Energy 360: Invited Perspective: Making Decisions 2.0

Abstract

President's column What is more integral to the exploration and production (E&P) business than making decisions? In many ways it is the essence of business. Every day we have to choose between “rocks and hard places.” If you get it right, you are a genius. If you get it wrong, there is usually a good reason why, like a “perfect storm” suddenly conspiring to invalidate the assumptions underpinning your decision or perhaps an “unknown unknown.” Nassim Taleb’s book Fooled By Randomness: The Hidden Role of Chance in Life and in the Markets suggests there may not always be a brilliant strategy and excellent decisions behind business success. Most companies today have formal devil’s advocates (risk councils, peer reviews, controllers) trying to pick apart decisions and recommendations, trying to make sure only good decisions are allowed to be made. In addition, most companies have introduced formal “decision gate processes” for material (investment) decisions. According to Independent Project Analysis (IPA) these decision improvement measures really have not improved things appreciably. The expected case never happens and the decision maker is usually handed actual outcomes that are inferior to what was presented as expected in the decision support package. More and more, it is not just about making the most money. Every company has corporate values against which all decisions must be tested and the “triple bottom line” (at least) makes it necessary to factor in many other elements. I sat down with an expert in the field of making decisions Patrick Leach, chief executive officer of Decision Strategies, to get his perspective on the 2.0 of making good decisions in 2015—something every SPE member would like to do well—at work and at home.