Good Decisions. Bad Outcomes revisited


We can’t entirely avoid outcome-based decisions. Still, we can reduce our reliance on stochastic outcomes. Here are four ways companies can create more-sound reward systems.

1. Change the mind-set. Publicly recognize that rewarding outcomes is a bad idea, particularly for companies that deal in complex and unpredictable environments.

2. Document crucial assumptions. Analyse a manager’s assumptions at the time when the decision takes place. If they are valid but circumstances change, don’t punish her, but don’t reward her, either.

3. Create a standard for good decision making. Making sound assumptions and being explicit about them should be the basic condition for getting a reward. Good decisions are forward-looking, take available information into account, consider all available options, and do not create conflicts of interests.

4. Reward good decisions at the time they’re made. Reinforce smart habits by breaking the link between rewards and outcomes.

The article below is of particular interest to me and my colleagues at Ontonix because it reinforces the approach that we advocate and that is supported by our unique technology.   Business is no longer about linear relationships or processes with the post-industrial resilience suggested by terms like “supply chain”. As was highlighted in this recent blog (video) Eric Berlow: How complexity leads to simplicity, when dealing with the modern [ … Read More

via Get “fit for randomness” [with Ontonix UK]

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