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Harvard Business Review Online | The Right and Wrong Compromise

 

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The Right and Wrong Compromise 

Making decisions takes up just a fraction of an executive’s time, but it’s the essence of the job. And compromiseis at the heart of most decisions, as Peter Drucker explained in one of the earliest of his more than 30 HBRarticles spanning the past four decades. In 1967, Drucker argued that the most effective executives candistinguish the right compromise from the wrong one. With characteristic clarity, Drucker distilled the decision-making process into six elements that are as crucial today as they were 35 years ago.

Effective executives do not make a great many decisions. They concentrate on what is important. And they know

the trickiest decision is the one between the right and wrong compromise. Above all, effective executives knowdecision making has clearly defined elements:

T h e C la s s i fic a t io n o f t h e P r o b l e m . The most common mistakes are treating a generic situation as if it were aseries of unique events and treating a new event as if it were just another example of an old problem.

T h e D e f in i t io n o f t h e P r o b le m . The danger is not the wrong definition; it is the plausible but incomplete one.The American automobile industry, for instance, worked hard at safer highway engineering and at drivertraining, believing these to be the major areas of concern in automotive safety, but the severity of accidentskept creeping up. It should have become clear that safety campaigns would have to be supplemented byengineering to make accidents less dangerous. This lack of awareness brought sharp congressional attack.

T h e S p e c if ic a t i o n s t h e A n s w e r M u s t S a t is f y . A decision that does not satisfy the “boundary conditions” – theobjectives it must reach and the minimum goals it must attain – is worse than one that wrongly defines theproblem.

D e c id i n g W h a t I s R ig h t , R a t h e r t h a n W h a t I s A cc e p t a b le . In the process of answering the question, Whatis acceptable? the decision maker usually loses any chance to come up with an effective answer.

B u ild i n g i n t o t h e D e c i s i o n t h e A c t io n t o C a r r y I t O u t . The flaw in many policy statements is that theycontain no action commitment.

Th e Fe e d b a c k Th a t T e s t s t h e Va l id it y o f t h e D e c is i o n . Effective decision makers follow the military’s rule:Commanders do not depend on reports to see how a decision is being carried out. They go and look. Failure togo and look at customers, markets, and competitors is a major reason for poor, ineffectual, and wrongdecisions.

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