Decision Making

Making good decisions is arguably one of the most important tasks for any executive. Many of us will take hundreds of decisions every day - some may be relatively straight-forward, while others may be more complex, complicated, and/or significant. Despite our best efforts, we are all susceptible to falling into the same decision making traps. Here are a few of the decision making traps to be aware of and suggestions for how to avoid falling into them.

Trap 1 - Anchoring

Before taking a decision, it's prudent to collect and consider all the relevant facts, data, and information. The Anchoring trap refers to the fact that we are all pre-disposed to give disproportionate weight to the first information we receive. Past experience can be an anchor. The first number presented in a negotiation can be an anchor. Even a first impression can be an anchor. Anchoring creates the risk that we fail to evaluate all the relevant facts, data, and information in the correct way to ensure we take a good decision.

Suggestions:

- Remember that Anchoring can arise in respect of every decision you take
- Seek information, facts, and data from a variety of sources and view the problem from the different perspectives
- Think about the problem on your own before consulting others
- Avoid anchoring others when you consult them (i.e. don't start off by giving your opinion)
- Keep an open mind as to the right decision until the end of the decision-making process 

Trap 2 - Status Quo

Most of us are all pre-disposed to favour those options that we believe will perpetuate the Status Quo. The Status Quo trap has it's roots in psychology. We tend to believe that making change requires taking action, which may open us up to criticism. However, we can justify to ourselves that maintaining the Status Quo is the safer option, even though this may not be true. We can even seek to justify maintaining the Status Quo further by saying that we'll revisit the decision at a later date - but will we really do so? And if we do, will we be Anchored by our initial decision? Furthermore, the more options we are given, the more likely we are to favour the Status Quo.

Suggestions:
- Ask yourself whether you would choose the Status Quo now, if it was not already the current position
- Accurately evaluate the effort involved in moving from the Status Quo (i.e. don't over estimate it)
- Remember that situations evolve over time, so assess the relative flexibility that all the options (including the Status Quo) will provide for further adaption/evolution in the future, not just their suitability for the immediate present
- Be comfortable wrestling with the difficulties of choosing between multiple options (i.e. if you begin to favour the Status Quo because it seems easier, seek to challenge your thinking further)

Trap 3 - Sunk Costs

The more effort we put into something, the more pre-disposed we are to put further effort in to support/justify this option. This remains true even when it has become clear that our initial decision was the wrong one and/or the position we are seeking to continue to justify is no longer the best one. Economists refer to past investments that are no longer recoverable as Sunk Costs. It can often seem safer or more comfortable to throw good investment after bad, in the hope that the situation will resolve in our favour, than to cut our losses and move our focus to other areas.

Suggestions:
- Seek out and consider the views of those who were not involved in the initial decision making process
- Consider whether it would be appropriate to introduce a re-assignment policy for decision-making focused on whether to continue investing time/money into a decision that is not yet working out (N.B. some banks use this approach when deciding on whether to advance further funds in support of problem loans)
- Remember that even good decisions and good decision-making processes can lead to bad outcomes
- Seek to eliminate any fear of failure from your culture (i.e. good decision making should be encouraged and this should include deciding when to call time on existing projects/initiatives, despite the Sunk Costs involved

Trap 4 - Confirmation Bias

Confirmation Bias means that we actively seek out the facts, data, and information that will support our existing belief. Confirmation Bias can be so strong as to mean that we even begin to ignore any facts, data, and information that contradicts our existing belief. Confirmation Bias can affect both where we go to collect information and how we evaluate that information.

Suggestions:
- Actively seek alternative points of view and assess them objectively
- Assign a colleague to play the role of Devil's Advocate and empower them to argue the merits of all counterarguments
- Avoid asking "leading questions" that are likely to lead to answers that support your existing belief
- Avoid surrounding yourself with people who always agree with you

Trap 5 - Framing

Most people will default to the Status Quo. Therefore, how we frame an option will greatly influence the result we are likely to see. Framing can introduce an Anchor and/or establish a Status Quo. Given that most of us a pre-disposed to favour protecting ourselves against a loss more than creating the opportunity to create an equivalent gain, any Framing around gains or losses can have an especially significant impact on the result we are likely to see. Framing the question to ask/problem to solve/paradox to manage is an essential step to good decision making, but remember that a poorly framed question/problem/paradox can undermine your decision making process.

Suggestions:
- Actively look for any distortions than can be cause by the way a question/problem/paradox is framed
- If a question/problem/paradox is posed in a negative or loss, re-frame it as a positive or gain and seek to decide from that frame too

Conclusion

We all have the potential to take good decisions. Two key skills to develop are our awareness of the decision making traps that we are all susceptible to falling into and the use of techniques to help us take good decisions despite these traps. We should also support and encourage our colleagues to develop these skills too - after all, the more of us who take good decisions, the better our collective outcomes will be.

Recommended Reading - The Hidden Traps in Decision Making - John S. Hammond, Ralph L. Keeney, and Howard Raiffa - Harvard Business Review, January 2006


For more information about ENRICHED LEADERSHIP, please get in CONTACT

Click here for more INSIGHTS