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Enhancing Decision Quality in Capital Planning


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For many organizations, the capital planning process can resemble a food fight or have the appearance of compliance under a cloud of confusion and mistrust. That is not criticism, but rather recognition that these are particularly complex decisions. Designing and implementing a consistent architecture for making capital allocation decisions can and should be the beginning of a process of continual improvement. This requires both hard skills and soft skills. Hard skills are required for a data management strategy, implementation of and training in insightful analytical techniques, design of visualization and reporting tools, and translation of mathematical insights. Soft skills are needed for framing the decisions, managing the governance process, assessing data from specialists, facilitating analytical discussions with decision-makers, and setting the tone for an iterative learning culture.

Implementing a structured decision-making process that embeds the notion of decision quality within all levels of the company can result in multiple benefits:

  • The ability to prioritize resources more efficiently and enhance strategic alignment.
  • Streamlined, often faster, decision-making supported by relevant and timely insights.
  • Improved team collaboration and stakeholder buy-in.
  • Greater ability to forecast investment requirements and expected future returns.
  • Increased consistency of the level and quality of analysis for investment decisions.
  • Improved transparency and greater understanding of investment uncertainties.

Investment decisions are often complex, often far more so than they might appear. Yet that complexity can be tamed. Revisiting the existing capital decision-making architecture — and developing a prioritized list of steps for improving your organization’s decision quality — is rarely a neat process. But it is an effort than can repay a company handsomely, and in many ways.