The Impact Of Three-Dimensional Thinking on Decision Making

Every day managers face a multitude of issues that require action. In an effort to make timely decisions, they often choose simple responses for complex questions. Overly simplified responses typically stem from a relatively narrow, two-dimensional perspective. Narrow perspectives produce unwelcome effects for decision makers through increased exposure to the Rule of Unintended Consequences. Managers, as well as their organizations, benefit when they consider problems from additional vantage points. This process is called three-dimensional problem solving - it looks at the interrelationship between the problem, solution and setting.

The following real life example illustrates how two-dimensional thinking can produce unexpected outcomes. In one case, the CEO determined that company expenses were too high. He ordered all departments to reduce their operating cost by 10%. Department “A” looked at their processing and determined that by eliminating three steps they could reduce their costs by $110,000 (a 12% reduction). The management of department “A” was pleased that it was able to meet the goal without adversely affecting the department’s production.

However, the elimination of the three steps in department “A” had unforeseen, detrimental effects on department “B” - the Rule of Unintended Consequences. The removal of these steps in department “A” eliminated the ability of department “B” to maintain their quality control program, which resulted in a 9% increase in the number of policies rated incorrectly. This action translated into a loss of income of over eleven million dollars annually for the company. Even though department “A” and the other departments met the CEO’s goal of a 10% reduction in their operating expenses, the lost income more than offset the expense savings and resulted in an increased expense ratio.

Unfortunately, this scenario plays out far too of-ten in complex organizations. The management of department “A” understood they were to solve the problem as quickly and efficiently as possible. They looked at the problem strictly from the context of their immediate environment and created a workable response for their circumstances. The management of department “A” failed to recognize, let alone evaluate, the interdependency their department had with the other departments of the company. Using a two-dimensional view, they inadvertently created a solution within a vacuum and with no regard for its “external” impact.

Regrettably this occurrence is not all that un-common in business today. The two-dimensional approach is myopic and serves as an incubator for unexpected outcomes. The Rule of Unintended Consequences plays a much greater role than most managers realize. Its impact is often counterproductive, disruptive and costly. Managers think their efforts have accomplished the goal, and are perplexed when they do not achieve the desired results. They are prone to repeat the process as outlined above and get the same substandard effect. Without realizing why, they call into question the goal, redefine the objective so as not to embarrass themselves, become more cautious in their decisions and develop an “incremental mindset” that impedes their strategic movement.

Management needs to realize that in a mutually dependent environment, corporate decision-making and planning cannot be successful if addressed from a simplistic two-dimensional perspective. This is particularly true for large, growing, or consolidating companies. Product and service integration is also another area requiring more expansive and intricate views. The appropriate process requires that the problem be analyzed using a three-dimensional approach. This approach requires management to study the interplay between departments, understand their functional dependency and recognize the potential impact of the proposed solution on other areas. This method may take more time and resources up front, but produces the desired result and limits the negative impact of unintended consequences.
Managers that use the three-dimensional approach fully incorporate the model of “plan, execute, evaluate and refine” in their decision-making. They look at more factors and interdependencies and at a deeper level. The additional information and learning gained from their experience is channeled back into their processes and decisions. By incorporating the three-dimensional approach, organizations can become more efficient, minimize negative unintended consequences, and ultimately improve their bottom line.

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Presented by Three Dimensional, LLC.
For more information contact Walt Tomenga or Terry Myers at 515-240-1510 or info@3-dllc.com