Take too long to order in a restaurant and you'll incur the wrath of your hungry companions. Hesitate to decide on an online auction and you'll miss out on snagging that must have item. The costs of decision paralysis in your business are much larger, which is why overcoming that paralysis is important.
There is near universal agreement that failure to make timely decisions has costs in the form of wasted time, missed or reduced opportunities, and a creeping slowing of the pace of the organisational unit as people adjust to the visible inertia.
What the cost of this decision paralysis is in euro, dollars or pounds generally remains opaque.
Opportunity costs provide us with one means to close in on some answers. In the classic application, the opportunity cost is the lost value between two choices. In our situation, the opportunity cost is the value lost by not making a decision at all, relative to any of the options.
You know, even in a back of the envelope estimate, what is at stake among your options and can proceed to decide what it is worth to secure one of them. That may have a range of costs rather than a single number, but it is real nonetheless.
An alternative measure of the cost of decision paralysis comes via a McKinsey & Co survey of the time allocated to decisions. The consultancy reports that survey respondents spent 37 percent of their time making decisions, and more than half of this time was thought to be spent ineffectively. McKinsey go on to project that in an average Fortune 500 company, this could translate into roughly $250 million wasted per year. Try the math for your own company.
We argue that taking a sub-optimal decision now is better than deferring a hypothetically better decision into an uncertain point in the future. Of course, this is predicated on having the highest possible confidence in the decision you can take now, without having 100% certainty.
In our Decision Sprints and Scrums, we consistently find that the team charged with a decision has most of the information they need to align and decide with confidence, and that any gaps are quickly closed with rapid research. To find that clarity and confidence, our decision support balances breaking down assumptions and building back up to well-evidenced decisions.