A632.3.3.RB - Framing Complex Decisions

Businesses today are more complex than they have ever been.  Advances in technology are being developed at a pace that many people, including organizational leaders, cannot keep up with.  Advances in communication technology have produced a world that is more interconnected. This increased connectedness has created a business environment that is more complex than ever before (Obolensky, 2016).  Even small businesses are able to compete on a global scale through ecommerce. The organization where I am employed has had to sense and respond to a more complex environment. Potential customers can learn more about the organization and competitors with a few mouse clicks.

Organizational leaders often struggle to keep up with the increased complexity in today’s environment.  There are three primary sources of complexity in today’s business arena. First, the information age in which we live has lead to a business environment that is increasingly rich in data.  There is so much information for leaders to process and respond to that many feel handicapped and underqualified. Second, the increased interconnectedness of our world has lead to greater systemic complexity.  Third, “In addition to data and systemic complexity, a third major source of complexity results from the interactions of multiple stakeholders, including competitors, regulators, and public interest groups” (Hoch, Kunreuther, & Gunther, 2001, p. 125).  

As a result of the increased complexity of our day, decision making is focused more on options and flexibility than on a precise evaluation of the alternatives (Hoch, et al., 2001).  “In essence, the decision maker is preparing to make correct choices in the future rather than on nailing down the decision in advance” (Hoch, et al., 2001, p. 128). There are three primary tools that organizations use while “preparing to make correct choices in the future.”  These tools include building an information base, identifying constraints, and strengthening the capabilities of the organization (Hoch, et al., 2001, p. 128-29)

Building the Information Base

The organization that I work for has spent time and effort, and made capital investments to build a solid information base. For example, the company has invested in newer aircraft that are equipped with flight data recorders to measure numerous flight parameters.  Altitude, airspeed, rate of climb and descent, and engine parameters are some of the data that are recorded. With this information the company can provide potential customers with statistics that indicate that the pilots are operating the aircraft according to recommended best practices.  For example, the speed and rate of closure during an approach to an offshore platform is within the recommended window, or that the recommended takeoff profile is flown. Additionally, some of our fleet is equipped with Health and Usage Monitoring System (HUMS). HUMS tracks and records the status of critical systems so that progressive faults or defects can be detected and remedied before they affect operational safety (Skybrary, 2018).  The company uses this information to ensure we operate as safely as possible and are the preferred operator in the offshore helicopter market.

Identifying Constraints

In today’s complex environment wise decision makers identify the constraints that limit the options of their organizations. “Real options theory has underlined the importance of assuring that today’s decisions are directed at assuring a rich menu of possibilities for tomorrow’s decisions” (Hoch, et al., 2001, p. 129).  

In 2014 the price of crude oil dropped from about $115 a barrel to around $70 a barrel (Samuelson, 2014).  The company that I work for was heavily affected by the crash in oil price as oil companies attempted to tighten their budgets and reduce extraneous spending.  In order to hedge against the possibility of a drop in crude oil price the company’s decision makers decided to expand into other markets of the helicopter industry.  The company’s primary market is the offshore oil and gas industry, but since before 2014 the company had diversified into several other markets. We have had ventures in helicopter EMS, firefighting, heli-taxi, unmanned aerial systems, and others.  

Strengthening Organizational Capabilities

As discussed in the previous paragraphs, the company that I work for has had to change some aspects of how the business is run.  There is a greater focus on data and ensuring that standards are adhered to. We have also had to diversify in to markets that we are not as familiar with.  This has caused the organization to have to strengthen its capabilities. “The fact that managers need powerful decision support and data management tools to function adequately dictates that organizations as a whole require new skills and capabilities to design and implement these tools”  (Hoch, et al., 2001, p. 129). For example, when the company attempted to start an unmanned aerial systems department, human resources had to seek out and hire individuals that were familiar with and qualified to operate those aircraft.

To me it seems that the company that I work for has done a pretty good job of navigating the complexity that has arisen in the last decade or two.  I believe that further success can be found by widening the field of view and eliminating constraints. For example, do we have geographical constraints that cause us to think we are limited to operating in certain segments of the globe?  Questions like this one can help the organization to reassess the real constraints, and identify any self imposed constraints. Operating in additional countries can contribute to the complexity of the organization as it often entails a different set of regulations.  Local area experts would need to be identified and worked with to ensure success. By doing so we can continue to grow and continue to improve in a challenging, increasingly complex business environment.

References

Hoch, S. J., Kunreuther, H. C., and Gunther, R. E. (2001). Wharton on making decisions. Hoboken, NJ: John Wiley & Sons, Inc

Obolensky, N. (2016). Complex adaptive leadership: Embracing paradox and uncertainty (2nd ed.) New York, NY: Taylor & Francis

Samuelson, R. J. (2014). Key facts about the great oil crash of 2014. Retrieved from https://www.washingtonpost.com/opinions/robert-samuelson-key-facts-about-the-great-oil-crash-of-2014/2014/12/03/a1e2fd94-7b0f-11e4-b821-503cc7efed9e_story.html?utm_term=.c7dccdd0e4f3

Skybrary. (2018). Health and Usage Monitoring System (HUMS). Retrieved from https://www.skybrary.aero/index.php/Health_and_Usage_Monitoring_System_(HUMS)