Monthly Archives: October 2012

The OODA Loop of Agile Decision Making

 

An important skill for an Agile Businesses is the ability to be decisive in indecisive times. Previously, managers made all important decisions because they were considered the most-informed, most capable of understanding all of the facts, and best trained for making decisions.

This condition created laborious approval processes and delayed decisions. By the time the final approval was given, it typically was made by the person farthest from the situation. This approval process also sent a not-so-subtle message that employees cannot be trusted to make good decisions.

Today, decisions must be made faster and often with less than complete information. To wait for all facts to be known, all costs to be completely understood, and to get buy-in from all executives, most likely the critical moment has passed. A more agile competitor has grabbed the opportunity while your organization was still thinking. Business opportunities will be lost again and again using this time-consuming approval process in the new economy.

For example, the CEO of one of my clients (a multi-million dollar company) must get board approval for any expenditure over $5,000. When this rule (and dollar amount) was established in the 1980s, that may have been a more reasonable figure. Today it’s a handcuff to timely decision making.

Decisions in the new economy need to be made as close to the customer as possible to create better agility. As decisions are being forced lower and lower in a company, the entire organization needs to be taught how to make proper decisions by using a basic model that is one of the simplest, most easily repeatable processes for making good decisions at the speed of the new economy.

The OODA Loop is a decision-making tool that allows for real time decision making as quickly as needed. Currently SEAL teams are being taught the OODA Loop because they can no longer wait on the chain of command for decisions. The speed of decision can literally mean the difference between life or death in conflict situations.

Fortunately, business decision-making doesn’t have consequences as dire, but the training and development of real-time decision making can create a more agile business in a highly competitive environment.

The OODA Loop

OODA is an anagram for Observe, Orient, Decide, Act. As with most skills, the more a person uses it, the more comfortable they become and the more efficient in using it.

Observe

The decision maker must be observant. Let’s use an example of a customer who needs assistance. Is this an enraged customer, or someone who simply has a question? Does this person expect the company to do something immediately, or is he looking for lengthy explanations and details? Observations help gain perspective of the decision at hand. The decision maker must be aware of the situation they are in.

Orient

Once you have made your observations, you need to orient them. For example, you have observed you have an angry customer and you orient this situation with the corporate policy of providing the ultimate in customer service. Does it make sense to immediately announce “I’ll get the manager” and walk off? This action is only going to inflame the situation, add more wait time, and train all future customers never to talk with anyone but the manager again. Not only is this a waste of time for the angry customer, but a waste of time for a manager who needs to be focusing on other aspects of the business. Orientation takes observations and places them in a context for a decision.

Decide

Once you’ve observed the situation and oriented it with your company vision, you are presented with a number of options. When dealing with the upset customer, the decision maker can argue the point, offer reparation, send the decision up the line, listen and defuse the situation with a savvy response that will calm the customer, or check out and pass it along to the boss to handle.

Act

Next, you take the best possible action. As we all know, in business we don’t make the right decision every time, but we have the opportunity to learn from our mistakes. By continually repeating this process to the level of complete comfort, not only are better decisions made more frequently, but the evaluation of poor decisions by walking through the process again will quickly show where the error happened along the way.

Decision making in the new economy requires a different skill set and speed; the more split-second decisions you make, the better you get at making them.

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