three other mass shootings killing 25 people. How does someone decide to do this? The victims, at least most of them, were not connected to the killer and there was no motive. Did he just reach a point of despair, decide he no longer want to live and then decided to take others with him. Why? In this case, it wasn’t a temporary fit of passion. Wong decided to commit the killings in advance. He had a valid gun permit for the two handguns. He went there with the intention of killing a lot of people, blocking the back exit with a car before going in the front door.

I’ve written about how people sometimes make emotional decisions based on anger, or other emotions, that are not rational, but these are usually reactions that pass quickly and people return to more rational thinking. Sometimes violence decisions can be based on the drive to “get back” at somebody, but the victim is the target of that decision. In Wong’s case, the decision seemed to be simply to kill others. I can’t understand how someone decides this.

Nadya Suleman’s (Octo Mom) decision to undergo in vitro fertilization and give birth to eight more children, to add to the six children she previously had with in vitro fertilization, has to be considered irresponsible. Even at times she, herself considers the decision irresponsible, as she stated to Dr. Phil McGraw: “My heart was in it. Not my head. I wasn’t thinking rationally.” This leads me to wonder sometimes: Just who is responsible for irresponsible decisions?

Since Octo Mom is a single mother with no job or means of support, the state picks up the tab for her medical expenses and support. The medical expenses alone were more than $1 million. So the tax payers are responsible for this irresponsible decision – at least the consequences of it. Many people are upset that her irresponsible decision will be paid for by the state. If the state ends up supporting them, was it irresponsible for the state to allow Nadya to have eight more children by in vitro?

Should Dr. Kamrava who implanted the six embryos have been more responsible?  He implanted six in her previous pregnancy also, even though fertility specialists generally agree that no more than two or three embryos should be implanted. 

You have to worry about how she will afford to raise 14 children. She claims that she will be able to once she completes her master’s degree in counseling (Ha). That’s irresponsible to think possible. She even told Ann Curry that “What human is capable of caring for 14 children all alone? No human is. You need to be a superhuman, and I’m not a superhuman.” No she isn’t superhuman, nor is she a responsible decision maker.

Who is responsible for irresponsible decisions?

Bernard Madoff pleaded guilty Thursday to all 11 felony charges brought by prosecutors in one of Wall Street’s largest investment swindles, telling the court he is “deeply sorry and ashamed” for his actions.

Reading a statement in the courtroom, Madoff admitted he began operating a giant Ponzi scheme in the early 1990s. He said he knowingly gave false testimony under oath to securities regulators and concealed his fraud by submitting audited reports to the SEC. In three months, Madoff has gone from a man known mostly as a pioneer of electronic trading in securities to an icon for disreputable money managers who live a life of affluence while fleecing those who entrust their life savings to their schemes. Madoff admitted that his once-revered investment fund was all a big lie, a $50 billion Ponzi scheme that wiped out life fortunes, school trusts and charities and apparently pushed at least two investors to commit suicide. The money Madoff received was never invested but was used by him, his business and others or, as occurs in Ponzi schemes, was paid out to early investors, prosecutors said.

How can anyone, especially someone already successful, make a decision to do something like this? Does he wake up one morning and decide to create a Ponzi scheme to steal money from others? Does greed overcome reason and responsibility? Or is it progressive: start doing it a little to get through a bad period, then do more because it works but hope to make it good, then get in so deep you have no other choice?

I frankly don’t know how someone makes that decision.

We often see news of people flip-flopping on their decisions, and Judd Gregg did it yesterday. He agreed to become commerce secretary for President Obama, but yesterday changed his mind. Why does this happen so often? Judd Gregg actually described it well saying he was: “absorbed by the euphoria of the desire to do something else that was interesting.” Then he realized it was a bad decision because he wasn’t aligned with the president’s policies after all.

That’s a good description of what sometimes happens to people making decisions – you get absorbed by a euphoria to do something interesting. It could be a new job, purchasing something interesting, doing something daring or interesting, or even a new relationship. Then reality sets it and you realize: “what was I thinking.”

Euphoria to do something interesting is not a good reason for a decision. Lesson learned Judd.