My colleagues and I have spent the last five years or so assessing commercial decision-making in a range of businesses, from banking and finance to manufacturing and retail. We’ve assessed people in all sorts of roles, from finance professionals to information technology (IT) support managers to creatives.
The data our work has produced can be alarming. We often see low levels of financial literacy and awareness, with employees who misunderstand basic concepts and largely ignore the financial implications of their decisions. Our experience tells us that there are a number of reasons why many people fail to engage with financial matters:
- They don’t feel that “numbers” are their concern. They believe that their contribution lies elsewhere and that it’s the finance team’s job to worry about numbers.
- They fail to appreciate the importance of financial knowledge and the impact their everyday decisions can make on the business.
- They don’t realize the advantage that financial knowledge can offer them both professionally and personally.
- Many have a personal antipathy to numbers, which, for some, verges on a phobia and manifests itself in willful avoidance.
Traditional workshops and digital learning can effectively address these barriers to engagement. However, they may only be part of the solution to creating better commercial decision-makers in your business.
Situational judgment assessments present respondents with situations and ask them to make judgments, often using ambiguous and incomplete information, to simulate the real-life conditions of decision-making. Across thousands of data points, the same themes and patterns have emerged, revealing several insights — some relatively obvious, some less so and some downright counterintuitive:
- Small work teams perform better than large teams. The smaller the group, the greater the collaboration and sharing of best practices.
- Individuals and teams with “skin in the game” perform better. Incentives matter but must be managed carefully, as misaligned rewards can create internal competition at the expense of organizational outcomes.
- Teams whose work connects them to other departments perform better. Teams working in silos perform significantly worse on measures of commercial decision-making.
- People closer to the commercial decision-making “front line” perform better, partly due to psychology. The distance between the individual and the commercial reality is a key predictor of effective or ineffective practice.
- Teams that are cross-functional perform better than specialist groups. Counterintuitively, this finding is true even when the specialist group consists of finance professionals.
What We Can Do
This data provides insight and evidence to challenge traditional organizational and structural thinking. For example, is it really more effective to have a dedicated team of individuals with the same specialty, or should we introduce greater diversity into the decision-making group?
Equally, we might think more about the physical environment that teams work in. For example, we know that isolated teams perform much worse than connected teams. How can we connect isolated teams to the wider business, and can we create professional networks that connect teams?
Can we provide nudges or reminders that bring the commercial “front line” closer to “back room” staff? The psychological environment can be key in encouraging people to think more broadly and deeply. Can we be bolder still and ensure that the commercial lens is the channel that all our training — financial or not — goes through to ensure that the commercial element touches all our developmental interactions?
Many companies are using the data they gather to make these sorts of changes — and they are seeing results. These actions have been a mixture of training, leadership and organizational development initiatives. For example, many organizations run a range of simulations to bring home some of the key insights around commercial decision-making. Simulations are particularly powerful developmental tools, as they create unfamiliar and challenging environments that are essential catalysts of personal and professional development.
For other organizations, implementing these changes has involved addressing leadership issues — in particular, encouraging a more inclusive and collaborative style. Leaders tend to rely on the strategies, processes and people they trust. Trust is built partly from familiarity, which means many leaders avoid the unfamiliar and the challenging. The danger is that, when they do so, they overlook new and different perspectives. As our data shows, more diverse groups make better decisions, but only if they’re properly led and supported.
Lastly, companies have introduced workplace “nudges” and environmental cues. One simple mechanism is to provide resources that help people make better decisions. We often assume that learning is the answer to a skill deficit, but digital resources such as financial glossaries and calculators that have been wholly contextualized to the business can become go-to aids that enable better decisions.
Being inclusive means creating an environment of trust and psychological safety where a variety of voices are heard. It means attracting and nurturing talent from different backgrounds and creating an environment where different views and behaviors are embraced. But none of these interventions makes much sense without the data that allows us to tailor and target them with confidence and insight.