When senior leaders consistently make good decisions, little else matters; when they make bad decisions, nothing else matters. Effective decision-making stands at the center of executive leadership and organizational success. As leaders climb the ladder to top positions, others call on them regularly to solve problems and occasionally to make decisions. At the top, these two critical functions define most of a leader’s day—the crucibles of destiny—the leader’s and the organization’s. Each time leaders engage in either, they stand at a pivot—a turning point that will take the company in directions that will contribute to success or demise.

People use the terms “problem-solving” and “decision-making” interchangeably, but the two differ. By definition, problem-solving involves the process of finding a solution to something that needs to change or a deviation from what you expected to happen. It involves a multistage process for moving an issue or situation from an undesirable to a more advantageous condition and typically entails a process for answering the following questions:

• What changed, when, and why?
• What is the tangible evidence of a problem?
• How can you measure the magnitude of the problem?
• What caused the change?
• Is this change or deviation consequential enough to spend time resolving it?

Once you have the answers to these questions, you can start to evaluate alternatives and to overcome the obstacle that stand between them and a satisfactory resolution.

If decision-making and problem-solving were predictable, static events, they would involve more science than art—something that could be taught, learned, and controlled. They’re not, and they don’t. Successful decisions involve a systematic evaluation of alternatives and realistic actions—but no one stands a chance of making a good decision if he or she starts with alternatives before defining a clear objective.

One of the most successful ways to help people get to the core of a situation originated with Sakichi Toyoda who developed a technique for the Toyota known as the “5 Whys”—a technique the company later used during the evolution of its manufacturing methodologies. As the leaders of Toyota discovered, by repeating “why?” five times, the nature of the problem and its solution become clearer—thereby suggesting an objective.

The “5 Why’s” have become almost catechistical for many organizations, especially those in manufacturing, and the technique is now used within Kaizen, Lean Manufacturing, and Six Sigma initiatives. When someone presents a problem, the “why’s?” begin. Why can’t we fulfill that order?  Why are we out of stock?  Why did we let the inventory get too low? As the questions continue, decision-makers move closer to the core issue, which is, in this scenario, “How do we balance the need to respond quickly to customer requests with a need to keep inventory low?”  Once everyone agrees about the nature of the issue, the individual decision-maker or group can then plan implementation of the best solution.  

Decision-making, as opposed to problem-solving, involves choosing from among several alternatives to move the company forward—to change what you’ve been doing to support a strategy that promises innovation and growth. Managers fill their days with problem-solving; successful executives know they have to do more—to move solutions to high-impact decisions.

Leading a successful company demands that a leader do three things: improve the business, develop the bench, and make important decisions—those decisions that have a significant impact on the entire organization, its performance, and results. Successful executives don’t make a great many decisions; instead, they concentrate on the critical ones and delegate to others the important but not crucial ones. These success-drivers focus on the highest level of conceptual understanding to think through what is strategic and generic, rather than tactical and problematic.

Effective decision-making does not happen by accident. In most cases, executives make a conscious, well-thought-out effort to reach an effective decision. They gain information to understand the problem that necessitates the decision, examine and evaluate numerous choices, and settle for nothing less than stellar data. Then, they do the courageous thing. They choose the best, not the safest or most popular course of action that will define their destiny.