CEOs need to decide
The “40-70” Rule
As the CEO of your business, you must make many critical decisions about the strategic direction of your company. Every decision that you make is determined by a variety of factors such as information, confidence, experience and your willingness to call the shots. When all these pieces come together to help in the creation of a decision things can get blurry.
To bring some clarity to the decision-making process let’s look at a proven decision-making process that was developed by Colin Powell, the former head of US military forces and former Secretary of State. While mostly recognized as a military leader (or CEO of the US military), his leadership and decision-making practices are used by many of his admirers in the military and in the private sector.
It is known as Colin Powell’s “40-70” Decision Making Rule and it has two parts. The first part basically says that every decision should be made with between 40% and 70% of the available information. Powell’s thought process behind the rule is rather straightforward and intuitive. Making a decision with less than 40% of the information implies a deep level of uncertainty and consequently, unveils a heightened possibility of making ill-informed decisions. Conversely, waiting to have over 70% of the information opens room for procrastination and hinders prompt decision-making which is detrimental in a competitive business environment.
The second part says that once you have analyzed the information or data determine the probability for success which should be in the range of 40% to 70%. While this can be hard to judge, you will need to estimate where you think you fall in this range based on the information you have.
Successful CEOs must strive to base their judgments within the decision-making “sweet spot”, that is the 40% to 70% range. This approach not only mitigates the risks of ill-informed decisions and facilitates swift, purposeful action, but it also leaves room for gut instinct and intuition, two elements intrinsic to effective leadership.
In essence, the “40-70” Rule empowers CEOs to strike a balance between impulsivity and hesitation. It brings to the table a progressive and rational approach to decision-making, emphasizing the importance of timely decisions while safeguarding against the pitfalls of indecisiveness or ill-informed judgment. Use the “40-70” Rule to guide your decision making process the next time you are confronted with a strategic decision about your business.