Large organizations make and execute thousands, perhaps millions of decisions every day. No leadership team can work on every decision at once. So Step 2 in our process is to identify the decisions that matter most—your critical decisions. We'll outline how to go about it and how to analyze those specific decisions to determine what's working well and what isn't.

Two categories of critical decisions. Some decisions clearly stand out as important. They're the big, high-value, strategic choices made in every part of the organization. Senior leaders decide whether to make a big acquisition. IT decides whether to invest in a major systems upgrade.

But many organizations overlook a second category that can be equally significant: operating decisions that seem small but that are made and remade frequently and generate a lot of value over time.

A key reason for Amazon.com's success, for instance, is its ability to make savvy merchandising decisions, including decisions about special prices and discounts, suggestions for complementary purchases, and so on. Most companies have a similar set of decisions made day in and day out by people close to the front lines of the business.

Decision architecture. To identify the key decisions in these two categories, you can use a tool we call decision architecture. You begin with a long list of decisions for every major business process of a company or unit and then narrow it down using two different screens:

• Value-at-stake. Estimate the value involved in each decision, and focus on those with the highest value. To be sure you don't miss the everyday decisions that add up over time, consider the value of a single decision multiplied by its frequency.
• Degree of management attention required. Some decisions inevitably need more attention than others. They might be more complex. Or they might have greater scope for improvement.

The result from applying these two screens is a list of your critical decisions—the top 20 or 30 decisions that absolutely must work well for the business to succeed.

Using the decision X-ray. When one of these critical decisions runs into trouble, the first impulse is usually to jump in and fix it. Understandable, but a long-term fix requires analyzing the decision in greater depth. What works? Where is the decision breaking down—in quality, speed, execution, or effort? What elements of the organization are holding things back? Teams can use a decision X-ray to pinpoint these issues. With interviews and other analyses, team members probe each factor to determine the trouble spots.

When Nike was changing its management structure, for instance, team members identified 33 critical decisions, such as determining retail strategy for a particular country. The team then gathered detailed input on how each decision had worked in the past and how it should work in the future. Thanks to the data, the company was able to resolve—and help everyone understand—how the key decisions would be made and executed under the new approach.

Learn about Step 3, Making decisions work.