These four complicating factors will challenge even the best decision-makers
What are these complicating factors, and what should you do about them? Way back in October, I examined the Harvard Business Review (HBR) article “Deciding How to Decide” on page 63 of the November 2013 issue, written by Hugh Courtney, Dan Lovallo, and Carmina Clarke. Look at it, or read it online here with the right subscription.
Dan Lovallo is a co-author of other HBR posts I’ve enjoyed. You can read my earlier posts about them here, here, here, and here. In the November 2013 article, Dan and his colleagues wrote that “Senior Managers are paid to make tough decisions” and provided a well-constructed decision tree for understanding how a manager should analyze a problem requiring a decision, based on the availability, completeness and certainty of relevant facts.
However, even with a sound decision-making process, additional complicating factors crop up when making decisions. What are those “Complicating Factors” and how should the smart decision-maker deal with them? A brief review follows.
Donald Rumsfeld notwithstanding, the first of the complicating factors is the decision-maker not knowing what he/she does not know. The issue is not confusion. Instead, it is potential detrimental reliance on the decision-maker’s belief that he/she can properly forecast outcomes in an environment of uncertainty. When the decision-maker is overconfident in his/her insights and abilities, and there are no third parties to challenge the decision-maker, the stage is set for trouble.
The second of the complicating factors is our inability to detect our own cognitive bias. Nobel Laureate Daniel Kahneman and co-authors Dan Lovallo, and Olivier Sibony wrote in their June 2011 Harvard Business Review (HBR) article entitled “Before You Make That Big Decision…”
We may not be able to control our own intuition, but we can apply rational thought to detect others’ faulty intuition and improve their judgement.
A decision-maker cannot detect his/her own cognitive bias, but can assemble a trusted team of colleagues to challenge the assumptions and reasoning of each decision. Of course, the team should not be composed of “yes men” that do not express true opinions.The smart decision-maker will recognize the existence of his/her own blind spots, and build a reliable process to detect and correct unintentional cognitive bias.
Dysfunctional Organizational Processes
The third of the complicating factors is often built into the decision-maker’s organizational processes. When decision-makers insist on simple analytic models because they cannot understand better targeted but more complex ones and will not reach out for support, the decisions they will make are suspect. If the decision-maker’s superiors attempt to influence the decision outcome for parochial or tactical concerns, decision quality declines. Ensuring that final go/no-go decisions are made by individuals with appropriate global concerns, and providing qualified experts to assist in decision modeling will go a long way toward relieving the parasitic drag of dysfunctional processes.
With apologizes to circus professionals, the fourth of the complicating factors is decision-makers who rely on a single analytic approach and/or tool to inform decisions is introducing blind spots in their process. The authors contrast an “Expert Opinion” approach to “green-lighting” the production of Hollywood movies, and a case-based reasoning approach that developed analogies between earlier successful productions and the candidate movie, to predict box office success. “Expert Opinion”, which relied on anecdotal approaches and industry wisdom, was the most common decision-making approach to approving movies. The experts supplemented their wisdom with some standard regression analysis, but that was it for analytic tool use.
Two of the authors tried something different. Non-expert movie-goers were given a survey to determine how similar they thought a candidate movie would be to earlier box office successes, based on plot line, characters, and a few other obvious characteristics. Their thesis was that candidate movies that were similar to successful ones would also be successful. The non-experts were twice as accurate as the experts in forecasting candidate movie revenues. The study authors noted the non-experts did even better than that on small box office successes that the experts panned. Trying additional analyses and using more than one tool makes sense. Don’t get caught in a mechanical, rote analysis approach that is simple, but may be far from adequate.
The Bottom Line
Decision-making is a complex series of processes, often compromised as our many human weaknesses are introduced. Think of the seven deadly sins…
You can find one or more of these in each of the challenges to decision-making discussed in this post. Remember that awareness of the overall decision-making process is critical.
Overconfidence in forecasting ability, cognitive bias, dysfunctional organizational processes, and inadequate application of analysis approaches and tools cannot be overcome until they are recognized and acknowledged. Only then will you begin lasting strengthening your decision-making processes. Be an eagle, and not an ostrich, and you will make better decisions.
Are you ready to discuss your decision-making challenges? For the last 20 years I have been assisting IT executives achieve their business goals and make better informed decisions. Contact me, and start the conversation now!