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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 executives time, but its the essence of the job. And compromise is at the heart of most decisions, as Peter Drucker explained in one of the earliest of his more than 30 HBR articles spanning the past four decades. In 1967, Drucker argued that the most effective executives can distinguish the right compromise from the wrong one. With characteristic clarity, Drucker distilled the decisionmaking 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 know decision making has clearly defined elements: The Classification of the Problem. The most common mistakes are treating a generic situation as if it were a series of unique events and treating a new event as if it were just another example of an old problem. The Definition of the Problem. 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 driver training, believing these to be the major areas of concern in automotive safety, but the severity of accidents kept creeping up. It should have become clear that safety campaigns would have to be supplemented by engineering to make accidents less dangerous. This lack of awareness brought sharp congressional attack. The Specifications the Answer Must Satisfy. A decision that does not satisfy the boundary conditions the objectives it must reach and the minimum goals it must attain is worse than one that wrongly defines the problem. Deciding What Is Right, Rather than What Is Acceptable. In the process of answering the question, What is acceptable? the decision maker usually loses any chance to come up with an effective answer. Building into the Decision the Action to Carry It Out. The flaw in many policy statements is that they contain no action commitment. The Feedback That Tests the Validity of the Decision. Effective decision makers follow the militarys rule: Commanders do not depend on reports to see how a decision is being carried out. They go and look. Failure to go and look at customers, markets, and competitors is a major reason for poor, ineffectual, and wrong decisions.

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