How to make good decisions (at least most of the time).

10/16/2015

by anne lueneburger

process

Gut based decisions have their limit unless you are chess master Kasparov who is drawing on a lifetime of training. For example, studies have found that only half of us feel the need to take medications as they are prescribed. Such lack of compliance is the major cause of hospital admissions. And it’s entirely preventable. When we read these stories we find ourselves perplexed: “Wait-what?”

Analytic approaches to decision making are equally flawed. A Harvard study shows that 83 percent of -carefully researched- mergers fail to increase shareholder value and half actually destroy it. No matter where we look, it is easy to be appalled at how bad we are at making good decisions.

So its not guts or brains alone that get us to a desirable outcome. And of course, we are not talking about everyday decisions as to what to have for lunch. We are concerned about those agonizing, hand wringing, clenching your teeth type decisions. Getting it right matters. Based on McKinsey led research, we increase our odds of making a good decision six fold if we follow a process.

Bestseller authors Chip and Dan Heath identified four villains that sabotage good decision-making. They developed brilliant (favorite word ever since I moved to the UK!) WRAP process that lets us overcome our blind spots:

Villain #1: Narrow focus. Solution: W as in Widen your options.

Many of us think in Whether-Or terms when it comes to making decisions. As a result we remain unaware of alternative choices and limit ourselves. Teenagers are notorious for falling into this trap (Should I date him or not?), but so are senior business leaders. As are organizations: only 29% of organizations consider more than one alternative (versus 30% of teens). Toss out that Pro & Con list. If you start out this list with limited options you are most likely wasting your time.

Three tips on how you can escape a narrow frame:

Start with an And Ask yourself: I can do option A, B, and…? The point is not to develop endless options, shoot for 4 or 5.

  • Imagine your current options are no longer available. What else could you do?
  • Find someone who’s already been there and solved your problem. What did they do? Google your problem, what are best practice solutions out there that inspire you?
  • Getting out of a black and white thinking mindset can be hard but it sets you up for making good decisions: if you develop more than two options you are almost twice as likely to achieve an optimal outcome.

Villain #2: Confirmation bias. Solution : R as in Reality-test your assumptions.

Once we have invested time/resources/emotions, we are more than twice as likely to favor confirming information over disconfirming information. (You really want your new hire to succeed and downplay that she has an anger management issue…).

Three tips to manage confirmation bias:

  • Play Devil’s advocate (or have someone on your team who takes that role). Probe and look for loopholes in the options you have developed. Also ask: What would have to be true for option x to be the very best choice?
  • Zoom out – get an evaluation of what happens “on average”. Ask yourself: where can I find out how things generally develop in situations like mine?
  • We are terrible at predicting the future, so construct small experiments to test your hypothesis. Interviews are less predictive of job performance than work samples or peer ratings. Even a simple IQ test is more predictive than an interview.

Villain#3: Short-term emotional perspective. Solution: A as in Attain distance before deciding.

When we face a difficult decision, we get derailed by our changing emotions. Even if no new information surfaces, we find ourselves going around in circles. What contributes is that we inherently favor what we know. And we are afraid of change and loss (did you know losses are experienced 4x stronger than gains?).

Three tips to get distance to our short-term emotional voice at the table:

  • Use the 10/10/10 approach: how will you feel about your decision in 10 minutes/10 months/10 years from now?
  • When we think of ourselves, we let complexity intrude. Instead, think of what you would say to your best friend if you were to advise on this situation.
  • Recall your core priorities. What matters to you most? And every hour, have a beeper that goes off and ask yourself: am I doing what I most need/want to be doing right now? Create a stop doing list, what you need to give up, to help you focus on your priorities.

Villain#4: Overconfidence in knowing what the future will bring. Solution: P as in Prepare a tripwire.

Don’t go into autopilot. While the process steps are sequential, sometimes we have to go back to the drawing board. Think about situations where you might want to reconsider your decision. Don’t leave decisions unquestioned. Tripwires create a safe space and cap risk. We tend to escalate our commitment to choices. Cookie example: if we get 30 unwrapped cookies we eat them in 6 days – if they are individually wrapped it takes us 24 days to finish them off.

Three tips to prepare your tripwire:

  • Set deadlines or milestones (I will act when… or) to re-evaluate where you are and where you should be. It is like mentally rehearsing how to respond in difficult interpersonal situations.
  • Assume that you are like the rest of humans among us and overconfident in your projected outcome. Give yourself a margin of error. We tend to underestimate the problems we might encounter along the way. We are also bad at estimating a best-case scenario and tend to make the margins to narrow. What if an incredible success comes of this, are we prepared to handle the future (i.e. someone likes your cupcakes, can you deliver?). Our future is not a point but a continuum. When we think about the extremes, we stretch our sense as to what is possible and better reflects reality.
  • Play with these bad outcome/amazing outcome lets you get ready along the way. Dire scenario, rosy scenario.

Think this sounds too involved? As part of living in a business reality of rapid change, we need to add a fifth villain, the urge of making decisions as quickly as possible. There is a beautiful folktale of a little girl holding two apples. Her mother asks her for one of the apples. The girl takes a bite of one apple, then the other. Her mother looks upset at her daughter’s selfishness. Then the little girl gives one of her bitten apples to her mother, and says: “Mom, here you are. This is the sweeter one.”

A strong leader must be calm, confident in her choices, and not rush to judgment. And sometimes this means taking the more involved route to success.

It’s a WRAP!

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