Who Makes Your Company’s Most Important Decisions?

shutterstock-106597682The average NFL franchise is worth $1.17 billion dollars, according to Forbes magazine. At least one-quarter of all NFL head coaches are paid $6 million annually.

Yet, on any given Sunday, those individuals tasked with critical decision making for these billion-dollar companies make decisions based largely on instinct and historical behaviors. Often, those decisions are not only wrong in their rational basis, but they are absolved by fans and media types who don’t understand the mathematical implications.

Take Andy Reid, for example. Reid is the head coach of the Kansas City Chiefs and will make $7.5 million this year; his team currently sits at 9-1 after suffering their first loss this past weekend. Clearly, Reid is doing something right with the Chiefs, but on Sunday he exhibited the kind of decision making that permeates business (and not just football’s business).

In the fourth quarter, with his Chiefs trailing the powerful Denver Broncos and Peyton Manning by fourteen points, Reid faced the decision of the game. His team had a fourth down and seven yards to go. They were inside Denver territory and needed to score twice, without the Broncos scoring again to have a shot at a victory. Reid chose to punt and play defense.

The win probability for the Chiefs following that punt went to 0.2 percent. Translation: GAME OVER

Two plays earlier, the Chiefs were sitting with a 3 percent chance of winning, which means the odds were stacked against them, but they still had the proverbial shot. After the punt, the Broncos moved down the field and kicked a field goal to make it a three possession game. The Chiefs would eventually score a touchdown to make it a ten point game, but even after that score, their odds of winning were still worse than when they chose to punt.

Reid made the “by the book” move and it sealed his team’s fate. It’s possible a series of fluke or unexpected plays could have happened and the Chiefs might have won, but that’s not what win probability and analytical decision making relies on. It is based on using data to make inform decisions.

If a man making $7.5 million in charge of the day-to-day decisions for a billion dollar franchise can be so poorly informed, what can it say about your own business?

It’s safe to say there is no one making day-to-day media decisions making upper-seven figures. The individuals making media partner selections, negotiating rates and optimizing campaigns have as much data as Andy Reid did on Sunday night for their own choices. Yet, are they doing it any better? Andy Reid did what football people do. He punted.

Do the people you employ, both directly and through agencies (or even on the media partner side) do the same? Or do they evaluate risk, assess opportunity and make the tough calls based on informed statistical analysis?

All business is big to those involved in it and as such, the decisions made at any given time have ongoing implications. How you make decisions, the data used versus the reliance on gut and “the way it’s always been done,” may be the difference between winning and losing.

Title image courtesy of Herbert Kratky/Shutterstock.com

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