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7 Tips that will Improve your Decision-making

50% of major management decisions are wrong!

That’s an unbelievable statistic, but true. Professor Paul C Nutt found this through his research into management decision-making.
Bain & Company contend that "making good decisions and making them happen quickly are the hallmarks of high-performing organizations" and help "the business outperform competitors".

Tip 1: Don’t make a decision you don’t need to make!

Just because all your golf buddies have an Apple Watch, doesn’t mean you need to consider getting one! The same applies to “fashions” in business. The classic case for me was in the late 90s when companies everywhere were buying Siebel CRM. A lot of it became, and probably still is, “shelfware”. This points to another trap – vendors are always entreating you to do something different and they are very skilled at encouraging you to make decisions (in their favour), as seen from the Siebel CRM example. But do you really need to consider what they say, now?
There is a predilection in western cultures for people to see decisiveness as a desirable attribute of effective leaders. This can encourage you to make bold announcements before the need is rationally proven.
Most people like to solve problems and so they are often thinking about them and how to solve them. When a problem is later considered, they will rush forward with their views. However, many will define the problem in terms of their pet solution. A common example for me is sales training. Whenever sales are down, someone it will decided that the sales training is needed because the problem is “our sales people can’t sell to the C-Suite” or similar. Great for the training providers - but what about strategy, market segmentation, demand generation, and so on?
Don’t be fooled, either, by what process people call “natural variation”. In complex systems, such as our everyday business world, there is an element of variation in indicators that is a result of features of the system itself, one that you cannot directly control. For example, the volume of calls to your Help desk will fluctuate daily. If you decide to take action when the number goes up (or down) you may make the situation worse! Tomorrow it may fall (or rise) – “reversion to the mean”.
Before you start your decision-making, ask yourself “is this decision needed and is it needed now”?

Tip 2: Look for opportunities you cannot see.

We all cope with the avalanche of information flowing over us by filtering out what we don’t think is relevant. But that means we miss information on what is changing around us, and so don’t make decisions that we should. Consider what happened to all those paper and web WhitePages once Google arrived.
We also have a tendency to block out bad news and danger signals in certain circumstances.

Perceptual-filter

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To avoid this trap you can do a number of things. As an individual, you can read and study widely, and use sources that have views opposite to your own as well as those that are sympathetic. For example, if you are of a particular political persuasion, seek out material from those with the opposite stance. If you are in a large organisation, dedicate people and resources to looking at what’s happening in the wider world, particularly industries being “disrupted”. They may provide warning of what’s coming to you.
Opportunities and problems are often ignored because we all (in Western cultures) have a tendency to attribute a person’s behavior to that individual and not the circumstances or environment. That can cause us not only to make an incorrect decision, but also to not take action to change a situation that may be affecting many people. We also tend to see ourselves as the cause of favourable outcomes, and unfavourable outcomes as the result of external factors. Again, the need for decision may not be identified.

Tip 3: Choose an appropriate decision-making process

If you’re choosing between black or blue socks, a toss of the coin may suffice. If you’re choosing where to buy a house or a factory, a more systematic approach is called for. If the house is on fire and your inside, a formal analysis of the alternatives may be inappropriate (and deadly)!
Justin Fox, writing in the Harvard Business Review, describes three “decision-making philosophies”:

Decision making Philosophies
Image: hbr.org/2015/05/from-economic-man-to-behavioral-economics


This article assumes the use of a Decision Analysis approach.

Tip 4: Consider more than one alternative


Professor Nutt found that in four out of five major decisions, managers give serious consideration to only one idea! This is a key contributor to the 50% decision failure rate.
I mentioned decisiveness above, and it’s often necessary to keep things moving. But rushing to a decision limits the options considered. Make sure you give yourself (or ask your boss) for sufficient time to come to a good decision.
The most important aspect of considering alternatives is to understand the situation – you can’t identify alternative solutions if you don’t understand what need/opportunity they relate to! That means you must undertake some form of discovery process to clearly, completely and correctly understand what is happening and why. You also must be clear on the personal or organisational context – what are my overall goals and are they clear?
Many “blunders” – as Professor Nutt calls them – can impair your search for viable alternatives. Adopting the remedies proposed by stakeholders (such as salespeople) is one. Quickly moving to a “pet idea” is another, as is letting your self-interest dominate your thinking. Blithely copying what others are doing (competitors, popular people and companies – “doing what Jack Welsh did”) is also very risky.
The best way to avoid such blunders is to form a diverse group or project team to help you. Make sure that the team has the resources – time, money, information – it needs to complete a solid discovery effort.
Make sure you search as widely as possible for alternatives. Do not limit yourself to the standard arenas of search. For example, if productivity in your shared services centre (SSC) is low, the root cause could be related to equipment, procedures, skills, and management (among others). Limiting your search for a solution to, say, equipment, may cause you to miss the most important issue.
In some cases, such as in strategic planning, you may wish to purposely look at “off the wall” ideas as a way of stimulating thought. This may involve getting a variety of perspectives. For example, in the SSC, as well as involving centre staff and IT (the two obvious participants) you may want to include representatives from, say, customer service , sales and/or manufacturing – groups who may interact with, affect, or be affected by the SSC.
Open your mind to the potential unexpected consequences of each alternative – what could go wrong, not only what may go well, and what could be the impact?

Tip 5: Choose the best alternative!

The best decisions come from for contemplation, not decisiveness.
Choosing the best alternative includes avoiding the temptation to jump to a readily available solution, such as one that you may have used in another company, or that a colleague has used successfully before. “Ready-made” solutions should not be adopted unless you have a sound understanding of the full context of the situation in which it was successful. It may not have been you or the solution that was the secret to success, it may have been (predominantly) the circumstances in which it was applied.
Somewhat strangely, a common problem in making a choice is lack of certainty about the intent of the decision. As I mentioned earlier, decisions need to be made in the context of clearly understood organisational objectives.
You must also be careful not to “rig” the process so that evaluation results in the selection of your preferred or favourite alternative. Note that this favouritism can be both consciously and unconsciously applied.
It’s important to simultaneously evaluate alternatives rather than do so sequentially. When assessing sequentially, it’s easy to forget the earlier alternatives, and it’s easy to unconsciously modify the selection criteria as the evaluation progresses. Another risk is “anchoring” which is when early information locks in your perception of an alternative. Still another is the “satisficing” error - picking the first option that is “good enough” rather than the best. A good tool I’ve used successfully many times is the Feasibility-Impact-Urgency Selection Matrix.

FIU

Also be aware that one can be persuaded that a familiar alternative is the “best”, or that there is a cause-and-effect relationship between two variables when they are, in fact, independent.
Finally, avoid letting emotions (and biases) interfere with the selection. Emotions can adversely affect decision making by causing you to form an early preference and so limit the search. They can also influence how you choose between alternatives and they often inform our decision (replacing facts). The best way to minimize emotions is to use a group technique and ensure diversity and detachment in the selection of its members.

Tip 6: Take action that is consistent with your analysis and choice.

Good decision needs to be properly implemented if you are to achieve the desired outcomes. For advice on how to effectively implement a decision, see “10 Steps to Solving Your Problems".

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Tip 7: Learn from both good and bad decisions

No one likes to be wrong, so we pretend to be right! We seek out information that confirms we made a good decision and we block out contrary information.
Like those with a gambling addiction, we are willing to throw good money after bad in an attempt to rescue a uncomfortable situation.
To avoid these problems set “go/no go” criteria as part of your implementation plan (Tip 6) and get other people to review the outcomes of your decisions. Finally, repeat the complete decision cycle (from Tip 1) using the new information and recent experience.