The secret to making better decisions – Part 3

“In manufacturing plants, decisions are made carefully and scientifically. But at the top of organizations, decisions—even those in which millions or billions of dollars are at stake—are often made based on politics or personality or a good PowerPoint presentation.” – Dan Heath

It’s time to reach out to the people who know your organization best

Why are so many important decisions made on gut feel? Why do we rely on instinct when experience shows it leads to so many erroneous choices? Is it because we feel a certain comfort level? Is it because we don’t trust the numbers?

One of the most common reasons we go with gut feel is because we tend to rely on the information that is readily available rather than the information that’s harder to find. This is known as the availability bias — what Daniel Kahneman refers to as the “What You See Is All There Is” bias.

“We made a mistake that’s exceedingly common in business,” admitted mutual fund manager Michael Mauboussin in the Harvard Business Review. “We measured the wrong thing.” His firm’s biggest client was catered to, year after year, like an 800 pound gorilla, until deeper analysis revealed that their gorilla was also one of their least profitable clients. They discovered that revenue (the metric they were relying on to assess their internal performance) had absolutely no connection with their overall objective – profitability. Many business leaders make the mistake of relying on intuition in selecting the metrics they use while failing to realize that most widely used metrics do not reveal cause and effect.

What’s a decision-maker to do?

If so many well-meaning leaders are making the wrong decisions even in the face of evidence to the contrary, how willing will they be to change their decision-making process? It’s not just about the way they decide, it’s about the way they feel about deciding, say “Decisive” authors Dan and Chip Heath. They told us in Part 2 that to make better decisions, we need to take four steps:

1. Widen our options
2. Reality-test our assumptions
3. Attain distance before deciding
4. Prepare to be wrong

Step one is interesting on many levels. When you think about it, widening one’s options is another way of saying, Do your due diligence. It is really a search for more evidence. But what kind of evidence? To make better decisions, we need to stop looking for proof or confirmation of our existing attitudes or beliefs and start looking for objective evidence that may actually challenge those attitudes or beliefs. Not an easy thing to do, but it’s definitely worth the effort, especially if you’re a CEO or an executive team pondering a billion dollar decision.

The path to better decision-making

Recently, evidence-based management has surfaced as an effective way of making decisions based on hard evidence as opposed to gut instinct and experience. According to Stanford professors Jeffrey Pfeffer and Robert Sutton, evidence-based management features “a willingness to put aside belief and conventional wisdom—the dangerous half-truths that many embrace—and replace these with an unrelenting commitment to gather the necessary facts to make more informed and intelligent decisions.”

What kind of facts? And where do you get them? Let’s say you’re a CEO or senior executive who wants to grow your organization or make it more profitable. What do you do? Before you make a traditional decision, which might be to expand your marketing budget or introduce a new product line or even acquire another company, why not follow step one and widen your options? Why not make sure your organization is operating on all cylinders first. How? One way is to ask a series of strategically important questions about your business, including:

  • Does our organization recognize and pursue opportunities to expand the business?
  • Does our organization prepare for and respond to changes and events?
  • Does our organization foster effective internal and external sharing of accurate and timely information?
  • Does our organization prioritize objectives and deliver on them in an effective way?

The answers to these questions and others will not only help you make better strategic decisions, they’ll pinpoint strategic and operational issues that could derail your company if not addressed in a timely manner. But how do you find the answers, and who do you ask?

Why not look to the people who collectively know more about your organization than anyone else: your stakeholders. That’s right: your customers, employees, managers, vendors, partners, associates and even shareholders. Who has a wider view of your organization than them? Best of all, it’s in their best interest to help. All you have to do is ask.

How? The most accurate and effective way is to email your stakeholders using a brief survey questionnaire. (If your stakeholders are slow in responding, that pinpoints another problem.) By widening your options you can begin to reality-test how well your organization is currently innovating, marketing, responding, communicating and listening. If you set up your questionnaire the right way, you’ll also discover any gaps in the responses between groups. These gaps will tell you whether and where there is dysfunction. Regardless of how you do it, listening to your stakeholders is never a bad thing.

Widening your options and reality-testing your assumptions based on stakeholder feedback should help put you on the path to better decision-making. It’s only logical. The best of all worlds, decision-wise, is achieved when intuition and experience are combined with objective evidence. 

And that means telling yourself a different story.

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