Intuition is an essential trait of executives. However, you ought to resist the urge to go immediately with your gut when weighing a significant business matter to arrive at the right decision. Instead, create space to examine a big decision along with several dimensions. The use of “measures for decision making” can help put your initial leanings into perspective. Taking a more disciplined approach to decision-making is not easy for many executives. Executives tend to form a global impression unless they make a special effort not to develop a comprehensive opinion.
“To be in hell is to drift; to be in heaven is to steer.”—George Bernard Shaw
Measures for Decision-Making
My introduction to the concept “measures for decision-making” occurred in the mid-90s. I was attending the Goldratt Institute’s advanced course in thinking. It is now called the Jonah Program.
Our team at Scarborough Public Utilities (a $400 million water and electric utility) used the measures for decision-making for every strategic decision. Our initiatives included launching a third utility — a fibre optic based broadband network — a first in Canada, and significantly reducing rates for our commercial and industrial customers while becoming the best in class in terms of reliability.
Also, in the mid-90s, Daniel Kahneman, a Nobel Prize-winning psychologist, along with his collaborator Amos Tversky, changed how the world thinks about economics. They are upending the notion that we are rational decision-makers. Along the way, he has changed the way many think about thinking itself.
In a new article, Kahneman suggests the way senior executives should approach decision-making. He sets out a process for making big strategic decisions in a paper published by the MIT Sloan Management Review. He calls it the “Mediating Assessments Protocol.” The approach has a simple goal: To put off gut-based decision-making until several separate factors can inform a choice. Mediating Assessments Protocol aligns well the structured approach using measurements for decision making.
Use a Protocol to Delay Intuition
A suitable protocol supplies a forum for a diversity of thought. You analyze a decision based on four to seven previously chosen measurements for decision making and assign a relative percentile score. Next, discuss each of the attributes separately with domain experts. Identify the risks and potential positive outcomes. Score the measures and do a sensitivity analysis on the weights. Those scores will help you make an informed holistic judgment.
It is a widespread practice for an executive team to make briefing books for big decisions like an acquisition. However, it is less common to have independently assessed measures for decision making and create a scorecard. This approach is a departure from the way most executives make important decisions.
“When you’re making an important decision, any option is like a candidate. You should think of what are the essential dimensions that would make a difference between a good option and an option that should be rejected, and you should look at those dimensions one at a time.” — Daniel Kahneman
Transform Group Think
A disciplined evidence-based approach to big strategic decisions helps limit groupthink. If you break up the process into segments and making it fact-based, you will impede groupthink. You transform groupthink to focus on the conclusion. By not trying to get to the end too early, for the people you involve, it becomes a fulfilling exercise. You are valuing their insights.
Many organizations have detailed processes in place for making lower-level decisions. However, decisions made at a higher level can be subject to more gut-based instincts. Executives often think they need to justify their big compensation packages with intuition. However, it is the impact of the decision that is essential — not who makes it. Creating high-performance decision-making teams is vital to quality decisions.
Inverse Relationship Between Process Detail and Its Importance
In my experience, the amount and detail of the process are inversely crucial to the importance of the decision. For example, all organizations have a procedure to decide how to buy office supplies. However, few have a method to make critical decisions. It would be best if you designed, a means to make them.
When making strategic decisions, executives tend to have fewer disciplined processes. This trend relates to who makes them. The people at the top, tend to trust the other people who are also at the top. However, you do not extend the same trust on decisions that you delegate to other staff.
Many executives think they need to form a complete perspective and that breaking it down into small pieces is not the way to make decisions. Your decision-making process needs careful assessments of the critical components to inform your intuitive, holistic decision.
The nature of strategic decisions and the challenge of comparing outcomes makes it difficult to get quantifiable evidence of a structured decision-making process effectiveness. However, personal, and anecdotal experiences have been encouraging.
Taking such a disciplined approach to decision-making will not be easy for many executives. Our brains do not work that way. It would be best if you committed to making informed decisions.
“It’s quite hard because you tend to form a global impression unless you make a special effort not to form a global impression.” — Daniel Kahneman
Tricks That Will Help You Make the Right Decision
Divide the team evaluating the factors. For example, to keep thing separate, have a human resource specialist make the talent assessments, while the due diligence team evaluates the quality of the business.
Assign a relative percentile score to each of the elements. With this approach, you will ensure that you make a comprehensive assessment. A pair-wise evaluation for the components of the measures for decision-making is the right approach.
Assemble your team using behavioural analytics to ensure you have strengths in all nine problem-solving areas. An individual must be able to conceptualize solutions to problems to be successful. We have unique styles or types of intelligence. The problem-solving style is the way one is intelligent or the manifestation of their intellect. The styles are:
- Analysis
- Experiential Learning
- Theoretical Reasoning
- Common Sense
- Street Sense
- Linguistics
- Quantitative Orientation
- Intuition
- Innovation
- Reflectiveness
High-Performance Teams
Many researchers have studied the effectiveness of group decision-making. Think about the benefits of having a large group versus the ideal number of people. The more individuals you have, theoretically, the better chance you have of getting the best information to make the best decision.
Hackman and Vidmar (1970) research found that the best group size for effective decision making is 4.6 members—call it five. However, the number of people is just one factor. Other attributes of successful team decision-making include social sensitivity and being able to read emotions. Consider the number and consider the members, as some may need a little training in empathy, sensitivity to others, and developing a culture that allows all to take part fully.
More recently, in the report, Decide and Deliver: 5 Steps to Breakthrough Performance in Your Organization, the authors state that the optimum size for a decision-making group is seven people. Also, for each added person beyond seven members, the group’s decision-making effectiveness reduces by ten percent.
The table below shows the six critical roles for members of a high performing team. It also sets out the required behavioural competencies for each role. All team members must be average or better in the five-team competencies.
Competencies | Team | Change Agent | Communicator | Innovator | Leader | Manager | Strategist |
---|---|---|---|---|---|---|---|
Builds Consensus | X | X | X | ||||
Embraces Change | X | X | X | ||||
Focuses on Results | X | ||||||
Leads Decisively | X | X | X | X | X | X | |
Promotes Compelling Vision | X | X | X | ||||
Drives Achievement | X | X | X | ||||
Thrives in Chaos | X | ||||||
Communicates Clarity | X | ||||||
Inspires Others | X | X | X | ||||
Seeks Innovation | X | X | X | X | |||
Demonstrates Character | X | ||||||
Initiates Independently | X | X | |||||
Focuses on Results | X | ||||||
Establishes Order | x | ||||||
We measure the behaviour traits of your potential team members and provide you with a data set so you can quickly assemble your high-performance team when needed.
Do Not Over Think
While making quick decisions can backfire if you are not careful. As mentioned above, you do need to think things through before you make a big decision. There is always more to it than what you initially see. A process to think about your options without overthinking them, so you do not go into it blindly. Just be aware of what you are getting yourself into.
“Business opportunities are like buses; there's always another one coming.” — Richard Branson
Following your instincts can change your organization. Moreover, it can get you out of your comfort zone. When we overthink big decisions, you could miss incredible opportunities. But it is also crucial that you do reflect on what your gut is telling you, so you do not jump into anything blindly. Listen to your gut instinct. However, you must go more in-depth. Set a timetable, so you do not have paralysis by analysis.
Concluding Thoughts
It is uncomfortable to think this way because our brains tend toward “excessive coherence” — the tendency to suppress contradicting evidence.
We are inclined to fall in love with our brilliance. So, when you say it is excellent on five of the assessed areas, but only okay on one area and you have a concern about the other, you need to determine if the matter can be mitigated — it may be a fatal flaw. You will gain comfort that you made the right decision when you think it is excellent on all dimensions or that you have a plan to manage the risks in some of the areas.
For example, when hiring, often the best-qualified candidate is not a high performer — that is why they are available! The differences boil down to:
- Great Candidates — what they have
- Top Performers — what they do
The insights from our behavioural analytics quickly show the shortcomings, and you hire the candidate that has the highest likelihood of being a top performer.
Gain all the insight you can before making a strategic decision. Can you develop the capabilities and the systems necessary to ensure success? If you are not prepared to make these investments, the right decision is to take a pass.
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