HR Decision Making

Every organization wants to make good decisions. Some decisions are easy to make and others are more complex, impacting lots of stakeholders and involving higher risks. Complex decisions require an effective decision making process that uses good information and safeguards against its judgment bias. Human Resource Departments, like other functional areas of an organization, are frequently faced with making complex decisions that have important consequences to the organization’s workforce and bottom line. The following is a short list of examples of current HR decision points:

1. Should we participate in a private health exchange?
2. Are we hiring the right talent?
3. How should we fund our medical plan?
4. Are we compliant with the health reform laws?
5. Is the HR function appropriately automated for our business?

Each issue requires careful consideration in its own right and most are interrelated with one another. These are complex decisions. HR might use the following 4 steps in its decision process and, depending on the issues being considered, may engage the services of an outside adviser to facilitate the process and bring additional expertise to the decision team:

1. Preliminary Evaluation. It is important to confirm early in the decision-making process that the question being asked is the right one. For instance, I once worked with an organization that wanted to know if they could save money if they bought their healthcare through a specific healthcare purchasing group. However, in working with the client’s team we determined that it made sense to recharacterize the decision point to ask the broader question, “How should we purchase our healthcare.” It may seem like a subtle change, but it dramatically increased the scope of purchasing options the organization would consider. By strengthening the decision point, we introduced more flexibility to subsequent stages of the decision process.   Throughout this analysis, it is critical to use the best, most unbiased information available. This is when financial baselines are established reflecting a “status quo” scenario. In addition, documentation of perceived issues associated with the decision point as well as current procedures, practices, policies, and other relevant information to the decision is summarized for the decision team.

2. Identify the stakeholders. While not all stakeholders will necessarily play an active role in the decision making process, the process should consider each stakeholder or group of stakeholders as necessary. Any decision, even a technically good one, can lead to a bad outcome if stakeholders with power and influence are not participants in the process at some level and given an opportunity to provide their buy-in. For instance, maybe it goes without saying that you would not exclude the CFO from a decision concerning how the company medical plan is funded, but another decision, perhaps considering how to financially incent workers to participate in a health promotion initiative, might require outreach to lower level, influential employees. Every organization is different, but big decisions are frequently made by a relatively small group of managers which creates its own interpersonal dynamics. The “Group Think” phenomenon should be avoided in complex decision making by encouraging alternative viewpoints and critical analysis of the issues. While the decision making group may not change, the decision process should have a mechanism, when necessary, to gather new ideas and perspectives from within and without the organization. These alternative viewpoints will be important to consider as the process moves to formulating alternatives.

3. Develop Alternative Scenarios. After the decision team has reviewed the qualitative and quantitative analysis surrounding the status quo scenario, they are ready to consider alternative scenarios. It is generally helpful to develop decision criteria for each important qualitative and quantitative category of comparison. These criteria would indicate the organization’s minimum or expected requirements for each category and they will help the decision team compare each scenario as it prepares to make a decision. Alternatives should be presented in a way that makes it easy for members of the decision group to discuss the pros and cons of each scenario for each important point of comparison. Specialized information, such as employee surveys, market studies, vendor interviews, cost/benefit analysis or research white papers may be required to fully develop scenarios and provide the decision team with the necessary context to adequately establish each scenario.

4. Make a Decision. Once the alternative scenarios are established and all specialized information summarized and reviewed, the team is ready to discuss each scenario and make a decision as to the best course of action to take. Depending on how complicated the decision is, the team may find it helpful to establish a scoring system to make a decision. For less complicated decisions, the team may feel comfortable making a decision based on the information summarized for their review.

At the end of the day, making a good decision requires good information and judgment. However, making the right decision is worth all the hard work because it will add value to your organization’s bottom line. Happy decision making!