Making Good Decisions When it Matters

Making Good Decisions When it Matters

Subconscious cognitive biases can derail decision-making

Psychologists and behavioural economists have identified cognitive biases that often undermine effective decision-making.  For example:

• Group Think – striving for consensus at the cost of a realistic appraisal or alternative course of action.
• Excessive Optimism – the tendency to be over-optimistic about the outcome of planned actions and events, and to underestimate the likelihood of negative ones.
• Inappropriate Attachments – the emotional attachment to people or elements in your organization (for example, a legacy product) that results in misaligned interests.
• The most prevalent bias is the Confirmation Bias, which is our tendency to seek out information that underscores a pre-existing belief and ignore contrary information. The tricky thing about the Confirmation Bias is that it can look very scientific.  After all, we believe that our thinking is objective.Dan Lovallo, a professor and decision-making researcher, says, “Confirmation Bias is probably the single biggest problem in business, because even the most sophisticated people get it wrong.  People go out and collect data, and they don’t even realize they’re cooking the books.”

Our biases are a function of our unique conditioning: our experiences, training and exposure to organizational culture.  Left unchecked, subconscious biases can undermine decision-making.

So what can be done to counter them and improve our thinking performance?

Good analysis and judgement ≠ good decisions. Good process does.

Research done by McKinsey and Company (The Case of Behavioural Strategy, McKinsey Quarterly, March 2010), suggests that good analysis and judgement doesn’t naturally yield good decisions.

Rather, when we design and follow a sound decision-making process, it is more likely to result is a better decision.

Their research affirmed that analysis is important and found that when a sound, unbiased decision-making process was in place, it ferreted out poor data.  However, they also found that superb analysis is less useful, unless the decision process gives it a fair hearing.

If process is key, what might some of the process components be?

1.    Decide which decisions require process

Not all decisions are equal.  Many of your decisions can be made quickly without following a rigorous process.  Generally, the greater the impact and risk associated with the decision, the more likely it will benefit from a structured process.

2.    Generate multiple views and options

In general, we tend to develop one of two options for how to pursue an opportunity or resolve an issue. When we define our choices too narrowly, we see solutions in binary terms.  A good practice is to suspend judgement and to ensure that one generates as many alternatives and options as possible before one begins to evaluate them.  This is sometimes referred to as “divergent thinking”, that is best done before you “converge” on actions and solutions.

3.    Encourage debate and discourse

In his book, The Five Dysfunctions of a Team, Patrick Lencioni points out that legitimizing “good conflict” in meetings not only increases buy-in because people’s opinions have been heard, but also increases the quality of the decision.  Ensure people understand that constructive debate is key for the process, encourage listening and inquiry, remind folk that it’s normal to have biases and that debate mitigates or counters them and finally, surface your own and others assumptions and invite others to challenge them.

4.    Determine and use criteria

What standards or characteristics should the decision meet?  Ideally, the decision criteria should be measurable and within the scope of what your key stakeholders consider important.  Examples of decision criteria are: ease of implementation, cost, employee engagement, customer satisfaction and risk.  Weighting the criteria you decide on can reflect their relative importance or emphasis.

5.    Follow up

Once a decision is made, bring the debate to an end and commit to following through on it.  And follow up to determine its impact.  Connect with folk that had legitimate concerns and make sure implementation plans address their issues where possible. Conduct a post-mortem on the decision once its outcome is known.  And periodically step back and review your process in the interests of learning from it.

These five process components should be customized (some can be left out and other components and tools can be added) for your specific situation.  Investing time in planning a structured process requires effort, but the payoff (better decisions) will make a difference to team and organizational performance.

Kwela’s Critical Thinking and Problem-Solving workshop provides best practices for effective problem-solving and decision-making.

Nic Tsangarakis, Principal
nict@kwelaleadership.com