Are Your Decisions Risk-Informed? Six Missteps to Avoid

0
92 views

Share on LinkedIn

“In April 2017, Kevin Johnson took over the reigns as CEO of Starbucks, the iconic coffee giant. He faced a number of key decisions to keep the global retail giant competitive, but one in particular loomed large . . . Were there certain times or circumstances where it was appropriate to engage in brand activism, and what impact might these initiatives have on brand integrity and the bottom line?”

So goes the blurb for a Darden Business School case that examines Starbucks’ 2015 Race Together campaign. The case synopsis suggests two positions to debate: “whether Johnson’s work should be focused on (1) similar attempts to align Starbucks with progressive ideals and social causes, or (2) Starbucks’ profitability and shareholder value alone.”

By any analysis, the Race Together campaign was a belly flop. In his book, From the Ground Up, published after the debacle, former Starbucks CEO Howard Schultz wrote, “Starbucks was called tone-deaf and patronizing . . . We were accused of overstepping acceptable bounds for a corporation, seizing upon a moment of national crisis to promote our brand, and preaching through the company megaphone.” Schultz admitted to dismissing internal concerns about Race Together, and that it was ultimately his decision to have baristas write the words on cups to spark discussion of racial inequality.

If you’re searching for a positive example of Risk Informed Decision Making, this isn’t it.

The overwhelming majority of business decisions are made under great uncertainty, and each alternative is accompanied by three risk-related questions:

1. What are the consequences of this decision – both good and bad?
2. How certain are those consequences?
3. Is the choice ethical?

In evaluating the Starbucks case, I believe Schultz had benign intent, but that clouded his thinking. Clearly, he was perfunctory in considering the consequences – if he thought about them at all. He made a mistake. I’ll withhold the vernacular. You know what it is. Smart people do it all the time. A shining emblem of The Stupidity of Intelligence.

The possibility of committing a decision error is an omnipresent workplace hazard. Staff at all levels make decisions, and just like good choices, poor decisions are inevitable. Companies must plan capacity to overcome the results of bad decisions, whenever and however they occur.

Could risk-informed Decision Making have prevented Race Together? It’s impossible to know. But the idea is “to ensure that decisions between competing alternatives are taken with an awareness of the risks associated with each option, and that all attributes of a decision are considered in an integrated manner,” according to an abstract, Overview of Risk Informed Decision Making Processes.

Another example: In April 2018, two African-American men waited to meet a friend in a Philadelphia Starbucks. They were denied use of the restroom, ostensibly because they hadn’t made a purchase, and in the chain of events, the store manager called 911 for police intervention. The men were arrested and detained for several hours, according to media reports.

On May 10, 2018, Howard Schultz, Starbucks’ executive chairman and former CEO, said the company had adopted a new restroom policy (i.e. no purchase necessary to use the restroom). “We don’t want to become a public bathroom, but we’re going to make the right decision 100 percent of the time and give people the key.”

“. . . Make the right decision 100 percent of the time.” Less wonky than Risk Informed Decision Making, but a pretty high bar, nonetheless. Either way, relaxing bathroom rules at Starbucks was the right move.

Bad decisions create ripples, no matter whether they’re made in the ozone at the top of the organization, or down at the bottom. Schultz’s Race Together decision sullied the company’s global brand, and created endless joke fodder for late night comedians. Yet, a store manager’s misguided bathroom-denial decision arguably eclipsed those unfortunate results. The incident caused Starbucks to close 8,000 of its US stores one day the following month to train its 175,000 employees about implicit bias, inclusion, and prevention of discrimination.

It’s illusory to think that employees will burden themselves with the formality and rigor of Risk Informed Decision Making every time they are faced with making a choice. Why should they? After all, our culture champions “common sense” and “street smarts,” especially in customer engagement. Doing the right thing in the heat of the moment means the last thing anyone needs to stress about is validating an action against yet another framework, flowchart, or decision model. “Beside United’s slavish devotion to rules conformity, Dr. Dao, how was your pre-flight experience?”

Five decision-making missteps to avoid:

Asking the wrong questions. It seems like stating the obvious, but “How do we get water to people who need it?” is the starting point for getting water to people who need it. Not, as Jacqueline Novogratz shared in her book, The Blue Sweater, “is it ethical to charge people for drinking water?” Or, “is access to water a human right?” Well-intentioned questions, but frustratingly incapable of fixing the problem.

In his book, The Best Service is No Service, Bill Price asked the right question. Instead of asking the seemingly urgent question “what can companies do to improve customer service?”, Price wanted to know how companies can reduce the need for customer service at all. The direct consequence was the ability to make more effective strategic decisions.

Making faulty assumptions. Many marketers assume that every customer wants a “relationship” with the company’s brand, that every customer needs a “personalized” online experience, and that the logical result of being a satisfied customer is that he or she will consistently advocate for the product. These assumptions should be challenged.

Relying on inaccurate information. “One famous example from history is the Mars Planet Orbiter . . . One piece of bad data caused the probe to fire its thrusters incorrectly. The problem was that one piece of software supplied by Lockheed Martin calculated the force the thrusters needed to exert in pounds of force – but a second piece of software, supplied by NASA, took in the data assuming it was in the metric unit, newtons. This resulted in the craft dipping 105 miles closer to the planet than expected – causing its total incineration, setting NASA years back in its quest to learn more about Mars, and a $327.6 million mission being burnt up in space,” according to IT Chronicles (Garbage In, Garbage Out: How Bad Data Leads to Bad Reporting and Bad Decision-Making).

Failing to obtain all needed information. One company I worked for made the decision to market its software to all manufacturers based on its success in one segment. The effort failed. The decision was flawed because the senior executives failed to learn which economic drivers existed in the new markets. They assumed buying motivators in the successful market were universal.

Not considering all options. In 2018, Heineken aired an ad with the tagline “sometimes lighter is better.” The racist message was hardly subtle, and the company was vilified for it. The company had other choices. It’s hard to believe they were all considered before deciding on this one.

Not considering consequences. The decisions at Boeing that led to two fatal crashes of its 737 MAX aircraft contain a litany of failures to consider consequences. In contrast, the growing emphasis of customer experience as a strategic differentiator involves ensuring that every business action has positive consequences for what customers perceive, feel, think, and do.

Risk Informed Decision Making won’t mitigate every decision error, but by avoiding these major missteps, and using good old common sense, employees can leave room for better choices.

LEAVE A REPLY

Please enter your comment!
Please enter your name here