We have discussed how the OODA loop – or the Observe, Orient, Decision, Action loop – works in helping to make better decisions. The first and the important thing to remember about the OODA loop is that it is mainly concerned with situations that involve split-second decision-making. Considering the fact that it was developed by an Air Force pilot, it is natural that the OODA loop describes decision-making in situations that are combat-oriented in nature.
However, this does not preclude its use in corporate decision-making as there are many situations in which the decision-makers have to make split-second decisions with little or skewed information. For instance, during board meetings and meetings of shareholders, important decisions and announcements have to be made depending on the exigencies of the situation.
To take an example, during hostile board meetings or meetings of senior management where the decision-makers have to confront other managers with competing agendas, they have to react quickly and with agility to ensure the decision that they make is in the best interests of the organisation and its shareholders. So, the point that needs to be noted is that decision-makers in these situations have to assess their opponents’ strategies and strengths and weaknesses, and react in a timely and quick manner.
The time between receiving the information and taking a decision is often in the seconds and minutes, hence decision-makers have to react quickly to the demands of the situation. Often, this means decisions have to be made by getting inside the minds of opponents. For instance, getting to know what the opponents’ strategies are and their intentions by assessing their body-language and words would be invaluable to the decision-makers.
Further, a noteworthy aspect is that the decision-makers have to rely on gut feelings and emotional intelligence to arrive at their decision. This means that the decision-makers have to trust themselves and their judgment to make the decision that will be in the best interests of the organisation and its shareholders.
This often involves acting with imprecise or skewed information. The reason for this is that the opponents themselves will be actualising their OODA Loops and, hence, it becomes a combat situation wherein the one with better decision-making abilities wins. This is the reason for the OODA loop’s popularity in contemporary organisations where training and mentoring often involves familiarising with the OODA loop.
Finally, it is not always the case that decisions taken by decision-makers are perfect and free from errors. Hence, there has to be a mechanism whereby feedback loops can be activated and which ensures decisions are vetted and evaluated for the impact that they have on the organisation.
So, to sum up the benefits of the OODA loop, it is indeed the case that this method developed by John Boyd is extremely useful for decision-making in any setting where the needed reaction times are short, and where the fitness and agility of the decision-maker plays a crucial part in making the decision.
How Much Does Hierarchy Matter?
In the contemporary business world, many companies have layers and layers of hierarchy, whereby decisions are made at the top and passed down to the rank and file employees. This gives rise to organizational structures that are vertically deep and horizontally broad, with spans of control extending to several layers in both directions. It is a moot point as to whether decisions made at the top are actualised fully, considering the several layers that they have to pass by the time they reach the bottom.
Of course, this depends on the kind of organisation since bureaucratic structures often have a tendency for decisions not to be implemented due to vested interests and inertia. The latter is especially important as many bureaucracies refrain from implementing decisions because of lethargy owing to the organisational setup’s nature.
In practice, many organisations ensure that certain autonomy is given to the employees in the middle–layers as well as those slightly senior, so that decision–making need not be centralised. This helps the organisations to democratise the decision-making process, whereby the autonomy enjoyed by middle managers and rank and file employees ensures their wholehearted participation in implementing the decisions.
Indeed, this often leads to situations where decisions are taken at the level of middle and lower management concerning the day-to-day running of their teams – which means that broad level decision-making concerning organisational policies and strategies are done at the top.
The concept of profit centres or cost centres is especially useful to consider in cases where decision-making is decentralised. For example, companies like Citigroup have divided their operations into regions and divisions according to functional areas – whereby decisions made at each region level are taken on the basis of the profit earned by them relative to the costs incurred in running them.
Since the regional heads and heads of the divisions are responsible for the profits made or losses incurred, they make decisions in a manner that benefits their regions or divisions. Indeed, this is a very effective way of ensuring that the right decisions are made – which not only benefit the region or the division but the entire organisation as well.
In recent years, there has emerged a process of having divisional heads run their divisions like companies – whereby they are responsible for all the activities of their divisions, and only the decisions pertaining to very high level strategies are made from the headquarters.
This is the case with large and mega-corporations like Unilever and Proctor & Gamble – where decisions are taken at the top which pertain to broad directions that the companies wants to follow, and most decision-making is decentralised. This goes down the line as well with each country, state and group-level centre making decisions that affect their day-to-day affairs in accordance with local conditions.