Decision Latency: Why Something You’ve Never Heard of is Dragging Down Your Profitability

You’re driving down the highway and the truck in front of you bucks and pipes start flying off. 

You can: 

1. Put your foot on the brake 
2. Pull the emergency brake 
3. Veer left 
4. Veer right 
5. Accelerate 
6. Some combo of the above 
7. Close your eyes and hope 

What do you do? 

If you’re reading this, then you’re a thinking person and you’re already asking a bunch of questions… 

• How fast am I going?
• Is there someone directly behind me?
  • How close are they?
  • Do they look like they’re paying attention?
• How close is the truck in front of me?
• Are there cars to the left or right?
  • How close are they?
  • Are the drivers paying attention?
• Are the pipes headed into the air or at me?
• Is it icy or rainy?
• Is the truck braking?

… You want to know things so that you can make the right decision. Now we’ll offer the answer to as many of those things that you want on that list before you have to decide. 

The only catch is that each one will cost you ½ second.  

In business, like in this scenario, if you wait until you have all the information, you’ll get hurt.  

You’re going 53mph. 

It’s raining. 

When you have high-stakes decisions, it’s almost an instinct to want to get as much information as you can before making the decision.  

Here’s a secret. You’ll never even think of all the things that can influence a situation, let alone have the ability to comprehend it. It’s just not how humans work. We can take into account a lot of things at once, but we are limited by what we can measure and comprehend. Go back 100 years and you got surprised by a hurricane. Go forward 100 years and it might be included in your 60-day forecast.  

The best bet is to know what the biggest influencers are, get the information, and act. Indecision or what one person explained to me as “Ready, aim, aim, aim, aim, aim…” is almost as harmful in business as it is in our highway scenario. 

The pipes are headed straight up in the air. 

There are no cars behind you.  

Our respected fellow decision-analyzers at McKinsey shared that , “… good decision-making practices tend to yield decisions that are both high quality and fast.” 

This means that while you’re rooting around in your data stacks for the secret key to making this all-important decision, your competitors are running past you. This delay, regardless of whether it is caused by your curiosity or your lack of information is about to cost you another battle.  

There’s a name for this. It’s called Decision Latency or what you’ve probably heard as ‘analysis paralysis’. This silent killer is stealing money from your profit line in so many ways.  

• Your competitor just decreased prices by 5%.
• A government contract was just awarded to your biggest client.
• Your industry forecast was just cut by 17% and the pie is getting smaller.

In any of these cases, you can and should react, but how? 

The longer that you wait, the more you become part of the audience and less of an actor.  

• You wait 60 days to get better information and build consensus. Meanwhile…
  • Market share starts moving rapidly toward your competitor and now you have to contemplate an even deeper cut to win back clients.
  • Your biggest client ‘upgrades’ to a newcomer who contacted them the day they won the government contract.
  • Your A/R starts to skyrocket and aging buckets fill up while other vendors to that industry get first in line for payments.

There’s a car to your left.  

The driver is white-knuckled, eyes-closed, and panic-stricken.  

In every case described, slowly gathering data and building consensus while someone else eats your lunch creates a drag on profits. Good news/bad news… The good news is that there are a few really important things you can do to reduce decision latency.  

The bad news is that in a company of 100 or more people, the number of business decisions that need to get made are in the tens of thousands. Rarely are they as cut and dry as a 5% price decrease or a reduced forecast. More likely it’s lots of little stuff:  

• “Should we try a different sentence in our outreach script?” 
• “Do you think it makes sense to put Business Intelligence under Finance?” 
• “Do we need to start doing retention interviews, so we can do fewer exit interviews?”

The truck is 16 feet in front of you.  

There are no cars behind you. 

No matter your role in your company, you are faced with decisions big and small all throughout the day. 

When the stakes are high, we tend to think that we need to gather as much information as possible, but it’s precisely at these moments when decision latency has the biggest impact. Here’s how to improve: 

Your job is to have the information for the fundamental drivers of the business on hand; they should be accessible and actionable. When a decision is needed, and it’s your job to make it, set a deadline and know why you’re setting it: Because good decisions can and do happen fast. 

For big decisions (those direction-altering, high risk, infrequent ones that the execs handle, like whether to make an acquisition), “Spur productive debate.” For cross-cutting decisions (those frequent ones that managers tend to handle, like planning and pricing), double down on a standardized process with measurable metrics. And for delegated decisions (those smaller, frequent, low-risk, day-to-day ones handled by teams and individuals, like hiring and marketing), “Ensure commitment, not just consensus.” (McKinsey) 

If we know now that high quality decision making is positively correlated to the speed of the decision, and that those most successful businesses make good decisions quickly, then why waffle? Why subscribe to analysis paralysis? Why wait, when you could simply step on the accelerator and be past the pipes and, soon after, the truck itself? 

Because what if you crash and burn? 

As we said already, you’re crashing and burning (just slowly) if you wait. This is why it matters so much to hire the right people, keep them, and have actionable data to help with decision-making at every turn.