A director's guide to decision-making

[00:00:00] Intro: Welcome to Minutes by Boardcycle, where in each episode we pack the insights from one of Australia's boardroom leaders into just a few minutes.

[00:00:09] Intro: Today, join host Richard Conway as he interviews Christy Boyce, Director of JB Hi-Fi, BAI Communications and EMM Consulting, on how organisational decision-making frameworks can be applied in the boardroom.

[00:00:27] Richard Conway: Hello and welcome to the minutes podcast. I'm your host, Richard Conway. And today I have the privilege of interviewing Christy Boyce, who's a director of JB Hi-Fi, BAI Communications, and EMM Consulting, and is also the Chair of the SCEGGS Darlinghurst Trust.

[00:00:43] Richard Conway: Christy was previously a director of CSR, a senior partner at Port Jackson Partners, and a partner at McKinsey. Welcome to the podcast, Christy.

[00:00:53] Christy Boyce: Thanks, Richard. I'm delighted to be here today.

[00:00:55] Richard Conway: Great. So Christy, I wanted to talk to you about decision-making and in [00:01:00] particular, whether and how organisational decision-making frameworks play out in the boardroom. Because as I mentioned earlier, besides your career as a non-executive director, you've had an extensive career in management consulting. And so I know you've spent a long time thinking about how organisations can make effective decisions. So firstly, I wanted to ask you, how important do you think it is for an organisation to articulate what its decision-making framework is, and do you have a particular framework that you think is most effective?

[00:01:35] Christy Boyce: That's a great question. Look, I don't know that I'd say I have a favourite framework. And in fact, I think if you commit yourself to one framework, you can get yourself in trouble because I do think it's a little bit horses for courses in terms of frameworks.

[00:01:49] Christy Boyce: And it really depends on what you're trying to do. And sometimes it's good to have quite a rigid framework, but most of the time, I think you want to be more flexible. That [00:02:00] said, I do have a way of thinking about things that I think is quite useful. When I'm looking at a difficult question, what I tend to do is think about, you know, what might be the options that you could pursue in that context, like what are the big choices that you actually have?

[00:02:17] Christy Boyce: And I think pushing yourself to think about that, and being quite expansive in that process, is really helpful. And then the next thing I tend to do is say, okay, for each option, what would you have to believe for that to be the right answer?

[00:02:31] Christy Boyce: And when I say, what would you have to believe? What would you have to believe in quite a broad way? So what would you have to believe in terms of internal capabilities, whether they be skills, assets, or relationships. What would you have to believe about the external environment? Customers, suppliers, regulators.

[00:02:51] Christy Boyce: And thinking quite broadly, employees, you know, what would you have to believe about all those important stakeholder groups, and then think a little bit about [00:03:00] what might change. So what trends you might, you need to look for out there that might change the answer. So changes in technology, changes in consumer preferences, changes in regulatory environments.

[00:03:12] Christy Boyce: And thinking that through and actually writing down, okay, what do I have to believe on all these different dimensions for this particular option to be the right answer? And then I think you can have a quite directed approach in terms of, what's the evidence available to support those beliefs and decision making is an imperfect science, right?

[00:03:32] Christy Boyce: Most of the time you're not going to be able to 100 percent prove everything, but you can sort of look at the balance of evidence and say, okay, well that option looks like it's got potential. There are a few things that we don't have evidence to support, or actually the evidence contradicts that, but that looks like a sensible answer versus there's no evidence to support anything that you would have to believe for option B, so option B is off the table.

[00:03:56] Christy Boyce: And I think that does a few things. I mean, I think there's real [00:04:00] discipline about pushing yourself to do that, that is useful. And you will tend to iterate that a number of times as you think more about it, but then when you share it with a board or with a management team, that transparency around the logic, sets you up to have a really good conversation.

[00:04:19] Christy Boyce: Because you're sort of all coming from at some level, a shared understanding of the set of issues. And you probably got clarity about those issues. And to some extent, you've got a shared language and that makes the conversation much more efficient. And it also allows you to evolve and push it together over time.

[00:04:38] Christy Boyce: So that's the way I tend to approach, you know, a tough issue that I'm trying to work out how to solve.

[00:04:45] Richard Conway: And as a director, Christy, is that how you're thinking about problems that are coming to you in the boardroom live, or is that something more that you would apply in your consultancy roles historically?

[00:04:59] Christy Boyce: Look, both. I [00:05:00] mean, I think I use them in different ways in the consulting roles, you know, you'll actually go and document all of it and share it and debate it. But I guess when I'm reading a board paper, or thinking about an issue from a board point of view, I will have that in the back of my mind. And I'll often be thinking about, what would you have to believe? Their beliefs that are sort of implicit in this whole conversation that we haven't actually brought to the surface that we need to be talking about.

[00:05:24] Christy Boyce: And my questions in a board context will often talk to either better understanding beliefs that have been articulated or trying to elevate issues that haven't been considered, but probably in my view are critical to making whatever choice we're trying to deal with.

[00:05:40] Richard Conway: Yeah. So does that therefore mean that when you're looking at a board paper, one of the things that you're trying to look at there is have the author or has management actually thought about all of the different options that are available here and have they thought about what they have to believe. I guess the question there [00:06:00] is, are you looking for that kind of decision-making structure or framework to be presented to you as a director?

[00:06:07] Christy Boyce: I think I'm trying to understand whether they have considered the options and they have considered the sort of full spectrum of issues in terms of determining which option is best.

[00:06:17] Christy Boyce: I don't necessarily need to see it laid out like that. Of course, that's lovely if they do it. But I am trying to get a sense from the board paper of, have those things been considered? And then when we're having the conversation, I'm trying to understand that as well.

[00:06:33] Christy Boyce: I mean, I think there's nothing more scary as a board member than when you sort of get presented with, this is the answer, and you don't understand where it came from and you don't understand what else was considered.

[00:06:48] Christy Boyce: I mean, of course, that's scariest when it's a big decision that can't be reversed. If it's something that's sort of on the face of it makes sense, and it's more about learning or option creation, and it's not particularly expensive, that's a [00:07:00] different conversation. But when it's a big decision that you probably can't reverse, then you really want to see the rigour of the thought around why one option is right and particularly what could go wrong.

[00:07:11] Richard Conway: Yeah, absolutely. That's probably a good segue into another question I wanted to ask you, which is about how you apply that thought process where you know your information is pretty imperfect and perhaps you don't have a really great fact base to think that one option is better than another option.

[00:07:32] Richard Conway: Or I guess another example where this can play out is, when you're thinking about competitive situations, you obviously don't know exactly what your competitors are going to do. So do you apply the same kind of thinking to that process or is there a different approach that works better when information is pretty imperfect like that?

[00:07:52] Christy Boyce: Well, I think the process of asking what are the options and what you have to believe is pretty robust and actually probably is particularly [00:08:00] suited to that type of situation. But I do think there are some things that you can do to help yourself in those types of situations as well. So, one thing I would say is if it really, seems relatively unique, try and think about analogies. And they might not even be from the industry in which you're operating. You know, what's a similar type of decision that someone has had to take, and what did they consider and what ended up being important? I guess down the road once they'd taken that decision.

[00:08:28] Christy Boyce: So sort of looking for analogies is one thing that I think can help you in that situation. The second is if you've articulated the "what would you have to believe." You can be creative in terms of finding evidence. It may not be exactly what you're looking for, but what are other signs that that is, or is not true? That is each sort of belief.

[00:08:51] Christy Boyce: And I think the other thing in those types of situations, and you mentioned the competitive situation. So I think the competitive situation is tough. What's even tougher is, if [00:09:00] you've got a quite dynamic, broader industry environment, where actually there are a lot of players who are changing, and its sort of rapidly evolving.

[00:09:10] Christy Boyce: Probably on multiple fronts, potentially technology, regulation, behaviour, you know, something like healthcare springs to mind, right? And I think in that situation, what would you have to believe approach is robust, but you might also want to think about how you sort of immerse yourselves in thinking through how the different actors will behave.

[00:09:30] Christy Boyce: So this would work in a competitive environment or to work in an industry environment, and I've seen it work really well, actually, when board members and executive team members are teamed up, and they're asked to think about how they would behave as a particular industry player, or if they were given a particular role. and then they sort of can think about what they do.

[00:09:50] Christy Boyce: And they sort of wearing that hat, as well as the board member hat in the meeting, when you're having those types of discussions and, you know, you can do that, you know, [00:10:00] really in depth with lots of work, but you can also just ask people to go away and think about it for an hour. And they will come up with some really interesting perspectives. And it's a good check on those decisions where you are assuming a lot about either competitive behaviour or broader industry behaviour.

[00:10:17] Richard Conway: Yeah, I think that's a really great idea to actually just role play it, even if it's really short role play, it's quite different to just thinking about how someone else might think about it for a couple of minutes. I guess another curveball to throw at you in that scenario is, in those kinds of rapidly evolving situations you were talking about, an option that organisations can take is to do nothing and wait and see for a little while.

[00:10:45] Richard Conway: And, that, I guess, is quite a tricky option to take because sometimes I guess it's the cop out choice when you can't figure out which ones are the other ones. But in other cases, it's a deliberate choice, but you do have to move at some [00:11:00] point in time. I guess I was interested if you could talk a little bit about when you think it's appropriate just to take the do nothing path and how you assess when it's time to start doing something from there.

[00:11:15] Christy Boyce: Yeah, that's a great question. And I think we sometimes underestimate the value of deferral. That it actually can be a very valuable option to defer a decision. So we shouldn't always beat ourselves up for not making a decision. There were times when it was absolutely the most rational thing to do. There are times when it's not.

[00:11:35] Christy Boyce: And I think the times particularly when it's a rational thing to do is when it is a really big bet and it's not reversible. And there's a number of uncertainties. And if you wait, those uncertainties may be resolved in a way that is really useful. Or, you know, that certain things will actually improve over time.

[00:11:56] Christy Boyce: So for example, if you were looking at a massive capital [00:12:00] spend and the technology was rapidly changing or coming down in cost, there might be a massive value in deferral. Because that is something, you know, once you've spent it, you've spent it. There could be some new technologies that are coming down the pipe that will dramatically change how you think about how you approach the particular requirement.

[00:12:22] Christy Boyce: Or, as I said, it's just there's an experience curve, and it's going to cost a lot less if you wait a year. So in those cases, you're actually thinking about how you can defer without too much cost. The counter question to that is always, what's it costing you to defer, you know, you're putting yourself at risk and you're going to end up with capacity constrained in a growing market. What might happen? But I do think thoughtful deferral can be a great strategic choice.

[00:12:50] Richard Conway: Yep, Christy, one final question on this topic for you is about, I guess the fact that organisations have a bunch of different [00:13:00] reasons why they make decisions the way they do.

[00:13:02] Richard Conway: Some of those are historical, some of them are industry related, some of them are cultural, et cetera. And I just wanted to ask you the general question of what you think the board's role is in that. Should the board really be shaping the way that an organisation makes decisions or should it be shaped by the organisation?

[00:13:22] Christy Boyce: Another great question. So I'm not one for dictating, this is how you make a decision. Because I think, you know, management comes to the board with a recommendation in most cases, and the role of the board is sort of a constructive challenge. But what I am interested in understanding and influencing as a board member is, have they thought about what they need to think about?

[00:13:44] Christy Boyce: So I understand there's a history in terms of the way things are presented, and how that might be articulated. But I do want to be confident that we've actually thought about the issues that we need to think about. [00:14:00]